As filed with the Securities and Exchange Commission on
April 3, 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. 92
[ 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 May 7, 1997
pursuant to subparagraph (d)(2)(i)(B) 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 20,
1997 its notice pursuant to Rule 24f-2 for the
Registrant's most recent fiscal year ended December 31, 1996.
The total number of pages is __________.
The exhibit index is on page __________.
THIS POST-EFFECTIVE AMENDMENT NO. 92 IS BEING FILED
SOLELY IN ORDER TO DESIGNATE A NEW EFFECTIVE DATE FOR
POST-EFFECTIVE
AMENDMENT NO. 90, WHICH WAS FILED PURSUANT TO RULE
485(a)(2) on JANUARY 21, 1997 WITH A DESIGNATED
EFFECTIVE DATE OF APRIL 7,
1997 AND IN WHICH A NEW SERIES OF THE TRUST DESIGNATED
AS IVY PAN-EUROPE FUND WAS ADDED TO THE TRUST AS A NEW
SERIES. AS SUCH,
THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
THAT ARE INCLUDED IN THIS POST-EFFECTIVE AMENDMENT NO.
92 ARE TO BE USED
CONCURRENTLY WITH AND SEPARATELY FROM EACH PROSPECTUS
AND STATEMENT OF ADDITIONAL INFORMATION FOR THE OTHER
16 SERIES
OFFERED BY THE REGISTRANT, WHICH ARE INCORPORATED BY
REFERENCE TO THIS FILING.
IVY FUND
CROSS REFERENCE SHEET
Post-Effective Amendment No. 92 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 May
____, 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 May
____, 1997 (the "SAI"), which has been filed with the
Securities and Exchange Commission (the "SEC") 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. The SEC maintains a web site
(http://www.sec.gov) that contains the SAI and other material
incorporated by reference.
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
Coopers & Lybrand L.L.P.
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 MANAGE-
OTHER OPERATING MENT FEES
EXPENSES EXPENSES (AFTER
12B-1 (AFTER (AFTER
EXPENSE SERVICE/ EXPENSE EXPENSE
REIMBURSE DISTRIBU- REIMBURSE- REIMBURSE-
MENTS)(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 purpose of the forefoing table is to assist an
investor in understanding the various costs that he or
she will bear directly or indirectly. 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. 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.
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
Investor Services, Inc. ("Moody's") or BB or below by
Standard & Poor's Corporation ("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 or BBB or higher by 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, as amended (the "1933 Act"), 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 March 14, 1997, IMI and MIMI had
approximately $2.64 billion and $1.47 million,
respectively, in assets under management. MIMI is a
subsidiary of Mackenzie Financial Corporation ("MFC"),
which has been an investment counsel and mutual fund
manager in Toronto, Ontario, Canada for more than 25
years.
INVESTMENT MANAGER
For IMI's business management and investment
advisory services, the Fund pays IMI a fee, which is
accrued daily and paid monthly, based on the Fund's
average net assets, at an annual rate of 1.00%. The
fees paid by the Fund are higher than those charged by
many funds that invest primarily in U.S. securities,
but not necessarily higher than the fees charged to
funds with investment objectives similar to those of the Fund.
Currently, IMI voluntarily limits the Fund's total
operating expenses (excluding Rule 12b-1 fees,
interest, taxes, brokerage
commissions, litigation, indemnification, and
extraordinary expenses) to an annual rate of 1.95% of
the Fund's average 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.
PORTFOLIO MANAGEMENT: Michael G. Landry,
President and a Director of IMI and MIMI, and Chairman
and a Trustee of the Trust, is the portfolio manager
for the Fund. Mr. Landry has headed these
organizations since 1987. Previously he was a Senior
Vice President and portfolio manager with Templeton
International. He has over 20 years of professional investment
experience, and has a degree in economics from Carleton
University.
Each of IMI's international equity portfolio
managers is supported by a team of research analysts,
who are responsible for providing objective information
on regional and country-specific economic and political
developments and monitoring individual companies.
Three of the five research analysts that support IMI's
international equity portfolio managers are based in
Ivy/Mackenzie's south Florida office, and two others provide
local coverage from Prague and Shanghai. IMI's analysts use
a variety of research sources, such as brokerage
reports, economic and financial news services, equity
databases and company reports. Established
relationships with more than thirty research firms
ensure that IMI's analysts and portfolio managers have
access to up-to-the-minute information on the various
factors that may influence a particular investment decision.
These firms range from large investment banks with global
coverage to local research houses. In many cases, IMI's
investment professionals also conduct primary research by
meeting with company management, touring facilities,
and speaking with local research analysts, economists
and strategists. Such primary research is considered
particularly important in emerging market
countries.
Research efforts focus on determining
opportunities that fall within the IMI's long-term,
value-oriented approach to investing. The investment
decision making process starts with a "top-down" view
of a particular country and the long-term outlook for
given industries within that country. Company selection
generally is based on a "bottom-up" analysis of certain
value measures (e.g., earnings, cash flow and growth
potential) that are monitored in a proprietary database
in which risk-adjusted company valuations across
countries and industries are compared. Ultimate
investment decisions take into account the fund's
investment objective, diversification requirements and risk
tolerance level. While current earnings are considered
important, investment decisions most often are based on
earnings estimates over a five-year period. Stock
selection typically is concentrated in the cheapest 20%
of the universe and sell recommendations normally are
generated when valuations reach the top 20% of the
universe.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative services for
the Fund, such as maintaining the registration of Fund
shares under state "Blue Sky" laws, and 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. Also, to the extent that the Fund
pays any dividends, these higher expenses will result
in lower dividends than those paid on 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 return. 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 the 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") 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.
