As filed electronically with the Securities and Exchange Commission on
March 16, 2000
(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. 113 [ 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
75 days after filing, pursuant to paragraph (a)(2) of Rule 485.
THIS POST-EFFECTIVE AMENDMENT NO. 113 IS BEING FILED IN ORDER TO ESTABLISH IVY
CUNDILL VALUE FUND AND IVY NEXT WAVE INTERNET FUND AS TWO SEPARATE SERIES OF THE
REGISTRANT AND SUPERCEDES POST-EFFECTIVE AMENDMENT NO. 111 (WHICH CONTAINED
PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION FOR IVY CUNDILL VALUE FUND
ONLY). THE PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION THAT ARE
INCLUDED IN THIS POST-EFFECTIVE AMENDMENT NO. 113 ARE TO BE USED CONCURRENTLY
WITH AND SEPARATELY FROM THE CURRENTLY EFFECTIVE PROSPECTUSES AND STATEMENTS OF
ADDITIONAL INFORMATION FOR THE OTHER NINETEEN SERIES OF THE REGISTRANT, WHICH
ARE NOT INCLUDED HEREWITH, BUT ARE INCORPORATED BY REFERENCE TO THIS FILING.
IVY FUND
CROSS REFERENCE SHEET
Post-Effective Amendment No. 113 contains the Prospectuses and
Statements of Additional Information ("SAIs") to be used with Ivy Cundill Value
Fund and Ivy Next Wave Internet Fund, two of the twenty-one series of Ivy Fund
(the "Registrant"). The other nineteen series of the Registrant are described in
separate prospectuses and SAIs, which are not included herewith but are
incorporated by reference herein.
ITEMS REQUIRED BY FORM N-1A:
PART A: (Consisting of 2 Prospectuses, one relating to the Funds' Class A, B, C
and I Shares, and the second to the Funds' Advisor Class Shares.)
ITEM 1 FRONT AND BACK COVER PAGES: Front and back cover pages
ITEM 2 RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE: Summary
ITEM 3 RISK/RETURN SUMMARY: FEE TABLE: Summary
ITEM 4 INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RELATED
RISKS: Summary; Additional Information About Investment Strategies And
Risks
ITEM 5 MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: Not applicable
ITEM 6 MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE: Management
ITEM 7 SHAREHOLDER INFORMATION: Shareholder Information
ITEM 8 DISTRIBUTION ARRANGEMENTS: Shareholder Information
ITEM 9 FINANCIAL HIGHLIGHTS INFORMATION: Not applicable
PART B (Consisting of 2 SAIs, one relating to the Funds' Class A, B, C and I
Shares, and the second to the Funds' Advisor Class Shares.)
ITEM 10 COVER PAGE AND TABLE OF CONTENTS: Cover Page; Table of Contents
ITEM 11 FUND HISTORY: General Information
ITEM 12 DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS: Investment
Objectives, Strategies and Risks; Investment Restrictions; Appendix A
ITEM 13 MANAGEMENT OF THE FUND: Investment Advisory And Other Services
ITEM 14 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Trustees and
Officers
ITEM 15 INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisory And Other
Services
ITEM 16 BROKERAGE ALLOCATION AND OTHER PRACTICES: Brokerage Allocation
ITEM 17 CAPITAL STOCK AND OTHER SECURITIES: Capitalization and Voting Rights
ITEM 18 PURCHASE, REDEMPTION AND PRICING OF SHARES: Special Rights and
Privileges; Capitalization and Voting Rights; Net Asset Value
ITEM 19 TAXATION OF THE FUND: Taxation
ITEM 20 UNDERWRITERS: Distribution Services
ITEM 21 CALCULATION OF PERFORMANCE DATA: Performance Information
ITEM 22 FINANCIAL STATEMENTS: Financial Statements
[Front Cover Page]
PROSPECTUS
__________ __, 2000
IVY FUND
Ivy Cundill Value Fund
Ivy Next Wave Internet Fund
Ivy Fund (the "Trust") is a registered open-end investment company currently
consisting of twenty one separate portfolios. This Prospectus relates to the
Class A, Class B, Class C and Class I shares of Ivy Cundill Value Fund and Ivy
Next Wave Internet Fund (the "Funds"). The Funds also offer Advisor Class
shares, which are described in a separate prospectus.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy or accuracy of this Prospectus. Any
representation to the contrary is a criminal offense.
Investments in the Funds are not deposits of any bank and are not federally
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
[Insert all logos]
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY.....................................................................4
ADDITIONAL INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS...............11
MANAGEMENT.................................................................15
SHAREHOLDER INFORMATION....................................................16
ACCOUNT APPLICATION........................................................26
HOW TO RECEIVE MORE INFORMATION ABOUT THE FUNDS............................32
SHAREHOLDER INQUIRIES......................................................32
<PAGE>
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN AUDITORS
Brown Brothers Harriman & Co. PricewaterhouseCoopers LLP
Boston, Massachusetts Fort Lauderdale, Florida
TRANSFER AGENT INVESTMENT MANAGER
Ivy Mackenzie Services Corp. Ivy Management, Inc.
PO Box 3022 700 South Federal Highway
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
<PAGE>
SUMMARY
IVY CUNDILL VALUE FUND
Investment The Fund seeks long-term capital growth. Any income realized
objective will be incidental.
Principal The Fund invests at least 65% of its assets in equity
investment securities throughout the world that the Fund's management
strategies team believes are trading below their estimated "intrinsic
value." This is the perceived realizable market value,
determined through the management team's analysis of the
companies' financial statements (and includes factors such
as earnings, cash flows, dividends, business prospects,
management capabilities and other catalysts for potentially
increasing shareholder value). Companies targeted for
investment also tend to have favorable debt to equity
levels. Up to 15% of the Fund's net assets may be invested
in illiquid securities.
To control its exposure to certain risks, the Fund might
use certain derivative investment techniques (such as
foreign currency exchange transactions and forward foreign
currency contracts).
Principal The main risks to which the Fund is exposed in
risks carrying out its investment strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not
perform as well as the securities held by other mutual
funds with investment objectives that are similar to those
of the Fund.
MARKET RISK: Equity securities typically represent a
proportionate ownership interest in a company. The market
value of equity securities can fluctuate significantly even
where "management risk" is not a factor, so you could lose
money if you redeem your Fund shares at a time when the
Fund's equity portfolio is not performing as well as
expected.
FOREIGN SECURITY AND EMERGING MARKET RISK: Investing in
foreign securities involves a number of economic, financial
and political considerations that are not associated with
the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing
conditions at any given time. Among these potential risks
are:
- greater price volatility;
- comparatively weak supervision and regulation of
securities exchanges, brokers and issuers;
- higher brokerage costs;
- fluctuations in foreign-currency exchange rates and
related conversion costs;
- adverse tax consequences; and
- settlement delays.
The risks of investing in foreign securities are more acute
in countries with emerging or developing economies.
ILLIQUID SECURITY RISK: The Fund may not be able to readily
dispose of illiquid securities promptly at an acceptable
price.
DERIVATIVES RISK: The Fund may, but is not required to, use
a range of derivative investment techniques to hedge
various market risks (such as interest rates, currency
exchange rates, and broad or specific equity or
fixed-income market movements) or to enhance potential
gain. The use of these derivative investment techniques
involves a number of risks, including the possibility of
default by the counterparty to the transaction and, to the
extent the judgement of the Fund's manager as to certain
market movements is incorrect, the risk of losses that are
greater than if the derivative technique (s) had not been
used.
Who The Fund may be appropriate for investors seeking long-
should term growth potential, but who can accept significant
invest* fluctuations in capital value in the short-term.
* You should consult with your financial advisor before deciding whether
the Fund is an appropriate investment choice in light of your
particular financial needs and risk tolerance.
Performance Information
The Fund commenced operations on _________ ___, 2000, and so no
performance information is available.
Fees and Expenses
The following tables describe the fees and expenses that you may pay if
you buy and hold shares of the Fund:
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- -----------------------------------------------------------
Class A Class B Class C Class I
Maximum sales charge (load) imposed 5.75% None None None
on purchases (as a percentage of
offering price)......
Maximum deferred sales charge (load) None 5.00% 1.00% None
(as a percentage of purchase
price)...........................
Maximum sales charge (load) imposed None None None None
on reinvested dividends....
Redemption fee*....................... None None None None
Exchange fee.......................... None None None None
* If you choose to receive your redemption proceeds via Federal Funds wire, a
$10 wire fee will be charged to your account.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
-----------------------------------------------------------------------------
Class A Class B Class C Class I
Management fees............. 1.00% 1.00% 1.00% 1.00%
Distribution and/or 0.25% 1.00% 1.00% None
service (12b-1) fees....
Other expenses....... 0.95% 0.95% 0.95% 0.86%
Total annual Fund 2.20% 2.95% 2.95% 1.86%
operating expenses*.....
* The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of the
following nine years, the Investment Manager will ensure that these
expenses do not exceed 2.50% of the Fund's average net assets.
Example
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of
those periods (with additional information shown for Class B and Class
C shares based on the assumption that you do not redeem your shares at
that time). The example also assumes that your investment has a 5%
return each year and that the Fund's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be as follows:
Year Class Class (no redemption) Class (no redemption) Class I
A B Class B C Class C
1st $785 $798 $298 $398 $298 $189
3rd 1,224 1,213 913 913 913 585
<PAGE>
IVY NEXT WAVE INTERNET FUND
Investment The Fund seeks long-term capital growth. Any income realized
objective will be incidental.
Principal The Fund invests at least 65% of its assets in the equity
investment securities of companies of any size engaged in the design,
strategies development and/or marketing of Internet related services or
products. The Fund may purchase securities through initial
public offerings.
The Fund's management team believes that the Internet is a
fertile growth area, and actively seeks to position the Fund
to benefit from this growth by investing in companies engaged
in Internet-related business activities that may deliver rapid
earnings growth and potentially high investment returns.
Principal The main risks to which the Fund is exposed in carrying out
risks its investment strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not
perform as well as the securities held by other mutual
funds with investment objectives that are similar to those
of the Fund.
MARKET RISK: Equity securities typically represent a
proportionate ownership interest in a company. The market
value of equity securities can fluctuate significantly even
where "management risk" is not a factor, so you could lose
money if you redeem your Fund shares at a time when the
Fund's equity portfolio is not performing as well as
expected.
SMALL- AND MEDIUM-SIZED COMPANY RISK: Many of the companies
in which the Fund may invest have relatively small market
capitalizations. Securities of smaller companies may be
subject to more abrupt or erratic market movements than the
securities of larger, more established companies, since
smaller companies tend to be thinly traded and because they
are subject to greater business risk. Transaction costs in
smaller-company stocks may also be higher than those of
larger companies.
IPO RISK: Securities issued through an initial public
offering (IPO) can experience an immediate drop in value if
the demand for the securities does not continue to support
the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new
to the market and may not have lengthy operating histories.
The Fund may engage in short-term trading in connection
with its IPO investments, which could produce higher
trading costs and adverse tax consequences. The number of
securities issued in an IPO is also limited, so it is
likely that IPO securities will represent a smaller
component of the Fund's portfolio as the Fund's assets
increase (and thus have a more limited effect on the Fund's
performance).
INDUSTRY CONCENTRATION RISK: Since the Fund focuses its
investment in securities of companies engaged in
Internet-related business activities, the Fund could
experience wider fluctuations in value than funds with more
diversified portfolios.
Who The Fund may be appropriate for investors
should seeking long-term growth potential, but who can accept
invest* significant fluctuations in capital value in the
short-term.
* You should consult with your financial advisor before deciding whether
the Fund is an appropriate investment choice in light of your
particular financial needs and risk tolerance.
Performance Information
The Fund commenced operations on _________ ___, 2000, and so no
performance information is available.
Fees and Expenses
The following tables describe the fees and expenses that you may pay if
you buy and hold shares of the Fund:
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- -----------------------------------------------------------
Class A Class B Class C Class I
Maximum sales charge (load) imposed 5.75% None None None
on purchases (as a percentage of
offering price)......
Maximum deferred sales charge (load) None 5.00% 1.00% None
(as a percentage of purchase
price)...........................
Maximum sales charge (load) imposed None None None None
on reinvested dividends....