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), 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 15 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 prices is
used. All other securities for which OTC market
quotations are readily available are valued at the
average between the current bid and asked prices.
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 advisers 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 the Fund. Also,
clients of these advisers and planners may make
purchases under the same conditions if the purchases
are through the master account of such adviser 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 9 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,
or 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.
In accordance with separate distribution plans for
the Fund's Class B and Class C shares adopted pursuant
to Rule 12b-1 under the 1940 Act, 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
__ 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, 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, semi-annually, 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 fund 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 Fund 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
01IPEFX0597
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
May _, 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 May __, 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 . . . . . . . . . . . . . . . . . .
. . . . . . 15 OPTIONS TRANSACTIONS . . . . . . .
. . . . . . . . . . . 15 OPTIONS, IN GENERAL
. . . . . . . . . . . . . . . . 15 WRITING
OPTIONS ON INDIVIDUAL SECURITIES . . . . . 17
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES . . . . 17
PURCHASING AND WRITING OPTIONS ON SECURITIES
INDICES . . . . . . . . . . . . . . . . . . .
18 RISKS OF OPTIONS TRANSACTIONS . . . . . .
. . . . . 19 SECURITIES INDEX FUTURES
CONTRACTS . . . . . . . . 21 RISKS OF
SECURITIES INDEX FUTURES . . . . . . . . . 23
COMBINED TRANSACTIONS . . . . . . . . . . . . . . . . . 24
RESTRICTED AND ILLIQUID SECURITIES . . . . . . . . . . .
25
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . .
. . . 26
ADDITIONAL RESTRICTIONS . . . . . . . . . . . . . . . .
. . . 28
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . .
. . . 29 AUTOMATIC INVESTMENT METHOD . . . . . .
. . . . . . . . 30 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
REINVESTMENT PRIVILEGE . . . . . . . . . . . . . . . . . 38
RIGHTS OF ACCUMULATION . . . . . . . . . . . . . . .
. . 39 SYSTEMATIC WITHDRAWAL PLAN . . . . . . . .
. . . . . . . 40 GROUP SYSTEMATIC INVESTMENT
PROGRAM . . . . . . . . . . 40
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . .
. . . 41 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 . . . . . . . . . . . . . . . . . . . . . . .
55 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 . . . . . . . .
. . . . . . . . . . . . . 64 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
. . . . . . . . . . . . . . . 69 BACKUP
WITHHOLDING . . . . . . . . . . . . . . . . . . . 70
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . .
. . . 70 AVERAGE ANNUAL TOTAL RETURN . . . .
. . . . . . . . 70 OTHER QUOTATIONS,
COMPARISONS AND GENERAL INFORMATION
. . . . . . . . . . . . . . . . . 72
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . .
. . . 72
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION
("S&P") AND MOODY'S INVESTORS SERVICE, INC.
("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS . . . . . . . . 73
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF April __, 1997
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
Manager 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 Manager
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 Manager 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 an 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, as amended
(the "1933 Act"), 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 1933 Act.
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 by 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 Manager 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, Ivy New Century Fund, Ivy
International Fund II (expected effective date of May 13,
1997) (the other seventeen 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
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 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 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 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 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 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, Ivy
International Fund II (expected effective date of May
13, 1997), 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 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 each 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, Ivy
International Fund II (expected effective date of May 13, 1997),
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,
Ivy International Fund II(expected effective date of
May 13, 1997), 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, Ivy New Century
Fund, and Ivy International Fund II (expected
effective date of May 13, 1997); $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 it 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 IMI 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 May __, 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.
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 Research 60 Concord Street
Corp. (instruments and Wilmington, MA 01887
controls); Director, Burr- Age: 73
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: 73
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
n a t i o n a l t r a d e
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: 76
(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 Director of Suite 300 Chairman
Mackenzie Investment Boca Raton, FL 33432
Management Inc. (1987- Age: 50
present); President, [*Deemed to be an
Director and Chairman of "interested person"
Ivy Management Inc. (1992- of the Trust, as
present); Chairman and defined
under the Director of Ivy Mackenzie
1940 Act.] 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 of Mackenzie Series
Trust (1987-present);
President of Mackenzie
Series Trust (1987-1996);
Chairman of Mackenzie
Series Trust (1996-
present).
Joseph G. Rosenthal Trustee Chartered
Accountant 110 Jardin Drive (1958-
present); Trustee of Unit #12
Mackenzie Series Trust Concord, Ontario Canada
(1985-present); Director of
L4K 2T7 The Mackenzie
Funds Inc. Age: 62
(1987-1995).
Richard N. Silverman Trustee Director, Newton-
Wellesley 18 Bonnybrook Road
Hospital; Director, Beth Waban, MA 02168
Israel Hospital; Director, Age: 73
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: 67
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 of 700 South Federal Hwy. and
Mackenzie Investment Suite 300 President
Management, Inc. (1996 Boca Raton, FL 33432
-present); Senior Vice Age: 40
President and Director of [*Deemed to be an
Mackenzie Investment "interested
person" Management, Inc. (1994 of the
Trust, as -1996); Senior Vice
defined under the President and Treasurer of
1940 Act.] Mackenzie
Investment
Management, Inc. (1989-
1994); Senior Vice
President and Director of
Ivy Management Inc. (1994-
present); Senior Vice
President, Treasurer
and Director of
Ivy Management
Inc. (1992-1994); Vice
President of The Mackenzie
Funds Inc. (1987-1995);
Senior Vice President and
Director, Ivy Mackenzie
Services Corp. (1996-
present); President
and Director of
Ivy Mackenzie
Services Corp. (1993-1996);
Trustee and President of
Mackenzie Series Trust
(1996-present); Vice
President of Mackenzie
Series Trust
(1994-1996);
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).
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, 1996)
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 T O
POSITION FROM TRUST EXPENSES RETIREMENT
TRUSTEES
John S. $7,419 N/A N/A
$10,000 Anderegg, Jr.
(Trustee)
Paul H. $7,419 N/A N/A
$10,000 Broyhill
(Trustee)
Keith J. $0 N/A N/A
$0 Carlson[**]
(Trustee and
President)
Stanley $4,949 N/A N/A
$10,000 Channick[*]
(Trustee)
Frank W. $7,419 N/A N/A
$10,000 DeFriece, Jr.
(Trustee)
Roy J. $7,419 N/A N/A
$10,000 Glauber[*]
(Trustee)
Michael G. $0 N/A N/A
$0 Landry
(Trustee and
Chairman of
the Board)
Joseph G. $7,419 N/A N/A
$10,000 Rosenthal
(Trustee)
Richard N. $10,000 N/A N/A
$10,000 Silverman
(Trustee)
J. Brendan $7,419 N/A N/A
$10,000 Swan
(Trustee)
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.
[**] Appointed as a Trustee of the Trust at a
meeting of the Board held on December 7, 1996.
As of February 21, 1997 the Officers and
Trustees of the Trust as a group owned beneficially
less than one percent of the outstanding Class A,
Class B, Class C or Class I shares of any Ivy Fund
portfolio, except that the Trustees as a group owned
1.51% of the outstanding Class A shares of Ivy Global Fund and
1.96% of the outstanding Class A shares of Ivy
Global Natural Resources Fund, two of the Trust's other
seventeen series.
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 April
__, 1997. On February 8, 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, Ivy New Century
Fund and Ivy International Fund II (expected
effective date of May 13, 1997). 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 Securities and Exchange Commission (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 net
assets. Advisory fee information is not yet available
for the Fund, which is scheduled to commence operations
on May __, 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
May __, 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 23, 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 May __, 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 February 8, 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 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 February 8, 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 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 May __, 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 May __, 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 May __, 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 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 May __, 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
eighteen 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, Ivy New Century
Fund, and Ivy International Fund II (expected
effective date of May 13, 1997), as well as Class I
for Ivy Bond Fund, Ivy Global Science & Technology
Fund, Ivy International Fund, Ivy International Small
Companies Fund, and Ivy International Fund II (expected effective
date of May 13, 1997), 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 members 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 16(c) of the 1940 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, Presidents' 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. It is estimated that the
Fund's portfolio turnover rate generally will not
exceed 25% in any given year.
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.
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 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 May __, 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 April __, 1997 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 INVESTORS SERVICE, INC.
("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994 Issue
(Moody's Investors 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 April __, 1997
AND
REPORT OF INDEPENDENT ACCOUNTANTS
_________________________________________________________________
IVY PAN-EUROPE FUND
STATEMENT OF ASSETS AND LIABILITIES
April __, 1997
_________________________________________________________________
ASSETS
Cash . . . . . . . . . . . . . . . . $ ______
Deferred organization expenses . . . ______
Prepaid blue sky fees . . . . . . . . ______
------- 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
April __, 1997
_________________________________________________________________
1. ORGANIZATION: Ivy Pan-Europe 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 May __, 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 PREPAID BLUE SKY FEES:
Organization expenses are being amortized over a five
year period from May __, 1997, the commencement date
of operations. Such organizational expenses have been
paid by MIMI and will be reimbursed by the Fund.
3. TRANSACTIONS WITH AFFILIATES: 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.
(r) Establishment and designation of
Series and Classes (Ivy Pan-Europe
Fund--Class A, Class B and Class
C), filed with this Post- Effective
Amendment No. 92 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. Not applicable
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.
(e) Form of Amended and Restated Plan
adopted pursuant to Rule 18f-3
under the Investment Company Act of
1940, filed with this Post-
Effective Amendment No. 92 to Registration
Statement No. 2-17613.
25. Not applicable
26. Number of Holders of Securities
26. Number of Holders of Securities
Fund: Date Class Record
Holders
Ivy Asia Pacific 1/31/97 Class A 13
Fund Class B 1
Class C 0
Ivy Bond Fund 1/31/97 Class A 4,635
Class B 217
Class C 41
Class I 0
Ivy Canada Fund 1/31/97 Class A 2,202
Class B 179
Class C 22
Ivy China Region 1/31/97 Class A 2,178
Class B 1,122
Class C 34
Ivy Emerging 1/31/97 Class A 5,211
Growth Fund Class B 3,318
Class C 259
Ivy Global Fund 1/31/97 Class A 1,474
Class B 638
Class C 11
Ivy Global Natural 1/31/97 Class A 50
Resources Fund Class B 12
Class C 1
Ivy Global Science 1/31/97 Class A 537
& Technology Fund Class B 400
Class C 198
Class I 0
Ivy Growth Fund 1/31/97 Class A 29,882
Class B 280
Class C 7
Ivy Growth with 1/31/97 Class A 6,062
Income Fund Class B 638
Class C 11
Class D 35
Ivy International 1/31/97 Class A 22,697
Fund Class B 15,183
Class C 1,270
Class I 327
Ivy International 1/31/97 Class A 0
Bond Fund Class B 0
Class C 0
Ivy International 1/31/97 Class A 29
Small Companies Fund Class B 20
Class C 2
Class D 0
Ivy Latin America 1/31/97 Class A 354
Strategy Fund Class B 158
Class C 7
Ivy Money Market 1/31/97 Class A 2,444
Fund Class B 133
Class C 7
Ivy New Century 1/31/97 Class A 877
Fund Class B 521
Class C 152
27. Indemnification
Reference is made to Article VIII of the
Registrant's 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.