Redemption fee*...................... None None None None
Exchange fee......................... None None None None
* If you choose to receive your redemption proceeds via Federal Funds wire, a
$10 wire fee will be charged to your account.
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
-----------------------------------------------------------------------------
Class A Class B Class C Class I
Management fees............. 1.00% 1.00% 1.00% 1.00%
Distribution and/or 0.25% 1.00% 1.00% None
service (12b-1) fees....
Other expenses....... 0.95% 0.95% 0.95% 0.86%
Total annual Fund 2.20% 2.95% 2.95% 1.86%
operating expenses*.....
* The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of the
following nine years, the Investment Manager will ensure that these
expenses do not exceed 2.50% of the Fund's average net assets.
Example
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of
those periods (with additional information shown for Class B and Class
C shares based on the assumption that you do not redeem your shares at
that time). The example also assumes that your investment has a 5%
return each year and that the Fund's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be as follows:
Year Class Class (no redemption) Class (no redemption) Class I
A B Class B C Class C
1st $785 $798 $298 $398 $298 $189
3rd 1,224 1,213 913 913 913 585
<PAGE>
ADDITIONAL INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS
Principal strategies
Ivy Cundill Value Fund:
The Fund seeks to achieve its principal objective of long-term capital
growth by investing primarily in the equity securities of companies
throughout the world.
The investment approach of Peter Cundill & Associates, Inc.
("Cundill"), the Fund's sub-advisor, is based on a contrarian "value"
philosophy. Cundill looks for securities that are trading below their
estimated intrinsic value. To determine the intrinsic value of a
particular company, Cundill focuses primarily on the company's
financial statements. Cundill also considers factors such as earnings,
dividends, business prospects, management capabilities and potential
catalysts (such as a change in management) to realize shareholder
value. A security is purchased when the price reflects a significant
discount to Cundill's estimate of the company's intrinsic value. Given
the bottom-up or company specific approach, Cundill does not forecast
economies or corporate earnings and does not rely on market timing.
Ivy Next Wave Internet Fund:
The Fund seeks to achieve its principal objective of long-term capital
growth by investing primarily in the equity securities of companies of
any size engaged in the design, development and/or marketing of
Internet related services or products. The Fund may also invest in
companies that are expected to benefit indirectly from the Internet and
related business applications.
The Internet is a global computer network connecting millions of users
worldwide through the use of a standard common addressing system and
communications protocol. People and businesses throughout the world use
the Internet to retrieve and exchange information, conduct business,
and access a vast array of services, products and other resources.
Rapid advances in the Internet business environment in recent years
have stimulated unprecedented growth. While this is no guarantee of
future performance, the Fund's management team believes that this
industry offers substantial opportunities for long-term capital
appreciation.
Both Funds: Each Fund may from time to time take a temporary defensive
position and invest without limit in U.S. Government securities,
investment-grade debt securities, and cash and cash equivalents such as
commercial paper, short-term notes and other money market securities.
When a Fund assumes such a defensive position it may not achieve its
investment objective. Investing in debt securities also involves both
interest rate and credit risk.
Principal risks
General market risk: As with any mutual fund, the value of a Fund's
investments and the income they generate will vary daily and generally
reflect market conditions, interest rates and other issuer-specific,
political or economic developments. Each Fund's share value will
decrease at any time during which its security holdings or other
investment techniques are not performing as well as anticipated, and
you could therefore lose money by investing in a Fund depending upon
the timing of your initial purchase and any subsequent redemption or
exchange.
Other risks: The following table identifies the investment techniques
that each Fund's adviser considers important in achieving the Fund's
investment objective or in managing its exposure to risk (and that
could therefore have a significant effect on the Fund's returns).
Following the table is a description of the general risk
characteristics of these investment techniques. The risks of certain
investment practices that are not principal strategies of the Funds
(such as borrowing and illiquid securities) are also described below.
Other investment techniques that the Funds may use, but that are not
likely to play a key role in their overall investment strategies, are
described in the Funds' Statement of Additional Information (see back
cover page for information on how you can receive a free copy).
------------------------------------------------- ----------- ----------
Investment technique: ICVF INWIF
------------------------------------------------- ----------- ----------
------------------------------------------------- ----------- ----------
Equity securities................. X X*
------------------------------------------------- ----------- ----------
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Foreign securities.............. X
------------------------------------------------- ----------- ----------
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Foreign currencies............ X
------------------------------------------------- ----------- ----------
------------------------------------------------- ----------- ----------
Emerging markets............. X
------------------------------------------------- ----------- ----------
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Illiquid securities............. X
------------------------------------------------- ----------- ----------
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Derivatives.................... X
------------------------------------------------- ----------- ----------
------------------------------------------------- ----------- ----------
Investment concentration... X
------------------------------------------------- ----------- ----------
------------------------------------------------- ----------- ----------
Borrowing..................... X X
------------------------------------------------- ----------- ----------
* The Fund's equity investments may include securities issued
through initial public offerings.
Risk characteristics:
o Equity Securities: Both Funds invest primarily in equity securities,
including common stocks, preferred stocks and securities convertible
into common stocks. Equity securities typically represent a
proportionate ownership interest in a company. As a result, the value
of equity securities rises and falls with a company's success or
failure. The market value of these securities can fluctuate
significantly, with smaller companies being particularly susceptible to
price swings. Transaction costs in smaller-company stocks may also be
higher than those of larger companies. Investors in Ivy Next Wave
Internet Fund should note that these risks are heightened in the case
of securities issued through IPOs.
o Foreign Securities: Ivy Cundill Value Fund may invest in the securities
of foreign issuers. Investing in foreign securities involves a number
of economic, financial and political considerations that are not
associated with the U.S. markets and that could affect the Fund's
performance favorably or unfavorably, depending upon prevailing
conditions at any given time. For example, the securities markets of
many foreign countries may be smaller, less liquid and subject to
greater price volatility than those in the U.S. Foreign investing may
also involve brokerage costs and tax considerations that are not
usually present in the U.S. markets.
Other factors that can affect the value of the Fund's foreign
investments include the comparatively weak supervision and regulation
by some foreign governments of securities exchanges, brokers and
issuers, and the fact that many foreign companies may not be subject to
uniform accounting, auditing and financial reporting standards. It may
also be difficult to obtain reliable information about the securities
and business operations of certain foreign issuers. Settlement of
portfolio transactions may also be delayed due to local restrictions or
communication problems, which can cause the Fund to miss attractive
investment opportunities or impair its ability to dispose of securities
in a timely fashion (resulting in a loss if the value of the securities
subsequently declines).
o Foreign Currencies: A number of Ivy Cundill Value Fund's securities may
also be denominated in foreign currencies, and the value of the Fund's
investments as measured in U.S. dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange
control regulations. Currency conversion can also be costly.
o Special Emerging Market Concerns: The risks of investing in foreign
securities are heightened in countries with developing economies. Among
these additional risks are the following:
o securities that are even less liquid and more volatile than those
in more developed foreign countries;
o less stable governments that are susceptible to sudden adverse
actions (such as nationalization of businesses, restrictions on
foreign ownership or prohibitions against repatriation of
assets);
o increased settlement delays;
o unusually high inflation rates (which in extreme cases can cause
the value of a country's assets to erode sharply);
o unusually large currency fluctuations and currency conversion
costs; and
o high national debt levels (which may impede an issuer's payment
of principal and/or interest on external debt).
o Illiquid Securities: "Illiquid securities" are assets that may not be
disposed of in the ordinary course of business within seven days at
roughly the value at which the investing fund has valued the assets.
Some of these may be "restricted securities," which cannot be sold to
the public without registration under the Securities Act of 1933 (in
the absence of an exemption) or because of other legal or contractual
restrictions on resale. Thus, while illiquid securities may offer the
potential for higher returns than more readily marketable securities,
there is a risk that the investing fund will not be able to dispose of
them promptly at an acceptable price.
o Derivative Investment Techniques: Ivy Cundill Value Fund may, but is
not required to, use certain derivative investment techniques to hedge
various market risks (such as interest rates, currency exchange rates
and broad or specific market movements) or to enhance potential gain.
Among the derivative techniques the Fund might use are options, futures
and forward foreign currency contracts.
Writing put and call options could cause the Fund to lose money by
forcing the sale or purchase of portfolio securities at inopportune
times or for prices higher (in the case of put options) or lower (in
the case of call options) than current market values, by limiting the
amount of appreciation the Fund can realize on its investments, or by
causing the Fund to hold a security it might otherwise sell.
Futures transactions (and related options) involve other types of
risks. For example, the variable degree of correlation between price
movements of futures contracts and price movements in the related
portfolio position of the Fund could cause losses on the hedging
instrument that are greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in
all circumstances and certain over-the-counter options may have no
markets. As a result, the Fund might not be able to close out a
transaction before expiration without incurring substantial losses (and
it is possible that the transaction cannot even be closed). In
addition, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would
purchases of options, where the exposure is limited to the cost of the
initial premium.
Foreign currency transactions (such as forward foreign currency
contracts) can cause investment losses in a variety of ways. For
example, changes in currency exchange rates may result in poorer
overall performance for the Fund than if it had not engaged in such
transactions. There may also be an imperfect correlation between the
Fund's portfolio holdings of securities denominated in a particular
currency and the 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.
o Investment Concentration: Since Ivy Next Wave Internet Fund focuses its
investment in securities of companies engaged in Internet-related
business activities, the Fund could experience wider fluctuations in
value than funds with more diversified portfolios.
Although Ivy Cundill Value Fund will not invest more than 25% of its
total assets in any one industry and does not expect to focus its
investments in a single country, it may at any given time have a
significant percentage of its total assets in one or more countries or
market sectors. If this were to occur, the Fund could experience a
wider fluctuation in value than funds with more diversified portfolios.
o Borrowing: For temporary or emergency purposes (such as meeting
shareholder redemption requests within the time periods specified under
the Investment Company Act of 1940), each Fund may borrow up to 10% of
the value of its total assets from qualified banks. Borrowing may
exaggerate the effect on a Fund's share value of any increase or
decrease in the value of the securities it holds. Money borrowed will
also be subject to interest costs.
Other Important Information:
European Monetary Union: Ivy Cundill Value Fund may have investments in
Europe. On January 1, 1999, a new European currency called the "euro"
was introduced and adopted for use by eleven European countries. The
transition to daily usage of the euro will occur during the period from
January 1, 1999 through December 31, 2001, at which time euro bills and
coins will be put into circulation. Certain European Union (EU)
members, including the United Kingdom, did not officially implement the
euro on January 1, 1999 and may cause market disruptions when and if
they decide to do so. Should this occur, the Fund could experience
investment losses.
MANAGEMENT
Investment Adviser
Ivy Management, Inc. ("IMI", or the "Advisor"), located at Via Mizner
Financial Plaza, 700 South Federal Highway, Boca Raton, Florida 33432,
provides investment advisory and business management services to the
Funds. IMI is an SEC-registered investment adviser with over $7.2
billion in assets under management, and provides similar services to
the other nineteen series of the Trust and the five series of Mackenzie
Solutions. For its services, IMI receives a fee that is equal, on an
annual basis, to 1.00% of each Fund's average net assets.
Cundill, an SEC-registered investment adviser located at 7733 Forsyth
Blvd., Suite 2000, St. Louis, Missouri, 63105, serves as subadvisor to
the Fund under an agreement with IMI. Cundill began operations in 1984,
and as of the end of 1999 (along with its affiliates) had approximately
$1 billion in assets under management. For its services, Cundill
receives a fee from IMI that is equal, on an annual basis, to 0.50% of
the Fund's average net assets. Cundill's fee will be paid by IMI out of
the advisory fee that it receives from the Fund.
Portfolio Management
Ivy Cundill Value Fund: The Fund is managed by two investment
professionals that are supported by a team of research analysts who are
responsible for providing information on regional and country-specific
economic and political developments and monitoring individual
companies.
o F. Peter Cundill has over 30 years of value investing experience
and has managed Mackenzie Financial Corporation's Cundill Value
Fund since 1975. He is a Chartered Financial Analyst, a Chartered
Accountant and holds a Bachelor of Commerce degree from McGill
University, Montreal.
o Leslie A. Ferris has over 16 years of investment industry
experience in North American equity and fixed income securities.