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. 92
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 certifies that it meets all of the
requirements for effectiveness of this Post-Effective
Amendment No. 92 to its Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Post-Effective Amendment No. 92 to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston, in
the Commonwealth of Massachusetts, on the third day of
April, 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. 92 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
4/3/97 Chairman (Chief
Executive Officer)
JOHN S. ANDEREGG, JR.* Trustee
4/3/97
PAUL H. BROYHILL* Trustee
4/3/97
STANLEY CHANNICK* Trustee
4/3/97
FRANK W. DEFRIECE, JR.* Trustee
4/3/97
ROY J. GLAUBER* Trustee
4/3/97
KEITH J. CARLSON** Trustee and
4/3/97 President
JOSEPH G. ROSENTHAL* Trustee
4/3/97
RICHARD N. SILVERMAN* Trustee
4/3/97
J. BRENDAN SWAN* Trustee
4/3/97
C. WILLIAM FERRIS* Secretary/Treasurer
4/3/97 (Chief 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.
# Executed pursuant to resolutions filed with Post-
Effective Amendment No. 91 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
EXHIBIT INDEX
1(r) Establishment and designation of Series and
Classes (Ivy Pan-Europe Fund--Class A, Class
B and Class C)
18(e) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940
EXHIBIT 1(r)
IVY FUND
Ivy Pan-Europe Fund
Establishment and Designation of Additional
Series of Shares of Beneficial Interest,
No Par Value Per Share
I, Michael G. Landry, being a duly elected, qualified and
acting Trustee of Ivy Fund (the "Trust"), a business trust formed
under the laws of the Commonwealth of Massachusetts, DO HEREBY
CERTIFY that, by written consent, the Trustees of the Trust (the
"Trustees"), pursuant to Article III of the Agreement and
Declaration of Trust of the Trust dated December 21, 1983, as
amended and restated December 10, 1992 (the "Declaration of
Trust"), duly approved, adopted and consented to the following
resolutions as actions of the Trustees of the Trust:
RESOLVED, that (i) the shares of beneficial interest of the
Trust having previously been divided into sixteen separate
series, designated as 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 Fund, Ivy
International Bond Fund, Ivy International Small Companies
Fund, Ivy Latin America Strategy Fund, Ivy Money Market Fund
and Ivy New Century Fund, the shares of beneficial interest
of the Trust shall hereby be divided into one additional
series designated as "Ivy Pan-Europe Fund" (the "Fund," and
collectively with the other sixteen series of the Trust, the
"Series"); and (ii) having established and designated the
Fund as an additional Series of the Trust, there shall
hereby be designated an unlimited number of authorized and
unissued shares of beneficial interest of the Trust as (a)
"Ivy Pan-Europe Fund--Class A," (b) "Ivy Pan-Europe Fund--
Class B" and (c) "Ivy Pan-Europe Fund--Class C," with the
Fund and each of its classes of shares being subject to all
provisions of the Declaration of Trust relating to shares of
the Trust generally, and having the following special and
relative rights:
1. The Fund shall be authorized to hold cash and invest in
securities and instruments and use investment
techniques as described in the Trust's registration
statement under the Securities Act of 1933, as amended
from time to time. Each share of beneficial interest,
no par value per share, of the Fund shall be redeemable
as provided in the Declaration of Trust, shall be
entitled to one vote (or fraction thereof in respect of
a fractional share) on matters on which shares of the
Fund shall be entitled to vote and shall represent a
pro rata beneficial interest in the assets allocated to
the Fund. The proceeds of sales of shares of the Fund,
together with any income and gain thereon, less any
diminution or expenses thereof, shall irrevocably
belong to the Fund, unless otherwise required by law.
Each share of the Fund shall be entitled to receive its
pro rata share of net assets of the Fund upon the
Fund's liquidation. Upon redemption of a shareholder's
shares, or indemnification for liabilities incurred by
reason of a shareholder being or having been a
shareholder of the Fund, such shareholder shall be paid
solely out of the property of the Fund.
2. Shareholders of the Fund shall vote separately as a
Series on any matter to the extent required by
applicable federal or state law. Shareholders of each
class of the Fund shall have (i) exclusive voting
rights with respect to matters on which the holders of
each such class shall be entitled to exclusive voting
rights under applicable federal or state law, and (ii)
no voting rights with respect to matters on which the
holders of another class of shares of the Fund or the
holders of another Series (or class thereof) shall be
entitled to exclusive voting rights under applicable
federal or state law.
3. The assets and liabilities of the Trust existing as of
the end of the day immediately preceding the date on
which the Registration Statement for the Fund becomes
effective shall be allocated among the Series other
than the Fund in accordance with Article III of the
Declaration of Trust, and thereafter the assets and
liabilities of the Trust shall be allocated among all
Series and classes thereof in accordance with Article
III of the Declaration of Trust, except as provided
below:
(a) Costs incurred by the Trust on behalf of the Fund
in connection with the organization, registration
and public offering of shares of the Fund shall be
allocated to the Fund and shall be amortized by
the Fund in accordance with applicable law and
generally accepted accounting principles.
(b) The Trustees may from time to time in particular
cases make specific allocations of assets or
liabilities among the Series.
4. The Trustees (including any successor Trustees) shall
have the right at any time and from time to time to
reallocate assets and expenses or to change the
designation of any Series (or class thereof) now or
hereafter created, or to otherwise change the special
and relative rights of any such Series (or class),
provided that such change shall not adversely affect
the rights of shareholders of that Series (or class).
5. The dividends and distributions with respect to each
class of shares shall be in such amount as may be
declared from time to time by the Trust's Board of
Trustees in accordance with the Declaration of Trust
and applicable law.
6. (a) Each Class B share of the Fund, other than a share
purchased through the automatic reinvestment of a
dividend or a distribution with respect to Class B
shares, shall be converted automatically, and
without any action or choice on the part of the
holder thereof, into and be reclassified as a
Class A share of the Fund on the date that is the
first business day following the last calendar day
of the month in which the eighth anniversary date
of the date of the issuance of such Class B share
falls (the "Conversion Date") on the basis of the
relative net asset values of the two classes,
without the imposition of any sales load, fee or
other charge;
(b) Each Class B share purchased through the automatic
reinvestment of a dividend or a distribution with
respect to Class B shares shall be segregated in a
separate sub-account. Each time any Class B
shares of the Fund in a shareholder's Fund account
(other than those in the sub-account) convert to
Class A shares of the Fund, a pro rata portion of
the Class B shares then 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
distributions;
(c) The conversion of Class B shares into Class A
shares may be suspended if (i) a ruling of the
Internal Revenue Service to the effect that the
conversion of Class B shares does not constitute a
taxable event under Federal income tax law is
revoked or (ii) an opinion of counsel on such tax
matter is withdrawn or (iii) the Board of Trustees
determines that continuing such conversions would
have material, adverse tax consequences for the
Fund or its shareholders; and
(d) On the Conversion Date, the Class B shares
converted into Class A shares shall cease to
accrue dividends and shall no longer be deemed
outstanding and the rights of the holders thereof
(except the right to receive the number of Class A
shares into which the Class B shares have been
converted and any declared but unpaid dividends to
the Conversion Date) shall cease. Certificates
representing Class A shares of the Fund resulting
from the conversion of Class B shares need not be
issued until certificates representing the Class B
shares converted, if issued, have been received by
the Trust or its agent duly endorsed for transfer;
FURTHER RESOLVED, that the preceding resolutions shall
constitute an Amendment to the Declaration of Trust,
effective as of the date that the Registration Statement for
the Fund is filed with the Securities and Exchange
Commission in accordance with Rule 485(a)(2) under the
Securities Act of 1933; and
FURTHER RESOLVED, that the officers of the Trust be, and
they hereby are, authorized to file such Amendment to the
Declaration of Trust in the offices of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, I have signed this Amendment this first
day of April, 1997.
MICHAEL G. LANDRY
_____________________________________
Michael G. Landry, as Trustee
The above signature is the true and correct signature of
Michael G. Landry, Trustee of the Trust.
C. WILLIAM FERRIS
_____________________________________
C. William Ferris, Secretary/Treasurer
Mackenzie Investment Management Inc.
EXHIBIT 18(e)
IVY FUND
PLAN PURSUANT TO RULE 18F-3
UNDER THE
INVESTMENT COMPANY ACT OF 1940
(As Amended and Restated on February 8, 1997)
I. INTRODUCTION
In accordance with Rule 18f-3 under the Investment Company
Act of 1940, as amended (the "1940 Act"), this Plan describes the
multi-class structure that will apply to certain series of Ivy
Fund (each, a "Fund" and collectively, the "Funds"), including
the separate class arrangements for the service and distribution
of shares, the method for allocating the expenses and income of
each Fund among its classes, and any related exchange privileges
and conversion features that apply to the different classes.
II. THE MULTI-CLASS STRUCTURE
Each of the following Funds is authorized to issue three
classes of shares, identified as Class A, Class B and Class C,
respectively: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada
Fund, Ivy China Region Fund, Ivy Pan-Europe Fund, Ivy Emerging
Growth Fund, Ivy Global Fund, Ivy Global Natural Resources Fund,
Ivy Global Science & Technology Fund, Ivy Growth Fund, Ivy Growth
with Income Fund, Ivy Latin America Strategy Fund, Ivy Money
Market Fund,[FN1][The separation of Ivy Money Market Fund shares
into three separate classes has been authorized as a means of
enabling the Funds' transfer agent to track the contingent
deferred sales charge period that applies to Class B and Class C
shares of other Ivy or Mackenzie Funds that are being exchanged
for shares of Ivy Money Market Fund. In all other relevant
respects, the three classes of Ivy Money Market Fund shares are
identical (i.e., having the same arrangement for shareholder
services and the distribution of securities), and are not subject
to any sales load other than in connection with the redemption of
Class B or Class C shares of that have been acquired pursuant to
an exchange from another Ivy or Mackenzie Fund. (See Section
III.D.)] Ivy International Fund, Ivy International Bond Fund, Ivy
International Small Companies Fund and Ivy New Century Fund. Ivy
Bond Fund, Ivy Global Science & Technology Fund, Ivy
International Fund and Ivy International Small Companies Fund are
also authorized to issue a fourth class of shares, identified as
Class I.