Before joining Cundill in 1998, she was a portfolio manager for
the Trust and for the Kemper Funds. Ms. Ferris is a Chartered
Financial Analyst, a Certified Public Accountant, and holds an MBA
from the University of Chicago.
Ivy Next Wave Internet Fund: A team of professional portfolio managers
employed by IMI makes investment decisions for the Fund.
SHAREHOLDER INFORMATION
Pricing of Fund shares
Each Fund calculates its share price by dividing the value of the
Fund's net assets by the total number of its shares outstanding as of
the close of regular trading (usually 4:00 p.m. Eastern time) on the
New York Stock Exchange (the "Exchange") on each day the Exchange is
open for trading (normally any weekday that is not a national holiday).
Each portfolio security that is listed or traded on a recognized stock
exchange is valued at the security's last quoted sale price on the
exchange on which it is principally traded. If no sale is reported at
that time, the average between the last bid and asked prices is used.
Securities and other Fund assets for which market prices are not
readily available are priced at their "fair value" as determined by the
Advisor in accordance with procedures approved by the Funds' Board of
Trustees. The Advisor may also price a foreign security at its "fair
value" if events materially affecting the value of the security occur
between the close of the foreign exchange on which the security is
principally traded and the time as of which a Fund prices its shares.
Fair-value pricing under these circumstances is designed to protect
existing shareholders from the actions of short-term investors trading
into and out of a Fund in an attempt to profit from short-term market
movements. When such fair value pricing occurs, there may be some
period of time during which a Fund's share price and/or performance
information is not available.
The number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based
on a Fund's net asset value next determined after your instructions are
received in proper form by Ivy Mackenzie Services Corp. ("IMSC") (the
Funds' transfer agent) or by your registered securities dealer. Each
purchase and redemption order is subject to any applicable sales charge
(see "Choosing the appropriate class of shares"). Since the Funds
normally invest in securities that are listed on foreign exchanges that
may trade on weekends or other days when the Funds do not price their
shares, each Fund's share value may change on days when shareholders
will not be able to purchase or redeem the Fund's shares.
<PAGE>
How To Buy Shares:
Please read these sections below carefully before investing.
Choosing the appropriate class of shares - The essential features of
the Funds' different classes of shares are described below. If you do
not specify on your Account Application which class of shares you are
purchasing, it will be assumed that you are purchasing Class A shares.
Each Fund has adopted separate distribution plans pursuant to Rule
12b-1 under the 1940 Act for its Class A, B and C shares that allow the
Fund to pay distribution and other fees for the sale and distribution
of its shares and for services provided to shareholders. Because these
fees are paid out of the Fund's assets on an on-going basis, over time
they will increase the cost of your investment and may cost you more
than paying other types of sales charges.
CLASS A SHARES: Class A shares are sold at net asset value plus a
maximum sales charge of 5.75% (the "offering price"). The sales charge
may be reduced or eliminated if certain conditions are met (see
"Additional Purchase Information" below). Class A shares are subject to
a 0.25% Rule 12b-1 service fee.
CLASS B SHARES: Class B shares are offered at net asset value, without
an initial sales charge, but subject to a contingent deferred sales
charge ("CDSC") that declines from 5% to zero on certain redemptions
within six years of purchase. Class B shares are subject to a 0.75%
Rule 12b-1 distribution fee and a 0.25% Rule 12b-1 service fee, and
convert automatically into Class A shares eight years after purchase.
CLASS C SHARES: Class C shares are offered at net asset value, without
an initial sales charge, but subject to a CDSC of 1.00% for redemptions
within the first year of purchase. Class C shares are subject to a
0.75% Rule 12b-1 distribution fee and a 0.25% Rule 12b-1 service fee.
CLASS I SHARES: Class I shares are offered to certain classes of
investors at net asset value, without any sales load or Rule 12b-1 fees.
The following table displays the various investment minimums, sales
charges and expenses that apply to each class.
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------- ------------------- -------------------- -------------------- ----------
Class A Class B Class C Class I
- ---------------------- ------------------- -------------------- -------------------- ----------
- ---------------------- ------------------- -------------------- -------------------- ----------
Minimum initial
investment* $1,000 $1,000 $1,000 $5,000,000
- ---------------------- ------------------- -------------------- -------------------- ----------
- ---------------------- ------------------- -------------------- -------------------- ----------
Minimum subsequent
investment* $100 $100 $100 $10,000
- ---------------------- ------------------- -------------------- -------------------- ----------
- ---------------------- ------------------- -------------------- -------------------- ----------
Initial sales charge Maximum 5.75%, None None None
with options for
a reduction or
waiver
- ---------------------- ------------------- -------------------- -------------------- ----------
- ---------------------- ------------------- -------------------- -------------------- ----------
CDSC None, except on Maximum 5.00%, 1.00% for the None
certain NAV declines over six first year
purchases years
- ---------------------- ------------------- -------------------- -------------------- ----------
- ---------------------- ------------------- -------------------- -------------------- ----------
Service and 0.25% Service fee 0.75% Distribution 0.75% Distribution None
distribution fees fee and 0.25% fee and 0.25%
service fee service fee
- ---------------------- ------------------- -------------------- -------------------- ----------
</TABLE>
* Minimum initial and subsequent investments for retirement plans are $25.
Additional Purchase Information:
o Class A Shares - Class A shares are sold at a public offering
price equal to their net asset value per share plus an initial
sales charge, as set forth below (which is reduced as the amount
invested increases):
<TABLE>
<S> <C> <C> <C>
- ---------------------------------- ---------------------- ------------------ ----------------------
Sales Charge as a Sales Charge as a Portion of Public
Percentage of Public Percentage of Offering Price
Offering Price Net Amount Retained by Dealer
Amount Invested Invested
- ---------------------------------- ---------------------- ------------------ ----------------------
- ---------------------------------- ---------------------- ------------------ ----------------------
Less than $50,000 5.75% 6.10% 5.00%
- ---------------------------------- ---------------------- ------------------ ----------------------
- ---------------------------------- ---------------------- ------------------ ----------------------
$50,000 but less than $100,000 5.25% 5.54% 4.50%
- ---------------------------------- ---------------------- ------------------ ----------------------
- ---------------------------------- ---------------------- ------------------ ----------------------
$100,000 but less than $250,000 4.50% 4.71% 3.75%
- ---------------------------------- ---------------------- ------------------ ----------------------
- ---------------------------------- ---------------------- ------------------ ----------------------
$250, 000 but less than $500,000 3.00% 3.09% 2.50%
- ---------------------------------- ---------------------- ------------------ ----------------------
$500,000 or over* 0.00% 0.00% 0.00%
- ---------------------------------- ---------------------- ------------------ ----------------------
</TABLE>
* A CDSC of 0.50% may apply to Class A shares that are redeemed within
twelve months of the end of the month in which they were purchased.
Class A shares that are acquired through reinvestment of dividends or
distributions are not subject to any sales charges.
How To Reduce Your Initial Sales Charge:
o "Rights of Accumulation" permits you to pay the sales charge that
applies to the cost or value (whichever is higher) of all Ivy Fund
Class A shares you own.
o A "Letter of Intent" permits you to pay the sales charge that would
apply to your cumulative purchase of Fund shares over a 13-month period
(certain restrictions apply).
How To Eliminate Your Initial Sales Charge:
You may purchase Class A shares at NAV (without an initial sales
charge or a CDSC) through any one of the following methods:
o through certain investment advisors and financial planners who charge a
management, consulting or other fee for their services;
o under certain qualified retirement plans;
o as an employee or director of Mackenzie Investment Management Inc. or
its affiliates;
o as an employee of a selected dealer; or
o through the Merrill Lynch Daily K Plan (the "Plan"), provided the Plan
has at least $3 million in assets or over 500 or more eligible
employees. Class B shares of a Fund are made available to Plan
participants at NAV without a CDSC if the Plan has less than $3 million
in assets or fewer than 500 eligible employees. For further information
see "Group Systematic Investment Program" in the SAI.
Certain trust companies, bank trust departments, credit unions,
savings and loans and other similar organizations may also be
exempt from the initial sales charge on Class A shares.
You may also purchase Class A shares at NAV if you are investing
at least $500,000 through a dealer or agent. Ivy Mackenzie
Distributors, Inc. ("IMDI"), the Funds' distributor, may pay the
dealer or agent (out of IMDI's own resources) for its distribution
assistance according to the following schedule:
--------------------------------- -------------------------------
Purchase Amount Commission
--------------------------------- -------------------------------
--------------------------------- -------------------------------
First $3,000,000 0.50%
--------------------------------- -------------------------------
--------------------------------- -------------------------------
Next $2,000,000 0.25%
--------------------------------- -------------------------------
--------------------------------- -------------------------------
Over $5,000,000 0.10%
--------------------------------- -------------------------------
IMDI may from time to time pay a bonus or other cash incentive to
dealers (other than IMDI) including, for example, those that employ a
registered representative who during a specified time period sells a
minimum dollar amount of the shares of a Fund and/or other funds
distributed by IMDI.
Each Fund may, from time to time, waive the initial sales charge on its
Class A shares sold to clients of certain dealers meeting criteria
established by IMDI. This privilege will apply only to Class A shares
of a Fund that are purchased using proceeds obtained by such clients
through redemption of another mutual fund's shares on which a sales
charge was paid. Purchases must be made within 60 days of redemption
from the other fund, and the Class A shares purchased are subject to a
1.00% CDSC on shares redeemed within the first year after purchase.
o Class B and Class C Shares - Class B and Class C shares are not
subject to an initial sales charge but are subject to a CDSC. If
you redeem your Class C shares within one year of purchase they
will be subject to a CDSC of 1.00%, and Class B shares redeemed
within six years of purchase will be subject to a CDSC at the
following rates:
--------------------------------- -----------------
CDSC as a
Percentage of
Year Since Purchase Dollar Amount
Subject to
Charge
--------------------------------- -----------------
First 5.00%
--------------------------------- -----------------
--------------------------------- -----------------
Second 4.00%
--------------------------------- -----------------
--------------------------------- -----------------
Third 3.00%
--------------------------------- -----------------
--------------------------------- -----------------
Fourth 3.00%
--------------------------------- -----------------
--------------------------------- -----------------
Fifth 2.00%
--------------------------------- -----------------
--------------------------------- -----------------
Sixth 1.00%
--------------------------------- -----------------
--------------------------------- -----------------
Seventh and thereafter 0.00%
--------------------------------- -----------------
The CDSC for both Class B and Class C shares will be assessed on
an amount equal to the lesser of the current market value or the
original purchase cost of the shares being redeemed. No charge
will be assessed on increases in account value above the original
purchase price or on reinvested dividends and distributions.
Shares will be redeemed on a lot-by-lot basis in the following
order:
o Shares held more than six years;
o Shares acquired through reinvestment of dividends and distributions;
o Shares subject to the lowest CDSC percentage, on a first-in, first-out
basis
(1) with the portion of the lot attributable to capital appreciation
redeemed first, which is not subject to a CDSC; then
(2) the portion of the lot attributable to your original basis, which is
subject to a CDSC.
The CDSC for Class B shares is waived for:
o Certain post-retirement withdrawals from an IRA or other retirement
plan if you are over 59 1/2 years old.
o Redemptions by certain eligible 401(a) and 401(k) plans and certain
retirement plan rollovers.
o Redemptions resulting from a tax-free return of excess contribution to
an IRA.
o Withdrawals resulting from shareholder death or disability provided
that the redemption is requested within one year of death or
disability.
o Withdrawals through the Systematic Withdrawal Plan of up to 12% per
year of your account value at the time the plan is established.
Both Class B shares and Class C shares are subject to an ongoing
service and distribution fee at a combined annual rate of up to
1.00% of the portfolio's average net assets attributable to its
Class B or Class C shares. The ongoing distribution fees will
cause these shares to have a higher expense ratio than that of
Class A and Class I shares. IMDI uses the money that it receives
from the deferred sales charge and the distribution fees to cover
various promotional and sales-related expenses, as well as
expenses related to providing distributions services, such as
compensating selected dealers and agents for selling these shares.