Shares of each class of a Fund represent an equal pro rata
interest in the underlying assets of that Fund, and generally
have identical voting, dividend, liquidation, and other rights,
preferences, powers, restrictions, limitations, qualifications
and terms and conditions, except that: (a) each class shall have
a different designation; (b) each class shall bear certain class-
specific expenses, as described more fully in Section III.C.2.,
below; (c) each class shall have exclusive voting rights on any
matter submitted to shareholders that relates solely to its
arrangement; and (d) each class shall have separate voting rights
on any matter submitted to shareholders in which the interests of
one class differ from the interests of any other class. Each
class of shares shall also have the distinct features described
in Section III, below.
III. CLASS ARRANGEMENTS
A. FRONT-END SALES CHARGES AND CONTINGENT DEFERRED SALES
CHARGES
Class A shares shall be offered at net asset value plus a
front-end sales charge. The front-end sales charge shall be in
such amount as is disclosed in each Fund's current prospectus and
shall be subject to reductions for larger purchases and such
waivers or reductions as are determined or approved by the Board
of Trustees. Class A shares generally will not be subject to a
contingent deferred sales charge (a "CDSC"), although a CDSC may
be imposed in certain limited cases as disclosed in each Fund's
current prospectus or prospectus supplement.
Class B and Class C shares shall be offered at net asset
value without the imposition of a front-end sales charge. A CDSC
in such amount as is described in each Fund's current prospectus
or prospectus supplement shall be imposed on Class B and Class C
shares, subject to such waivers or reductions as are determined
or approved by the Board of Trustees.
Class I shares are not subject to a front-end sales charge
or a CDSC.
B. RULE 12B-1 PLANS
Each Fund (other than Ivy Money Market Fund) has adopted a
service and distribution plan pursuant to Rule 12b-1 under the
1940 Act (a "12b-1 plan") under which it pays to Ivy Mackenzie
Distributors, Inc. (the "Distributor") an annual fee based on the
average daily net assets value of the Fund's outstanding Class A,
Class B and Class C shares, respectively.[FN2][Class I shares are
not subject to Rule 12b-1 service or distribution fees.] The
maximum fees currently charged to each Fund under its 12b-1 plan
are set forth in the table below, and are expressed as a
percentage of the Fund's average daily net assets.[FN3][Fees for
services in connection with the Rule 12b-1 plans will be
consistent with any applicable restriction imposed by the
National Association of Securities Dealers, Inc.]
The services that the Distributor provides in connection
with each Rule 12b-1 plan for which service fees[FN4][Each Fund
pays the Distributor at the annual rate of up to 0.25% of the
average daily net asset value attributable to its Class A, Class
B and Class C shares, respectively. Ivy Canada Fund pays an
additional service-related fee of 0.15% of the average daily net
asset value attributable to its Class A shares. In addition,
each Fund (other than Ivy Canada Fund) pays the Distributor a fee
for other distribution services at the annual rate of 0.75% of
the Fund's average daily net assets attributable to its Class B
and Class C shares. Ivy Canada Fund pays the Distributor an
additional amount for other distribution services at the annual
rate of 0.60% of average daily net assets attributable to its
Class B and Class C shares.] are paid include, among other
things, advising clients or customers regarding the purchase,
sale or retention of a Fund's Class A, Class B or Class C shares,
answering routine inquiries concerning the Fund, assisting
shareholders in changing options or enrolling in specific plans
and providing shareholders with information regarding the Fund
and related developments.
The other distribution services provided by the Distributor
in connection with each Fund's Rule 12b-1 plan include any
activities primarily intended to result in the sale of the Fund's
Class B and Class C shares. For such distribution services, the
Distributor is paid for, among other things, compensation to
broker-dealers and other entities that have entered into
agreements with the Distributor; bonuses and other incentives
paid to broker-dealers or such other entities; compensation to
and expenses of employees of the Distributor who engage in or
support distribution of a Fund's Class B or Class C shares;
telephone expenses; interest expense (only to the extent not
prohibited by a regulation or order of the SEC); printing of
prospectuses and reports for other than existing shareholders;
and preparation, printing and distribution of sales literature
and advertising materials.
RULE 12b-1 FEES
CLASS B AND
CLASS A CLASS A CLASS C SHARES
SHARES SHARES (SERVICE AND
(SERVICE (DISTRIBUTION DISTRIBUTION
FUND NAME FEE) FEES) FEES)
Ivy Asia Pacific Fund 0.25% 0.00% 1.00%
Ivy Bond Fund 0.25% 0.00% 1.00%
Ivy Canada Fund 0.25% 0.15% 1.00%
Ivy China Region Fund 0.25% 0.00% 1.00%
Ivy Pan-Europe
Fund 0.25% 0.00% 1.00%
Ivy Emerging Growth
Fund 0.25% 0.00% 1.00%
Ivy Global Fund 0.25% 0.00% 1.00%
Ivy Global Natural
Resources Fund 0.25% 0.00% 1.00%
Ivy Global Science &
Technology Fund 0.25% 0.00% 1.00%
Ivy Growth Fund 0.25% 0.00% 1.00%
Ivy Growth with Income
Fund 0.25% 0.00% 1.00%
Ivy International Bond
Fund 0.25% 0.00% 1.00%
Ivy International Fund 0.25% 0.00% 1.00%
Ivy International
Small Companies Fund 0.25% 0.00% 1.00%
Ivy Latin America
Strategy Fund 0.25% 0.00% 1.00%
Ivy Money Market Fund* 0.00% 0.00% 0.00%
Ivy New Century Fund 0.25% 0.00% 1.00%
* See footnote 1.