Approximately eight years after the original date of purchase,
your Class B shares will be converted automatically to Class A
shares. Class A shares are subject to lower annual expenses than
Class B shares. The conversion from Class B shares to Class A
shares is not considered a taxable event for federal income tax
purposes. Class C shares do not have a similar conversion
privilege.
o Class I Shares - Class I shares are offered only to institutions
and certain individuals, and are not subject to an initial sales
charge or a CDSC, nor to ongoing service or distribution fees.
Class I shares also bear lower fees than Class A, Class B and
Class C shares.
Submitting Your Purchase Order:
Initial Investments:
Complete and sign the Account Application appearing at the end of this
Prospectus. Enclose a check payable to the Fund in which you wish to
invest. You should note on the check the class of shares you wish to
purchase (see page [XX] for minimum initial investments). Deliver your
application materials to your registered representative or selling
broker, or send them to one of the addresses below:
BY REGULAR MAIL: BY COURIER:
Ivy Mackenzie Services Corp. Ivy Mackenzie Services Corp.
P.O. Box 3022 700 South Federal Hwy., Suite 300
Boca Raton, FL 33431-0922 Boca Raton, FL 33432-6114
Buying Additional Shares:
There are several ways to increase your investment in a Fund:
o BY MAIL - Send your check with a completed investment slip
(attached to your account statement) or written instructions
indicating the account registration, Fund number or name, and
account number. Mail to one of the addresses above.
o THROUGH YOUR BROKER - Deliver to your registered representative or
selling broker the investment slip attached to your statement, or
written instructions, along with your payment.
o BY WIRE - Purchases may also be made by wiring money from your
bank account to your Fund account. Your bank may charge a fee for
wiring funds. Before wiring any funds, please call IMSC at (800)
777-6472. Wiring instructions are as follows:
First Union National Bank of Florida
Jacksonville, FL
ABA #063000021
Account #2090002063833
For further credit to:
Your Account Registration
Your Fund Number and Account Number
o BY AUTOMATIC INVESTMENT METHOD - You can authorize funds to be
electronically drawn each month from your bank account and
invested as a purchase of shares into your Fund account. Complete
sections 6A and 7B of the Account Application.
How To Redeem Shares:
Submitting Your Redemption Order:
You may redeem your Fund shares through your registered securities
dealer or directly through IMSC. If you choose to redeem through your
registered securities dealer, the dealer is responsible for properly
transmitting redemption orders in a timely manner. If you choose to
redeem directly through IMSC, you have several ways to submit your
request:
o BY MAIL - Send your written redemption request to IMSC at one of
the addresses on page [XX] of this Prospectus. Be sure that all
registered owners listed on the account sign the request.
Medallion signature guarantees and supporting legal documentation
may be required. When you redeem, IMSC will normally send
redemption proceeds to you on the next business day, but may take
up to seven days (or longer in the case of shares recently
purchased by check).
o BY TELEPHONE - Call IMSC at (800) 777-6472 to redeem from your
individual, joint or custodial account. To process your redemption
order by telephone, you must have telephone redemption privileges
on your account. IMSC employs reasonable procedures that require
personal identification prior to acting on redemption instructions
communicated by telephone to confirm that such instructions are
genuine. In the absence of such procedures, a Fund or IMSC may be
liable for any losses due to unauthorized or fraudulent telephone
instructions. Requests by telephone can only be accepted for
amounts up to $50,000.
o BY SYSTEMATIC WITHDRAWAL PLAN ("SWP") - You can authorize to have
funds electronically drawn each month from your Fund account and
deposited directly into your bank account. Certain minimum
balances and minimum distributions apply. Complete sections 6B of
the Account Application to add this feature to your account.
Receiving Your Redemption Proceeds - You can receive redemption
proceeds through a variety of payment methods:
o BY CHECK - Unless otherwise instructed in writing, checks will be made
payable to the current account registration and sent to the address of
record.
o BY FEDERAL FUNDS WIRE - Proceeds will be wired on the next business day
to a pre-designated bank account. Your account will be charged $10 each
time redemption proceeds are wired to your bank, and your bank may also
charge you a fee for receiving a Federal Funds wire.
o BY ELECTRONIC FUNDS TRANSFER - For SWP redemptions only.
Important Redemption Information:
o A CDSC may apply to certain Class A share redemptions, to Class B
shares redeemed within six years of purchase, and to Class C shares
that are redeemed within one year of purchase.
o If you own shares of more than one class of a Fund, the Fund will
redeem first the shares having the highest 12b-1 fees, unless you
instruct otherwise.
o Within a class of shares, any shares subject to a CDSC will be redeemed
last unless you specifically elect otherwise.
o Shares will be redeemed in the order described under "Additional
Purchase Information - Class B and Class C shares".
o A Fund may (on 60 days' notice) redeem the accounts of shareholders
whose investment, including sales charges paid, has been less than
$1,000 for more than 12 months.
o A Fund may take up to seven days (or longer in the case of shares
recently purchased by check) to send redemption proceeds.
How to Exchange Shares:
You may exchange your Fund shares for shares of another Ivy fund,
subject to certain restrictions (see "Important exchange information").
Submitting Your Exchange Order:
You may submit an exchange request to IMSC as follows:
o BY MAIL: Send your written exchange request to IMSC at one of the
addresses on page [XX] of this Prospectus. Be sure that all registered
owners listed on the account sign the request.
o BY TELEPHONE: Call IMSC at 800.777.6472 to authorize an exchange
transaction. To process your exchange order by telephone, you must have
telephone exchange privileges on your account. IMSC employs reasonable
procedures that require personal identification prior to acting on
exchange instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such procedures, a Fund or
IMSC may be liable for any losses due to unauthorized or fraudulent
telephone instructions.
Important Exchange Information:
You must exchange into the same share class you currently own.
Exchanges are considered taxable events and may result in a capital
gain or a capital loss for tax purposes.
It is the policy of the Funds to discourage the use of the exchange
privilege for the purpose of timing short-term market fluctuations. The
Funds may therefore limit the frequency of exchanges by a shareholder,
charge a redemption fee or cancel a shareholder's exchange privilege if
at any time it appears that such market-timing strategies are being
used. For example, shareholders exchanging more than five times in a
12-month period may be considered to be using market-timing strategies.
Dividends, distributions and taxes
o The Fund generally declares and pays dividends and capital gain
distributions (if any) at least once a year.
o Dividends and distributions are "reinvested" in additional Fund shares
unless you request to receive them in cash.
o Reinvested dividends and distributions are added to your account at NAV
and are not subject to a CDSC regardless of which share class you own.
o Cash dividends and distributions can be sent to you:
o BY MAIL: a check will mailed to the address of record unless otherwise
instructed.
o BY ELECTRONIC FUNDS TRANSFER ("EFT"): your proceeds will be directly
deposited into your bank account.
To change your dividend and/or distribution options, call IMSC at (800)
777-6472.
Dividends ordinarily will vary from one class to another. The Funds
intend to declare and pay dividends annually. The Funds will distribute
net investment income and net realized capital gains, if any, at least
once a year. The Funds may make an additional distribution of net
investment income and net realized 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").
Dividends paid out of a Fund's investment company taxable income
(including dividends, interest and net short-term capital gains) will
be taxable to you as ordinary income. If a portion of a 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 to you as long-term capital gains,
regardless of how long you have held your shares. Dividends are taxable
to you in the same manner whether received in cash or reinvested in
additional Fund shares. While the Funds' managers may at times pursue
strategies that result in tax efficient outcomes for Fund shareholders,
they do not generally manage the Funds to optimize tax efficiencies.
If shares of a Fund are held in a tax-deferred account, such as a
retirement plan, income and gain will not be taxable each year.
Instead, the taxable portion of amounts held in a tax-deferred account
generally will be subject to tax as ordinary income only when
distributed from that account.
A distribution will be treated as paid to you on December 31 of the
current calendar year if it is declared by a Fund in October, November
or December with a record date in such a month and paid by the Fund
during January of the following calendar year. In certain years, you
may be able to claim a credit or deduction on your income tax return
for your share of foreign taxes paid by your Fund.
Upon the sale or other disposition of your Fund shares, you may realize
a capital gain or loss which will be long-term or short-term, generally
depending upon how long you held your shares.
A Fund may be required to withhold U.S. Federal income tax at the rate
of 31% of all distributions payable to you if you fail to provide the
Fund with your correct taxpayer identification number or to make
required certifications, or if you have been notified by the Internal
Revenue Service that you are subject to backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be
credited against your U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
You should consult with your tax adviser as to the tax consequences of
an investment in the Funds, including the status of distributions from
the Funds under applicable state or local law.
<PAGE>
ACCOUNT APPLICATION
Please mail applications and checks to:
Ivy Mackenzie Services Corp.
P.O. Box 3022, Boca Raton, FL 33431-0922
- -------------------------------------------------------------------------------
This application should not be used for retirement accounts for which
Ivy Fund (IBT) is custodian.
- -------------------------------------------------------------------------------
1 Registration
Name ___________
Address ___________
City ___________ State ____________ Zip __________
Phone # (day) (___)_______ Phone # (evening) (___)___________
___ Individual ___ UGMA / UTMA ___ Sole proprietor
___ Joint tenant ___ Corporation ___ Trust
___ Estate ___ Partnership ___ Other ________
Date of Trust ____________ Minor's state of residence________________
(FUND USE ONLY)
- ------------
Account Number
- ------------
Dealer / Branch / Rep
- ------------
Account Type / Soc Cd
2 Tax I.D.
Citizenship: ____ U.S. ____Other (please specify): ________________
Social Security # ____-____-____ or Tax identification # ___-__________
Under penalties of perjury, I certify by signing in Section 8 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 "Dividends, distributions and taxes" 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 _______
Representative's # _______ Representative's phone # _______
Authorized signature of dealer __________________________________________
4. Investments
A. Enclosed is my check for ($1,000 minimum) $___________ made payable to
the appropriate Fund. Please invest it in Advisor Class shares.
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: _______________ Fund name: ________________
Account #: _______________ Account #: ________________
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 ONLY
Confirmed trade orders:
________ Confirm # ________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. Pay all dividends in cash and reinvest capital gains into additional
shares in this Fund. Account number: _______
B. Pay all dividends and capital gains in cash.
I request the above cash distribution, selected in A or B above, be sent to:
_____ the address listed in the registration
_____ the special payee listed in Section 7A (by mail)
_____ the special payee listed in Section 7B (by EFT)
6 Optional Special Features
A. Automatic Investment Method (AIM)
___ I wish to have my bank account listed in section 7B automatically debited
via EFT on a predetermined frequency and invested into my Fund account listed
below.
1. Withdraw $__________ for each time period indicated below and invest my
bank proceeds into the Fund.
Share class: ___Class A ___ Class B ___ Class C
Account #: __________________________________
2. Debit my bank account:
_____ Annually (on the ___ day of the month of _____).
_____ Semiannually (on the __ day of the months of _____ and ______).
_____ Quarterly (on the ___ day of the first / second / third month of
each calendar quarter. (circle one)
_____ Monthly* ___ once per month on the ___ day
___ twice per month on the ___ days
___ 3 times per month on the ___ days
___ 4 times per month on the ___ days
B. Systematic Withdrawal Plans (SWP)**
___ I wish to have my Fund account automatically debited on a predetermined
frequency and the proceeds sent to me per my instructions below.
1. Withdraw ($50 minimum) $_____ for each time period indicated below from
the following Fund account:
Share Class ___ Class A ____ Class B ____ Class C
Account #: ______________________________________
2. Withdraw from my Fund account:
_____ Annually (on the ___ day of the month of _____).
_____ Semiannually (on the __ day of the months of _____ and ______).
_____ Quarterly (on the ___ day of the first / second / third month
of each calendar quarter. (circle one)
_____ Monthly* ___ once per month on the ___ day
___ twice per month on the ___ days
___ 3 times per month on the ___ days
___ 4 times per month on the ___ days
3. I request the withdrawal proceeds be:
___ sent to the address listed in the registration.
___ sent to the special payee listed in section 7A or 7B.
Note: A minimum balance of $5,000 is required to establish a SWP.