C. ALLOCATION OF EXPENSES AND INCOME
1. "TRUST" AND "FUND" EXPENSES
The gross income, realized and unrealized capital gains and
losses and expenses (other than "Class Expenses," as defined
below) of each Fund shall be allocated to each class on the basis
of its net asset value relative to the net asset value of the
Fund. Expenses so allocated include expenses of Ivy Fund that
are not attributable to a particular Fund or class of a Fund
("Trust Expenses") and expenses of a Fund not attributable to a
particular class of the Fund ("Fund Expenses"). Trust Expenses
include, but are not limited to, Trustees' fees and expenses;
insurance costs; certain legal fees; expenses related to
shareholder reports; and printing expenses. Fund Expenses
include, but are not limited to, certain registration fees (i.e.,
state registration fees imposed on a Fund-wide basis and SEC
registration Fees); custodial fees; transfer agent fees; advisory
fees; fees related to the preparation of separate documents of a
particular Fund, such as a separate prospectus; and other
expenses relating to the management of the Fund's assets.
2. "CLASS" EXPENSES
The types of expenses attributable to a particular class
("Class Expenses") include: (a) payments pursuant to the Rule
12b-1 plan for that class[FN5][Class I shares of Ivy Bond Fund,
Ivy Global Science & Technology Fund, Ivy International Fund and
Ivy International Small Companies Fund bear no distribution or
service fees.]; (b) transfer agent fees attributable to a
particular class; (c) printing and postage expenses related to
preparing and distributing shareholder reports, prospectuses and
proxy materials; (d) registration fees (other than those set
forth in Section C.1. above); (e) the expense of administrative
personnel and services as required to support the shareholders of
a particular class[FN6][Class I shares of Ivy Bond Fund, Ivy
Global Science & Technology Fund, Ivy International Fund and Ivy
International Small Companies Fund bear lower administrative
services fees relative to these Funds' other classes of shares
(i.e., Class I shares of the Funds pay a monthly administrative
services fee based upon each Fund's average daily net assets at
the annual rate of only 0.01%, while Class A, Class B and Class C
shares of these two Funds pay such a fee at the annual rate of
0.10%).]; (f) litigation or other legal expenses relating solely
to a particular class; (g) Trustees' fees incurred as a result of
issues relating to a particular class; and (h) the expense of
holding meetings solely for shareholders of a particular class.
Expenses described in subpart (a) of this paragraph must be
allocated to the class for which they are incurred. All other
expenses described in this paragraph may (but need not) be
allocated as Class Expenses, but only if Ivy Fund's Board of
Trustees determines, or Ivy Fund's President and
Secretary/Treasurer have determined, subject to ratification by
the Board of Trustees, that the allocation of such expenses by
class is consistent with applicable legal principles under the
1940 Act and the Internal Revenue Code of 1986, as amended.
In the event that a particular expense is no longer
reasonably allocable by class or to a particular class, it shall
be treated as a Trust Expense or Fund Expense, and in the event a
Trust Expense or Fund Expense becomes reasonably allocable as a
Class Expense, it shall be so allocated, subject to compliance
with Rule 18f-3 and to approval or ratification by the Board of
Trustees.
3. WAIVERS OR REIMBURSEMENTS OF EXPENSES
Expenses may be waived or reimbursed by any adviser to Ivy
Fund, by Ivy Fund's underwriter or any other provider of services
to Ivy Fund without the prior approval of Ivy Fund's Board of
Trustees.
D. EXCHANGE PRIVILEGES
Shareholders of each Fund have exchange privileges with the
other Funds and with the five funds that comprise Mackenzie
Series Trust (together, with the Funds, the "Ivy and Mackenzie
Funds").[FN7][Other exchange privileges, not described herein,
exist under certain other circumstances, as described in each
Fund's current prospectus or prospectus supplement.]
1. CLASS A:
INITIAL SALES CHARGE SHARES. Class A shareholders may
exchange their Class A shares ("outstanding Class A shares") for
Class A shares of another Ivy or Mackenzie Fund (or for shares of
another Ivy or Mackenzie Fund that currently offers only a single
class of shares) ("new Class A Shares") on the basis of the
relative net asset value per Class A share, plus an amount equal
to the difference, if any, between the sales charge previously
paid on the outstanding Class A shares and the sales charge
payable at the time of the exchange on the new Class A shares.
Incremental sales charges are waived for outstanding Class A
shares that have been invested for 12 months or longer.