C. Federal Funds Wire for Redemption Proceeds**
By checking "yes" immediately above, I authorize IMSC 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. Telephonic redemptions** ___ yes ___ no
By checking "yes" immediately above, the Fund or its agents are
authorized to honor telephone instructions from any person as more fully
described in the Prospectus for the redemption of Fund shares. The amount of the
redemption shall not exceed $50,000 and the proceeds are to be payable to the
shareholder of record and mailed to the address of record. To change this option
once established, written instructions must be received from the shareholder of
record or the current registered representative.
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
(AIM) / withdrawal (SWP) 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 payee:
Name of bank or individual ___________
Account # (if applicable) _____________
Street ____________________________
City ______ State ______ Zip ______
B. Fed Wire / EFT 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 above means that the Telephone Redemption Privileges will be
provided. 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. Please see "How
to redeem shares" in the Prospectus for more information on this
privilege.
I certify to my legal capacity to purchase or redeem shares of the Fund
for my own account or for the account of the organization named in
Section 1. I have received a current Prospectus and understand its
terms are incorporated in this application by reference. I am
certifying my taxpayer information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
------------------------------
Signature of Owner, Custodian, Date
Trustee or Corporate Officer
------------------------------
Signature of Joint Owner, Date
Co-Trustee or Corporate Officer
(Remember to sign Section 8)
<PAGE>
[Back Cover Page]
HOW TO RECEIVE MORE INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is contained in the
Funds' Statement of Additional Information dated _________ __, 2000 (the "SAI"),
which is incorporated by reference into this Prospectus, and is available upon
request and without charge from IMDI at the following address and phone number:
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway, Suite 300
Boca Raton, Florida 33432
(800) 456-5111
Information about the Funds (including the SAI) may also be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. (please call
1-202-942-8090 for further details). Information about the Funds is also
available on the EDGAR Database on SEC's Internet Website (www.sec.gov), and
copies of this information may be obtained, upon payment of a copying fee, by
electronic request at the following E-mail address: [email protected], or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-0102.
SHAREHOLDER INQUIRIES
Please call Ivy Mackenzie Services Corp., the Funds' transfer agent, regarding
any other inquiries about the Funds at 1-800-777-6472 (www.ivymackenzie.com,
E-mail: [email protected]).
Investment Company Act File No. 811-1028
[Front Cover Page]
PROSPECTUS
__________ __, 2000
IVY FUND
Ivy Cundill Value Fund
Ivy Next Wave Internet Fund
Ivy Fund (the "Trust") is a registered open-end investment company currently
consisting of twenty one separate portfolios. This Prospectus relates to the
Advisor Class shares of Ivy Cundill Value Fund and Ivy Next Wave Internet Fund
(the "Funds"). The Funds also offer Class A, Class B, Class C and Class I
shares, which are described in a separate prospectus.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy or accuracy of this Prospectus. Any
representation to the contrary is a criminal offense.
Investments in the Funds are not deposits of any bank and are not federally
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
[Insert all logos]
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY ....................................................................4
ADDITIONAL INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS...............11
MANAGEMENT.................................................................15
SHAREHOLDER INFORMATION....................................................16
ACCOUNT APPLICATION........................................................26
HOW TO RECEIVE MORE INFORMATION ABOUT THE FUNDS............................32
SHAREHOLDER INQUIRIES......................................................32
<PAGE>
OFFICERS
Keith J. Carlson, Chairman
James W. Broadfoot, President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, Massachusetts
CUSTODIAN AUDITORS
Brown Brothers Harriman & Co. PricewaterhouseCoopers LLP
Boston, Massachusetts Fort Lauderdale, Florida
TRANSFER AGENT INVESTMENT MANAGER
Ivy Mackenzie Services Corp. Ivy Management, Inc.
PO Box 3022 700 South Federal Highway
Boca Raton, Florida 33431-0922 Boca Raton, Florida 33432
800.777.6472 800.456.5111
<PAGE>
SUMMARY
IVY CUNDILL VALUE FUND
Investment The Fund seeks long-term capital growth. Any income realized
objective will be incidental.
Principal The Fund invests at least 65% of its assets in equity
investment securities throughout the world that the Fund's management
strategies team believes are trading below their estimated "intrinsic
value." This is the perceived realizable market value,
determined through the management team's analysis of the
companies' financial statements (and includes factors such
as earnings, cash flows, dividends, business prospects,
management capabilities and other catalysts for potentially
increasing shareholder value). Companies targeted for
investment also tend to have favorable debt to equity
levels. Up to 15% of the Fund's net assets may be invested
in illiquid securities.
To control its exposure to certain risks, the Fund might
use certain derivative investment techniques (such as
foreign currency exchange transactions and forward foreign
currency contracts).
Principal The main risks to which the Fund is exposed in
risks carrying out its investment strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not
perform as well as the securities held by other mutual
funds with investment objectives that are similar to those
of the Fund.
MARKET RISK: Equity securities typically represent a
proportionate ownership interest in a company. The market
value of equity securities can fluctuate significantly even
where "management risk" is not a factor, so you could lose
money if you redeem your Fund shares at a time when the
Fund's equity portfolio is not performing as well as
expected.
FOREIGN SECURITY AND EMERGING MARKET RISK: Investing in
foreign securities involves a number of economic, financial
and political considerations that are not associated with
the U.S. markets and that could affect the Fund's
performance unfavorably, depending upon prevailing
conditions at any given time. Among these potential risks
are:
- greater price volatility;
- comparatively weak supervision and regulation of
securities exchanges, brokers and issuers;
- higher brokerage costs;
- fluctuations in foreign-currency exchange rates and
related conversion costs;
- adverse tax consequences; and
- settlement delays.
The risks of investing in foreign securities are more acute
in countries with emerging or developing economies.
ILLIQUID SECURITY RISK: The Fund may not be able to readily
dispose of illiquid securities promptly at an acceptable
price.
DERIVATIVES RISK: The Fund may, but is not required to, use
a range of derivative investment techniques to hedge
various market risks (such as interest rates, currency
exchange rates, and broad or specific equity or
fixed-income market movements) or to enhance potential
gain. The use of these derivative investment techniques
involves a number of risks, including the possibility of
default by the counterparty to the transaction and, to the
extent the judgement of the Fund's manager as to certain
market movements is incorrect, the risk of losses that are
greater than if the derivative technique (s) had not been
used.
Who The Fund may be appropriate for investors seeking long-
should term growth potential, but who can accept significant
invest* fluctuations in capital value in the short-term.
* You should consult with your financial advisor before deciding whether
the Fund is an appropriate investment choice in light of your
particular financial needs and risk tolerance.
Performance Information
The Fund commenced operations on _________ ___, 2000, and so no
performance information is available.
Fees and Expenses
The following tables describe the fees and expenses that you may pay if
you buy and hold shares of the Fund:
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- -----------------------------------------------------------
Maximum sales charge (load) imposed on purchases (as a percentage of
offering price): None
Maximum deferred sales charge (load) (as a percentage of
purchase price): None
Maximum sales charge (load) imposed on reinvested dividends: None
Redemption fee*: None
Exchange fee: None
* If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
-----------------------------------------------------------------------------
Management fees 1.00%
Distribution and/or service (12b-1) fees 0.00%
Other expenses 0.95%
Total annual Fund operating expenses* 1.95%
* The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of the
following nine years, the Investment Manager will ensure that these
expenses do not exceed 2.50% of the Fund's average net assets.
Example
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of
those periods (with additional information shown for Class B and Class
C shares based on the assumption that you do not redeem your shares at
that time). The example also assumes that your investment has a 5%
return each year and that the Fund's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be as follows:
Year:
1st $198
3rd 612
<PAGE>
IVY NEXT WAVE INTERNET FUND
Investment The Fund seeks long-term capital growth. Any income realized
objective will be incidental.
Principal The Fund invests at least 65% of its assets in the equity
investment securities of companies of any size engaged in the design,
strategies development and/or marketing of Internet related services or
products. The Fund may purchase securities through initial
public offerings.
The Fund's management team believes that the Internet is a
fertile growth area, and actively seeks to position the Fund
to benefit from this growth by investing in companies engaged
in Internet-related business activities that may deliver rapid
earnings growth and potentially high investment returns.
Principal The main risks to which the Fund is exposed in carrying out
risks its investment strategies are the following:
MANAGEMENT RISK: Securities selected for the Fund may not
perform as well as the securities held by other mutual
funds with investment objectives that are similar to those
of the Fund.
MARKET RISK: Equity securities typically represent a
proportionate ownership interest in a company. The market
value of equity securities can fluctuate significantly even
where "management risk" is not a factor, so you could lose
money if you redeem your Fund shares at a time when the
Fund's equity portfolio is not performing as well as
expected.
SMALL- AND MEDIUM-SIZED COMPANY RISK: Many of the companies
in which the Fund may invest have relatively small market
capitalizations. Securities of smaller companies may be
subject to more abrupt or erratic market movements than the
securities of larger, more established companies, since
smaller companies tend to be thinly traded and because they
are subject to greater business risk. Transaction costs in
smaller-company stocks may also be higher than those of
larger companies.
IPO RISK: Securities issued through an initial public
offering (IPO) can experience an immediate drop in value if
the demand for the securities does not continue to support
the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new
to the market and may not have lengthy operating histories.
The Fund may engage in short-term trading in connection
with its IPO investments, which could produce higher
trading costs and adverse tax consequences. The number of
securities issued in an IPO is also limited, so it is
likely that IPO securities will represent a smaller
component of the Fund's portfolio as the Fund's assets
increase (and thus have a more limited effect on the Fund's
performance).
INDUSTRY CONCENTRATION RISK: Since the Fund focuses its
investment in securities of companies engaged in
Internet-related business activities, the Fund could
experience wider fluctuations in value than funds with more
diversified portfolios.
Who The Fund may be appropriate for investors
should seeking long-term growth potential, but who can accept
invest* significant fluctuations in capital value in the
short-term.
* You should consult with your financial advisor before deciding whether
the Fund is an appropriate investment choice in light of your
particular financial needs and risk tolerance.
Performance Information
The Fund commenced operations on _________ ___, 2000, and so no
performance information is available.
Fees and Expenses
The following tables describe the fees and expenses that you may pay if
you buy and hold shares of the Fund:
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- -----------------------------------------------------------
Maximum sales charge (load) imposed on purchases (as a percentage
of offering price): None
Maximum deferred sales charge (load) (as a percentage
of purchase price): None
Maximum sales charge (load) imposed on reinvested dividends: None
Redemption fee*: None
Exchange fee: None
* If you choose to receive your redemption proceeds via Federal Funds
wire, a $10 wire fee will be charged to your account.
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
-----------------------------------------------------------------------------
Management fees 1.00%
Distribution and/or service (12b-1) fees 0.00%
Other expenses 0.95%
Total annual Fund operating expenses* 1.95%
* The Fund's Investment Manager has agreed to reimburse the Fund's
expenses for the current fiscal year to the extent necessary to
ensure that the Fund's Annual Fund Operating Expenses, when
calculated at the Fund level, do not exceed 1.95% of the Fund's
average net assets (excluding 12b-1 fees and taxes). For each of the
following nine years, the Investment Manager will ensure that these
expenses do not exceed 2.50% of the Fund's average net assets.
Example
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of
those periods (with additional information shown for Class B and Class
C shares based on the assumption that you do not redeem your shares at
that time). The example also assumes that your investment has a 5%
return each year and that the Fund's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be as follows:
Year:
1st $198
3rd 612
<PAGE>
ADDITIONAL INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS
Principal strategies
Ivy Cundill Value Fund:
The Fund seeks to achieve its principal objective of long-term capital
growth by investing primarily in the equity securities of companies
throughout the world.
The investment approach of Peter Cundill & Associates, Inc.
("Cundill"), the Fund's sub-advisor, is based on a contrarian "value"
philosophy. Cundill looks for securities that are trading below their
estimated intrinsic value. To determine the intrinsic value of a
particular company, Cundill focuses primarily on the company's
financial statements. Cundill also considers factors such as earnings,
dividends, business prospects, management capabilities and potential
catalysts (such as a change in management) to realize shareholder
value. A security is purchased when the price reflects a significant
discount to Cundill's estimate of the company's intrinsic value. Given
the bottom-up or company specific approach, Cundill does not forecast
economies or corporate earnings and does not rely on market timing.
Ivy Next Wave Internet Fund:
The Fund seeks to achieve its principal objective of long-term capital
growth by investing primarily in the equity securities of companies of
any size engaged in the design, development and/or marketing of
Internet related services or products. The Fund may also invest in
companies that are expected to benefit indirectly from the Internet and
related business applications.
The Internet is a global computer network connecting millions of users
worldwide through the use of a standard common addressing system and
communications protocol. People and businesses throughout the world use
the Internet to retrieve and exchange information, conduct business,
and access a vast array of services, products and other resources.
Rapid advances in the Internet business environment in recent years
have stimulated unprecedented growth. While this is no guarantee of
future performance, the Fund's management team believes that this
industry offers substantial opportunities for long-term capital
appreciation.
Both Funds: Each Fund may from time to time take a temporary defensive
position and invest without limit in U.S. Government securities,
investment-grade debt securities, and cash and cash equivalents such as
commercial paper, short-term notes and other money market securities.
When a Fund assumes such a defensive position it may not achieve its
investment objective. Investing in debt securities also involves both
interest rate and credit risk.
Principal risks
General market risk: As with any mutual fund, the value of a Fund's
investments and the income they generate will vary daily and generally
reflect market conditions, interest rates and other issuer-specific,
political or economic developments. Each Fund's share value will
decrease at any time during which its security holdings or other
investment techniques are not performing as well as anticipated, and
you could therefore lose money by investing in a Fund depending upon
the timing of your initial purchase and any subsequent redemption or
exchange.
Other risks: The following table identifies the investment techniques
that each Fund's adviser considers important in achieving the Fund's
investment objective or in managing its exposure to risk (and that
could therefore have a significant effect on the Fund's returns).
Following the table is a description of the general risk
characteristics of these investment techniques. The risks of certain
investment practices that are not principal strategies of the Funds
(such as borrowing and illiquid securities) are also described below.
Other investment techniques that the Funds may use, but that are not
likely to play a key role in their overall investment strategies, are
described in the Funds' Statement of Additional Information (see back
cover page for information on how you can receive a free copy).
------------------------------------------------- ----------- ----------
Investment technique: ICVF INWIF
------------------------------------------------- ----------- ----------
------------------------------------------------- ----------- ----------
Equity securities................. X X*
------------------------------------------------- ----------- ----------
------------------------------------------------- ----------- ----------
Foreign securities.............. X
------------------------------------------------- ----------- ----------
------------------------------------------------- ----------- ----------
Foreign currencies............ X
------------------------------------------------- ----------- ----------
------------------------------------------------- ----------- ----------
Emerging markets............. X
------------------------------------------------- ----------- ----------
------------------------------------------------- ----------- ----------
Illiquid securities............. X
------------------------------------------------- ----------- ----------
------------------------------------------------- ----------- ----------
Derivatives.................... X
------------------------------------------------- ----------- ----------
------------------------------------------------- ----------- ----------
Investment concentration... X
------------------------------------------------- ----------- ----------
------------------------------------------------- ----------- ----------
Borrowing..................... X X
------------------------------------------------- ----------- ----------
* The Fund's equity investments may include securities issued
through initial public offerings.
Risk characteristics:
o Equity Securities: Both Funds invest primarily in equity securities,
including common stocks, preferred stocks and securities convertible
into common stocks. Equity securities typically represent a
proportionate ownership interest in a company. As a result, the value
of equity securities rises and falls with a company's success or
failure. The market value of these securities can fluctuate
significantly, with smaller companies being particularly susceptible to
price swings. Transaction costs in smaller-company stocks may also be
higher than those of larger companies. Investors in Ivy Next Wave
Internet Fund should note that these risks are heightened in the case
of securities issued through IPOs.
o Foreign Securities: Ivy Cundill Value Fund may invest in the securities
of foreign issuers. Investing in foreign securities involves a number
of economic, financial and political considerations that are not
associated with the U.S. markets and that could affect the Fund's
performance favorably or unfavorably, depending upon prevailing
conditions at any given time. For example, the securities markets of
many foreign countries may be smaller, less liquid and subject to
greater price volatility than those in the U.S. Foreign investing may
also involve brokerage costs and tax considerations that are not
usually present in the U.S. markets.
Other factors that can affect the value of the Fund's foreign
investments include the comparatively weak supervision and regulation
by some foreign governments of securities exchanges, brokers and
issuers, and the fact that many foreign companies may not be subject to
uniform accounting, auditing and financial reporting standards. It may
also be difficult to obtain reliable information about the securities
and business operations of certain foreign issuers. Settlement of
portfolio transactions may also be delayed due to local restrictions or
communication problems, which can cause the Fund to miss attractive
investment opportunities or impair its ability to dispose of securities
in a timely fashion (resulting in a loss if the value of the securities
subsequently declines).
o Foreign Currencies: A number of Ivy Cundill Value Fund's securities may
also be denominated in foreign currencies, and the value of the Fund's
investments as measured in U.S. dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange
control regulations. Currency conversion can also be costly.
o Special Emerging Market Concerns: The risks of investing in foreign
securities are heightened in countries with developing economies. Among
these additional risks are the following:
o securities that are even less liquid and more volatile than
those in more developed foreign countries;
o less stable governments that are susceptible to sudden
adverse actions (such as nationalization of businesses,
restrictions on foreign ownership or prohibitions against
repatriation of assets);
o increased settlement delays;
o unusually high inflation rates (which in extreme cases can
cause the value of a country's assets to erode sharply);
o unusually large currency fluctuations and currency
conversion costs; and
o high national debt levels (which may impede an issuer's
payment of principal and/or interest on external debt).
o Illiquid Securities: "Illiquid securities" are assets that may not be
disposed of in the ordinary course of business within seven days at
roughly the value at which the investing fund has valued the assets.
Some of these may be "restricted securities," which cannot be sold to
the public without registration under the Securities Act of 1933 (in
the absence of an exemption) or because of other legal or contractual
restrictions on resale. Thus, while illiquid securities may offer the
potential for higher returns than more readily marketable securities,
there is a risk that the investing fund will not be able to dispose of
them promptly at an acceptable price.
o Derivative Investment Techniques: Ivy Cundill Value Fund may, but is
not required to, use certain derivative investment techniques to hedge
various market risks (such as interest rates, currency exchange rates
and broad or specific market movements) or to enhance potential gain.
Among the derivative techniques the Fund might use are options, futures
and forward foreign currency contracts.
Writing put and call options could cause the Fund to lose money by
forcing the sale or purchase of portfolio securities at inopportune
times or for prices higher (in the case of put options) or lower (in
the case of call options) than current market values, by limiting the
amount of appreciation the Fund can realize on its investments, or by
causing the Fund to hold a security it might otherwise sell.
Futures transactions (and related options) involve other types of
risks. For example, the variable degree of correlation between price
movements of futures contracts and price movements in the related
portfolio position of the Fund could cause losses on the hedging
instrument that are greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in
all circumstances and certain over-the-counter options may have no
markets. As a result, the Fund might not be able to close out a
transaction before expiration without incurring substantial losses (and
it is possible that the transaction cannot even be closed). In
addition, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would
purchases of options, where the exposure is limited to the cost of the
initial premium.
Foreign currency transactions (such as forward foreign currency
contracts) can cause investment losses in a variety of ways. For
example, changes in currency exchange rates may result in poorer
overall performance for the Fund than if it had not engaged in such
transactions. There may also be an imperfect correlation between the
Fund's portfolio holdings of securities denominated in a particular
currency and the 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.
o Investment Concentration: Since Ivy Next Wave Internet Fund focuses its
investment in securities of companies engaged in Internet-related
business activities, the Fund could experience wider fluctuations in
value than funds with more diversified portfolios.
Although Ivy Cundill Value Fund will not invest more than 25% of its
total assets in any one industry and does not expect to focus its
investments in a single country, it may at any given time have a
significant percentage of its total assets in one or more countries or
market sectors. If this were to occur, the Fund could experience a
wider fluctuation in value than funds with more diversified portfolios.
o Borrowing: For temporary or emergency purposes (such as meeting
shareholder redemption requests within the time periods specified under
the Investment Company Act of 1940), each Fund may borrow up to 10% of
the value of its total assets from qualified banks. Borrowing may
exaggerate the effect on a Fund's share value of any increase or
decrease in the value of the securities it holds. Money borrowed will
also be subject to interest costs.
Other Important Information:
European Monetary Union: Ivy Cundill Value Fund may have investments in
Europe. On January 1, 1999, a new European currency called the "euro"
was introduced and adopted for use by eleven European countries. The
transition to daily usage of the euro will occur during the period from
January 1, 1999 through December 31, 2001, at which time euro bills and
coins will be put into circulation. Certain European Union (EU)
members, including the United Kingdom, did not officially implement the
euro on January 1, 1999 and may cause market disruptions when and if
they decide to do so. Should this occur, the Fund could experience
investment losses.
MANAGEMENT
Investment Adviser
Ivy Management, Inc. ("IMI", or the "Advisor"), located at Via Mizner
Financial Plaza, 700 South Federal Highway, Boca Raton, Florida 33432,
provides investment advisory and business management services to the
Funds. IMI is an SEC-registered investment adviser with over $7.2
billion in assets under management, and provides similar services to
the other nineteen series of the Trust and the five series of Mackenzie
Solutions. For its services, IMI receives a fee that is equal, on an
annual basis, to 1.00% of each Fund's average net assets.
Cundill, an SEC-registered investment adviser located at 7733 Forsyth
Blvd., Suite 2000, St. Louis, Missouri, 63105, serves as subadvisor to
the Fund under an agreement with IMI. Cundill began operations in 1984,
and as of the end of 1999 (along with its affiliates) had approximately
$1 billion in assets under management. For its services, Cundill
receives a fee from IMI that is equal, on an annual basis, to 0.50% of
the Fund's average net assets. Cundill's fee will be paid by IMI out of
the advisory fee that it receives from the Fund.
Portfolio Management
Ivy Cundill Value Fund: The Fund is managed by two investment
professionals that are supported by a team of research analysts who are
responsible for providing information on regional and country-specific
economic and political developments and monitoring individual
companies.
o F. Peter Cundill has over 30 years of value investing experience
and has managed Mackenzie Financial Corporation's Cundill Value
Fund since 1975. He is a Chartered Financial Analyst, a Chartered
Accountant and holds a Bachelor of Commerce degree from McGill
University, Montreal.
o Leslie A. Ferris has over 16 years of investment industry
experience in North American equity and fixed income securities.
Before joining Cundill in 1998, she was a portfolio manager for
the Trust and for the Kemper Funds. Ms. Ferris is a Chartered
Financial Analyst, a Certified Public Accountant, and holds an MBA
from the University of Chicago.
Ivy Next Wave Internet Fund: A team of professional portfolio managers
employed by IMI makes investment decisions for the Fund.
SHAREHOLDER INFORMATION
Pricing of Fund shares
Each Fund calculates its share price by dividing the value of the
Fund's net assets by the total number of its shares outstanding as of
the close of regular trading (usually 4:00 p.m. Eastern time) on the
New York Stock Exchange (the "Exchange") on each day the Exchange is
open for trading (normally any weekday that is not a national holiday).
Each portfolio security that is listed or traded on a recognized stock
exchange is valued at the security's last quoted sale price on the
exchange on which it is principally traded. If no sale is reported at
that time, the average between the last bid and asked prices is used.
Securities and other Fund assets for which market prices are not
readily available are priced at their "fair value" as determined by the
Advisor in accordance with procedures approved by the Funds' Board of
Trustees. The Advisor may also price a foreign security at its "fair
value" if events materially affecting the value of the security occur
between the close of the foreign exchange on which the security is
principally traded and the time as of which a Fund prices its shares.
Fair-value pricing under these circumstances is designed to protect
existing shareholders from the actions of short-term investors trading
into and out of a Fund in an attempt to profit from short-term market
movements. When such fair value pricing occurs, there may be some
period of time during which a Fund's share price and/or performance
information is not available.