CONTINGENT DEFERRED SALES CHARGE SHARES. Class A
shareholders may exchange their Class A shares subject to a
contingent deferred sales charge ("CDSC"), as described in the
Prospectus ("outstanding Class A shares"), for Class A shares of
another Ivy or Mackenzie Fund (or for shares of another Ivy or
Mackenzie Fund that currently offers only a single class of
shares) ("new Class A shares") on the basis of the relative net
asset value per Class A share, without the payment of a CDSC that
would otherwise be due upon the redemption of the outstanding
Class A shares. Class A shareholders of a Fund exercising the
exchange privilege will continue to be subject to the Fund's CDSC
schedule (or period) following an exchange, unless the CDSC
schedule that applies to the new Class A shares is higher (or
such period is longer) than the CDSC schedule (or period), if
any, applicable to the outstanding Class A shares, in which case
the schedule (or period) of the Fund into which the exchange is
made shall apply.
2. CLASS B AND CLASS C:
Shareholders may exchange their Class B or Class C shares
("outstanding Class B shares" or "outstanding Class C shares,"
respectively) for Class B (or Class C) shares of another Ivy or
Mackenzie Fund ("new Class B shares" or "new Class C shares,"
respectively) on the basis of the net asset value per Class B (or
Class C) share, without the payment of any CDSC that would
otherwise be due upon the redemption of the outstanding Class B
(or Class C) shares. Class B and Class C shareholders of a Fund
exercising the exchange privilege will continue to be subject to
the Fund's CDSC schedule (or period) following an exchange,
unless, in the case of Class B shareholders, the CDSC schedule
that applies to the new Class B shares is higher (or such period
is longer) than the CDSC schedule (or period) applicable to the
outstanding Class B shares, in which case the schedule (or
period) of the Fund into which the exchange is made shall apply.
3. CLASS I:
Class I shareholders may exchange their outstanding Class I
shares for Class I shares of another Fund or Mackenzie Fund on
the basis of the net asset value per Class I share.
4. GENERAL:
Shares resulting from the reinvestment of dividends and
other distributions will not be charged an initial sales charge
or CDSC when exchanged into another Ivy or Mackenzie Fund.
With respect to Fund shares subject to a CDSC, if less than
all of an investment is exchanged out of the Fund, the shares
exchanged will reflect, pro rata, the cost, capital appreciation
and/or reinvestment of distributions of the original investment
as well as the original purchase date, for purposes of
calculating any CDSC for future redemptions of the exchanged
shares.
E. CONVERSION FEATURE
Class B shares of a Fund convert automatically to Class A
shares of the Fund as of the close of business on the first
business day after the last day of the calendar quarter in which
the eighth anniversary of the purchase date of the Class B shares
occurs. The conversion will be based on the relative net asset
values per share of the two classes, without the imposition of
any sales load, fee or other charge. For purposes of calculating
the eight year holding period, the "purchase date" shall mean the
date on which the Class B shares were initially purchased,
regardless of whether the Class B shares that are subject to the
conversion were obtained through an exchange (or series of
exchanges) from a different Ivy or Mackenzie Fund. For purposes
of conversion of Class B shares, Class B shares acquired through
the reinvestment of dividends and capital gain distributions paid
in respect of Class B shares will be held in a separate sub-
account. Each time any Class B shares in the shareholder's
regular account (other than those shares in the sub-account)
convert to Class A shares, a pro rata portion of the Class B
shares in the sub-account will also convert to Class A shares.
The portion will be determined by the ratio that the
shareholder's Class B shares converting to Class A shares bears
to the shareholder's total Class B shares not acquired through
the reinvestment of dividends and capital gain distributions.
IV. BOARD REVIEW
A. INITIAL APPROVAL
The Board of Trustees of Ivy Fund, including a majority of
the Trustees who are not interested persons of Ivy Fund, as
defined under the 1940 Act (the "Independent Trustees"), at a
meeting held on December 1-2, 1995, initially approved this Plan
based on a determination that the Plan, including the expense
allocation, is in the best interests of each class of shares of
each Fund individually and Ivy Fund as a whole.[FN8][The Plan, as
initially approved, pertained only to the Class A and Class B
shares of the Funds, and the Class I shares of Ivy Bond Fund and
Ivy International Fund. The Plan was amended and restated on
April 30, 1996 to reflect the establishment and designation of
Class C shares of the Funds. The Plan was further amended and
restated on June 8, 1996 to reflect the establishment and
designation of Ivy Global Science and Technology Fund. The Plan
was further amended and restated on December 7, 1996 to reflect
the establishment and designation of Ivy Global Natural Resources
Fund, Ivy Asia Pacific Fund and Ivy International Small Companies
Fund. The Plan has been further amended and restated, as of the
date set forth on the first page hereof, to reflect the
establishment and designation of Ivy Pan-Europe Fund.]
B. APPROVAL OF AMENDMENTS
Before any material amendments to this Plan, Ivy Fund's
Board of Trustees, including a majority of the Independent
Trustees, must find that the Plan, as proposed to be amended
(including any proposed amendments to the method of allocating
class and/or fund expenses), is in the best interests of each
class of shares of each Fund individually and Ivy Fund as a
whole. In considering whether to approve any proposed
amendment(s) to the Plan, the Trustees of Ivy Fund shall request
and evaluate such information as they consider reasonably
necessary to evaluate the proposed amendment(s) to the Plan.
Such information shall address the issue of whether any waivers
or reimbursements of advisory or administrative fees could be
considered a cross-subsidization of one class by another, and
other potential conflicts of interest between classes.
C. PERIODIC REVIEW
The Board of Trustees of Ivy Fund shall review the Plan as
frequently as it deems necessary, consistent with applicable
legal requirements.
V. EFFECTIVE DATE
The Plan first became effective as of January 1, 1996.