The number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based
on a Fund's net asset value next determined after your instructions are
received in proper form by Ivy Mackenzie Services Corp. ("IMSC") (the
Funds' transfer agent) or by your registered securities dealer. Each
purchase and redemption order is subject to any applicable sales charge
(see "Choosing the appropriate class of shares"). Since the Funds
normally invest in securities that are listed on foreign exchanges that
may trade on weekends or other days when the Funds do not price their
shares, each Fund's share value may change on days when shareholders
will not be able to purchase or redeem the Fund's shares.
How To Buy Shares:
Please read these sections below carefully before investing.
Advisor Class shares are offered through this prospectus only to the
following investors:
o Trustees or other fiduciaries purchasing shares for employee benefit plans
that are sponsored by organizations that have at least 1,000 employees;
o Any account with assets of at least $10,000 if (a) a financial
planner, trust company, bank trust department or registered
investment adviser has investment direction, and where the
investor pays such person as compensation for his advice and other
services an annual fee of at least 0.50% on the assets in the
account, or (b) such account is established under a "wrap fee"
program and the account holder pays the sponsor of he program an
annual fee of at least 0.50% on the assets in the account;
o Officers and Trustees of Ivy Fund and Mackenzie Solutions (and their
relatives);
o Directors or employees of Mackenzie Investment Management Inc. or its
affiliates;
o 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).
The following investment minimums, sales charges and expenses apply.
Minimum initial investment* $10,000
-------------------------------------------------------- --------------------
-------------------------------------------------------- --------------------
Minimum subsequent investment* $250
-------------------------------------------------- --------------------
-------------------------------------------------- --------------------
Initial sales charge None
-------------------------------------------------------- --------------------
-------------------------------------------------------- --------------------
CDSC None
-------------------------------------------------------- --------------------
-------------------------------------------------------- --------------------
Service and distribution fees None
-------------------------------------------------------- --------------------
* Minimum initial and subsequent investments for retirement plans are
$25.
Submitting Your Purchase Order:
Initial Investments:
Complete and sign the Account Application appearing at the end of this
Prospectus. Enclose a check payable to the Fund in which you wish to
invest (see page [XX] for minimum initial investments). Deliver your
application materials to your registered representative or selling
broker, or send them to one of the addresses below:
BY REGULAR MAIL: BY COURIER:
Ivy Mackenzie Services Corp. Ivy Mackenzie Services Corp.
P.O. Box 3022 700 South Federal Hwy., Suite 300
Boca Raton, FL 33431-0922 Boca Raton, FL 33432-6114
Buying Additional Shares:
There are several ways to increase your investment in a Fund:
o BY MAIL - Send your check with a completed investment slip
(attached to your account statement) or written instructions
indicating the account registration, Fund number or name, and
account number. Mail to one of the addresses above.
o THROUGH YOUR BROKER - Deliver to your registered representative or
selling broker the investment slip attached to your statement, or
written instructions, along with your payment.
o BY WIRE - Purchases may also be made by wiring money from your
bank account to your Fund account. Your bank may charge a fee for
wiring funds. Before wiring any funds, please call IMSC at (800)
777-6472. Wiring instructions are as follows:
First Union National Bank of Florida
Jacksonville, FL
ABA #063000021
Account #2090002063833
For further credit to:
Your Account Registration
Your Fund Number and Account Number
o BY AUTOMATIC INVESTMENT METHOD - You can authorize funds to be
electronically drawn each month from your bank account and
invested as a purchase of shares into your Fund account. Complete
sections 6A and 7B of the Account Application.
How To Redeem Shares:
Submitting Your Redemption Order:
You may redeem your Fund shares through your registered securities
dealer or directly through IMSC. If you choose to redeem through your
registered securities dealer, the dealer is responsible for properly
transmitting redemption orders in a timely manner. If you choose to
redeem directly through IMSC, you have several ways to submit your
request:
o BY MAIL - Send your written redemption request to IMSC at one of
the addresses on page [XX] of this Prospectus. Be sure that all
registered owners listed on the account sign the request.
Medallion signature guarantees and supporting legal documentation
may be required. When you redeem, IMSC will normally send
redemption proceeds to you on the next business day, but may take
up to seven days (or longer in the case of shares recently
purchased by check).
o BY TELEPHONE - Call IMSC at (800) 777-6472 to redeem from your
individual, joint or custodial account. To process your redemption
order by telephone, you must have telephone redemption privileges
on your account. IMSC employs reasonable procedures that require
personal identification prior to acting on redemption instructions
communicated by telephone to confirm that such instructions are
genuine. In the absence of such procedures, a Fund or IMSC may be
liable for any losses due to unauthorized or fraudulent telephone
instructions. Requests by telephone can only be accepted for
amounts up to $50,000.
o BY SYSTEMATIC WITHDRAWAL PLAN ("SWP") - You can authorize to have
funds electronically drawn each month from your Fund account and
deposited directly into your bank account. Certain minimum
balances and minimum distributions apply. Complete sections 6B of
the Account Application to add this feature to your account.
Receiving Your Redemption Proceeds - You can receive redemption
proceeds through a variety of payment methods:
o BY CHECK - Unless otherwise instructed in writing, checks will be
made payable to the current account registration and sent to the
address of record.
o BY FEDERAL FUNDS WIRE - Proceeds will be wired on the next
business day to a pre-designated bank account. Your account will
be charged $10 each time redemption proceeds are wired to your
bank, and your bank may also charge you a fee for receiving a
Federal Funds wire.
o BY ELECTRONIC FUNDS TRANSFER - For SWP redemptions only.
Important Redemption Information:
o If you own shares of more than one class of a Fund, the Fund will
redeem first the shares having the highest 12b-1 fees, unless you
instruct otherwise.
o A Fund may (on 60 days' notice) redeem the accounts of shareholders
whose investment, including sales charges paid, has been less than
$1,000 for more than 12 months.
o A Fund may take up to seven days (or longer in the case of shares
recently purchased by check) to send redemption proceeds.
How to Exchange Shares:
You may exchange your Fund shares for shares of another Ivy fund,
subject to certain restrictions (see "Important exchange information").
Submitting Your Exchange Order:
You may submit an exchange request to IMSC as follows:
o BY MAIL: Send your written exchange request to IMSC at one of the
addresses on page [XX] of this Prospectus. Be sure that all registered
owners listed on the account sign the request.
o BY TELEPHONE: Call IMSC at 800.777.6472 to authorize an exchange
transaction. To process your exchange order by telephone, you must
have telephone exchange privileges on your account. IMSC employs
reasonable procedures that require personal identification prior
to acting on exchange instructions communicated by telephone to
confirm that such instructions are genuine. In the absence of such
procedures, a Fund or IMSC may be liable for any losses due to
unauthorized or fraudulent telephone instructions.
Important Exchange Information:
o You must exchange into the same share class you currently own.
o Exchanges are considered taxable events and may result in a
capital gain or a capital loss for tax purposes.
o It is the policy of the Funds to discourage the use of the
exchange privilege for the purpose of timing short-term market
fluctuations. The Funds may therefore limit the frequency of
exchanges by a shareholder, charge a redemption fee or cancel a
shareholder's exchange privilege if at any time it appears that
such market-timing strategies are being used. For example,
shareholders exchanging more than five times in a 12-month period
may be considered to be using market-timing strategies.
Dividends, distributions and taxes
o The Fund generally declares and pays dividends and capital gain
distributions (if any) at least once a year.
o Dividends and distributions are "reinvested" in additional Fund
shares unless you request to receive them in cash.
o Cash dividends and distributions can be sent to you:
o BY MAIL: a check will mailed to the address of record unless
otherwise instructed.
o BY ELECTRONIC FUNDS TRANSFER ("EFT"): your proceeds will be
directly deposited into your bank account.
To change your dividend and/or distribution options, call IMSC at (800)
777-6472.
Dividends ordinarily will vary from one class to another. The Funds
intend to declare and pay dividends annually. The Funds will distribute
net investment income and net realized capital gains, if any, at least
once a year. The Funds may make an additional distribution of net
investment income and net realized 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").
Dividends paid out of a Fund's investment company taxable income
(including dividends, interest and net short-term capital gains) will
be taxable to you as ordinary income. If a portion of a 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 to you as long-term capital gains,
regardless of how long you have held your shares. Dividends are taxable
to you in the same manner whether received in cash or reinvested in
additional Fund shares. While the Funds' managers may at times pursue
strategies that result in tax efficient outcomes for Fund shareholders,
they do not generally manage the Funds to optimize tax efficiencies.
If shares of a Fund are held in a tax-deferred account, such as a
retirement plan, income and gain will not be taxable each year.
Instead, the taxable portion of amounts held in a tax-deferred account
generally will be subject to tax as ordinary income only when
distributed from that account.
A distribution will be treated as paid to you on December 31 of the
current calendar year if it is declared by a Fund in October, November
or December with a record date in such a month and paid by the Fund
during January of the following calendar year. In certain years, you
may be able to claim a credit or deduction on your income tax return
for your share of foreign taxes paid by your Fund.
Upon the sale or other disposition of your Fund shares, you may realize
a capital gain or loss which will be long-term or short-term, generally
depending upon how long you held your shares.
A Fund may be required to withhold U.S. Federal income tax at the rate
of 31% of all distributions payable to you if you fail to provide the
Fund with your correct taxpayer identification number or to make
required certifications, or if you have been notified by the Internal
Revenue Service that you are subject to backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be
credited against your U.S. Federal income tax liability.
Fund distributions may be subject to state, local and foreign taxes.
You should consult with your tax adviser as to the tax consequences of
an investment in the Funds, including the status of distributions from
the Funds under applicable state or local law.
<PAGE>
ACCOUNT APPLICATION
Please mail applications and checks to:
Ivy Mackenzie Services Corp.
P.O. Box 3022, Boca Raton, FL 33431-0922
- -------------------------------------------------------------------------------
This application should not be used for retirement accounts for which
Ivy Fund (IBT) is custodian.
- -------------------------------------------------------------------------------
1 Registration
Name ___________
Address ___________
City ___________ State ____________ Zip __________
Phone # (day) (___)_______ Phone # (evening) (___)___________
___ Individual ___ UGMA / UTMA ___ Sole proprietor
___ Joint tenant ___ Corporation ___ Trust
___ Estate ___ Partnership ___ Other ________
Date of Trust ____________ Minor's state of residence________________
(FUND USE ONLY)
- ------------
Account Number
- ------------
Dealer / Branch / Rep
- ------------
Account Type / Soc Cd
2 Tax I.D.
Citizenship: ____ U.S. ____Other (please specify): ________________
Social Security # ____-____-____ or Tax identification # ___-__________
Under penalties of perjury, I certify by signing in Section 8 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 "Dividends, distributions and taxes" 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 _______
Representative's # _______ Representative's phone # _______
Authorized signature of dealer __________________________________________
4. Investments
A. Enclosed is my check for ($1,000 minimum) $___________ made payable to
the appropriate Fund. Please invest it in Advisor Class shares.
B. FOR DEALER USE ONLY
Confirmed trade orders:
________ Confirm # ________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. Pay all dividends in cash and reinvest capital gains into additional
shares in this Fund. Account number: _______
B. Pay all dividends and capital gains in cash.
I request the above cash distribution, selected in A or B above, be sent to:
_____ the address listed in the registration
_____ the special payee listed in Section 7A (by mail)
_____ the special payee listed in Section 7B (by EFT)
6 Optional Special Features
A. Automatic Investment Method (AIM)
___ I wish to have my bank account listed in section 7B automatically debited
via EFT on a predetermined frequency and invested into my Fund account listed
below.
1. Withdraw $__________ for each time period indicated below and invest my
bank proceeds into the Fund. Account #: ____________________________
2. Debit my bank account:
_____ Annually (on the ___ day of the month of _____).
_____ Semiannually (on the __ day of the months of _____ and ______).
_____ Quarterly (on the ___ day of the first / second / third month
of each calendar quarter. (circle one)
_____ Monthly* ___ once per month on the ___ day
___ twice per month on the ___ days
___ 3 times per month on the ___ days
___ 4 times per month on the ___ days
B. Systematic Withdrawal Plans (SWP)**
___ I wish to have my Fund account automatically debited on a predetermined
frequency and the proceeds sent to me per my instructions below.
1. Withdraw ($50 minimum) $_____ for each time period indicated below from
the following Fund account:
Account #: ______________________________________
2. Withdraw from my Fund account:
_____ Annually (on the ___ day of the month of _____).
_____ Semiannually (on the __ day of the months of _____ and ______)
_____ Quarterly (on the ___ day of the first / second / third month
of each calendar quarter. (circle one)
_____ Monthly* ___ once per month on the ___ day
___ twice per month on the ___ days
___ 3 times per month on the ___ days
___ 4 times per month on the ___ days
3. I request the withdrawal proceeds be:
___ sent to the address listed in the registration.
___ sent to the special payee listed in section 7A or 7B.
Note: A minimum balance of $5,000 is required to establish a SWP.
C. Federal Funds Wire for Redemption Proceeds**
By checking "yes" immediately above, I authorize IMSC 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. Telephonic redemptions** ___ yes ___ no
By checking "yes" immediately above, the Fund or its agents are
authorized to honor telephone instructions from any person as more fully
described in the Prospectus for the redemption of Fund shares. The amount of the
redemption shall not exceed $50,000 and the proceeds are to be payable to the
shareholder of record and mailed to the address of record. To change this option
once established, written instructions must be received from the shareholder of
record or the current registered representative.
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
(AIM) / withdrawal (SWP) 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 payee:
Name of bank or individual ___________
Account # (if applicable) _____________
Street ____________________________
City ______ State ______ Zip ______
B. Fed Wire / EFT 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 above means that the Telephone Redemption Privileges will be
provided. 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. Please see "How
to redeem shares" in the Prospectus for more information on this
privilege.
I certify to my legal capacity to purchase or redeem shares of the Fund
for my own account or for the account of the organization named in
Section 1. I have received a current Prospectus and understand its
terms are incorporated in this application by reference. I am
certifying my taxpayer information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
------------------------------
Signature of Owner, Custodian, Date
Trustee or Corporate Officer
------------------------------
Signature of Joint Owner, Date
Co-Trustee or Corporate Officer
(Remember to sign Section 8)
<PAGE>
[Back Cover Page]
HOW TO RECEIVE MORE INFORMATION ABOUT THE FUNDS
Additional information about the Funds and their investments is contained in the
Funds' Statement of Additional Information dated _________ __, 2000 (the "SAI"),
which is incorporated by reference into this Prospectus, and is available upon
request and without charge from IMDI at the following address and phone number:
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway, Suite 300
Boca Raton, Florida 33432
(800) 456-5111
Information about the Funds (including the SAI) may also be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. (please call
1-202-942-8090 for further details). Information about the Funds is also
available on the EDGAR Database on SEC's Internet Website (www.sec.gov), and
copies of this information may be obtained, upon payment of a copying fee, by
electronic request at the following E-mail address: [email protected], or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-0102.
SHAREHOLDER INQUIRIES
Please call Ivy Mackenzie Services Corp., the Funds' transfer agent, regarding
any other inquiries about the Funds at 1-800-777-6472 (www.ivymackenzie.com,
E-mail: [email protected]).
Investment Company Act File No. 811-1028
IVY CUNDILL VALUE FUND
IVY NEXT WAVE INTERNET FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
__________ __, 2000
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of twenty-one fully managed portfolios, each of which
(except for Ivy South America Fund and Ivy International Strategic Bond Fund) is
diversified. This Statement of Additional Information ("SAI") relates to the
Class A, B, C, and I shares of Ivy Cundill Value Fund and Ivy Next Wave Internet
Fund (each a "Fund"). The other nineteen portfolios of the Trust are described
in separate prospectuses and SAIs.
This SAI is not a prospectus and should be read in conjunction with the
prospectus for the Funds dated ________ __, 2000 (the "Prospectus"), which may
be obtained upon request and without charge from the Trust at the Distributor's
address and telephone number printed below. The Funds also offer Advisor Class
shares, which are described in a separate prospectus and SAI that may also be
obtained without charge from the Distributor.
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. ("IMDI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
<PAGE>
TABLE OF CONTENTS
Page
GENERAL INFORMATION........................................................4
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS................................4
EQUITY SECURITIES................................................10
CONVERTIBLE SECURITIES...........................................11
SMALL- AND MEDIUM-SIZED COMPANIES................................11
DEBT SECURITIES..................................................12
IN GENERAL..............................................12
INVESTMENT-GRADE DEBT SECURITIES........................12
LOW-RATED DEBT SECURITIES...............................12
U.S. GOVERNMENT SECURITIES..............................14
ZERO COUPON BONDS.......................................15
FIRM COMMITMENT AGREEMENTS AND
"WHEN-ISSUED" SECURITIES..............................15
ILLIQUID SECURITIES..............................................15
FOREIGN SECURITIES...............................................16
DEPOSITORY RECEIPTS..............................................17
EMERGING MARKETS.................................................17
FOREIGN CURRENCIES...............................................19
FOREIGN CURRENCY EXCHANGE TRANSACTIONS...........................19
INVESTMENT CONCENTRATION.........................................20
OTHER INVESTMENT COMPANIES.......................................21
REPURCHASE AGREEMENTS............................................21
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS................21
COMMERCIAL PAPER.................................................21
BORROWING........................................................22
WARRANTS.........................................................22
OPTIONS TRANSACTIONS.............................................22
IN GENERAL..............................................22
WRITING OPTIONS ON INDIVIDUAL SECURITIES................23
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES.............24
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES....24
RISKS OF OPTIONS TRANSACTIONS...........................24
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS...............25
IN GENERAL..............................................25
FOREIGN CURRENCY FUTURES CONTRACTS
AND RELATED OPTIONS...................................27
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS.......28
SECURITIES INDEX FUTURES CONTRACTS......................29
RISKS OF SECURITIES INDEX FUTURES.......................29
COMBINED TRANSACTIONS...................................30
PORTFOLIO TURNOVER........................................................31
MANAGEMENT OF THE FUNDS...................................................31
TRUSTEES AND OFFICERS............................................31
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST.....38
INVESTMENT ADVISORY AND OTHER SERVICES....................................38
BUSINESS MANAGEMENT AND INVESTMENT
ADVISORY SERVICES..............................................38
INVESTMENT MANAGER...............................................38
SUB-ADVISOR......................................................39
TERM AND TERMINATION OF ADVISORY AGREEMENT
AND SUBADVISORY AGREEMENT......................................40
DISTRIBUTION SERVICES............................................40
RULE 18F-3 PLAN.........................................41
RULE 12B-1 DISTRIBUTION PLANS...........................41
CUSTODIAN........................................................44
FUND ACCOUNTING SERVICES.........................................44
TRANSFER AGENT AND DIVIDEND PAYING AGENT.........................44
ADMINISTRATOR....................................................44
AUDITORS.45
BROKERAGE ALLOCATION......................................................45
CAPITALIZATION AND VOTING RIGHTS..........................................46
SPECIAL RIGHTS AND PRIVILEGES.............................................48
AUTOMATIC INVESTMENT METHOD......................................48
EXCHANGE OF SHARES...............................................48
INITIAL SALES CHARGE SHARES.............................48
CONTINGENT DEFERRED SALES CHARGE SHARES..........................49
CLASS A.................................................49
CLASS B.................................................49
CLASS C.................................................50
CLASS I.................................................50
ALL CLASSES.............................................50
LETTER OF INTENT.................................................51
RETIREMENT PLANS.................................................51
INDIVIDUAL RETIREMENT ACCOUNTS..........................52
ROTH IRAs...............................................53
QUALIFIED PLANS.........................................54
DEFERRED COMPENSATION FOR PUBLIC
SCHOOLS AND CHARITABLE ORGANIZATIONS
("403(B)(7) ACCOUNT").................................55
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAs................55
SIMPLE PLANS............................................55
REINVESTMENT PRIVILEGE...........................................55
REDUCED SALES CHARGES AND RIGHTS OF ACCUMULATION.................56
SYSTEMATIC WITHDRAWAL PLAN.......................................56
GROUP SYSTEMATIC INVESTMENT PROGRAM..............................57
REDEMPTIONS...............................................................58
CONVERSION OF CLASS B SHARES..............................................59
NET ASSET VALUE...........................................................59
TAXATION 61
OPTIONS, FUTURES AND FOREIGN CURRENCY
FORWARD CONTRACTS..............................................62
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES...........63
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES...............63
DEBT SECURITIES ACQUIRED AT A DISCOUNT...........................64
DISTRIBUTIONS....................................................64
DISPOSITION OF SHARES............................................65
FOREIGN WITHHOLDING TAXES........................................66
BACKUP WITHHOLDING...............................................66
PERFORMANCE INFORMATION...................................................67
AVERAGE ANNUAL TOTAL RETURN.............................67
CUMULATIVE TOTAL RETURN.................................68
OTHER QUOTATIONS, COMPARISONS
AND GENERAL INFORMATION...............................68
FINANCIAL STATEMENTS......................................................69
APPENDIX A................................................................70
APPENDIX b................................................................77
<PAGE>
GENERAL INFORMATION
Each Fund is organized as a separate, diversified portfolio of the
Trust, an open-end management investment company organized as a Massachusetts
business trust on December 21, 1983. Each Fund commenced operations on
____________ __, 2000.
Descriptions in this SAI of a particular investment practice or
technique in which each Fund may engage or a financial instrument which each
Fund may purchase are meant to describe the spectrum of investments that IMI, in
its discretion, might, but is not required to, use in managing each Fund's
portfolio assets. For example, IMI may, in its discretion, employ a given
practice, technique for one or more funds but not for all funds advised by it.
It is also possible that certain types of financial instruments or investment
techniques described herein may not be available, permissible, economically
feasible or effective for their intended purposes in some or all markets, in
which case a Fund would not use them. Investors should also be aware that
certain practices, techniques, or instruments could, regardless of their
relative importance in a Fund's overall investment strategy, from time to time
have a material impact on that Fund's performance.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each Fund has its own investment objectives and policies, which are
described in the Prospectus under the captions "Summary" and "Additional
Information About Strategies and Risks." Descriptions of each Fund's policies,
strategies and investment restrictions, as well as additional information
regarding the characteristics and risks associated with each Fund's investment
techniques, are set forth below.
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.
IVY CUNDILL VALUE FUND
Ivy Cundill Value Fund seeks long-term capital growth. Any income
realized will be incidental. The Fund seeks to achieve its principal objective
of long-term capital growth by investing primarily in the equity securities of
companies throughout the world. Under normal conditions, the Fund invests at
least 65% of its assets in equity securities. Although the Fund will not invest
more than 25% of its total assets in any one industry and does not expect to
focus its investments in a single country, it may at any given time have a
significant percentage of its total assets in one or more countries or market
sectors.
The investment approach of Peter Cundill & Associates (Bermuda) Ltd.,
the Fund's sub-advisor ("Cundill" or the "sub-advisor"), is based on a
contrarian "value" philosophy. The sub-advisor looks for securities that it
believes are trading below their estimated intrinsic value. To determine the
intrinsic value of a particular company, the sub-advisor focuses on the balance
sheet of the company rather than the income statement. In addition to reviewing
the assets, the sub-advisor considers the earnings, dividends, prospects and
management capabilities of the company. Essentially, the sub-advisor revalues
the assets and liabilities of the company to reflect the sub-advisor's estimate
of fair value. Securities are purchased where there is a substantial discount of
price to the estimate of the company's intrinsic value. Because the approach is
to look for undervalued securities, the sub-advisor does not forecast economies
or corporate earnings and does not rely on market timing.
Ivy Cundill Value Fund may invest in warrants, and securities issued on
a "when-issued" or firm commitment basis, and may engage in foreign currency
exchange transactions and enter into forward foreign currency contracts. The
Fund may also invest up to 10% of its total assets in other investment companies
and up to 15% of its net assets in illiquid securities. The Fund may not invest
more than 5% of its total assets in restricted securities.
For temporary defensive purposes and during periods when IMI believes
that circumstances warrant, the Fund may invest without limit in U.S. Government
securities, obligations issued by domestic or foreign banks (including
certificates of deposit, time deposits and bankers' acceptances), and domestic
or foreign commercial paper (which, if issued by a corporation, must be rated
Prime-1 by Moody's Investors Service, Inc. ("Moody's") or A-1 -by Standard &
Poor's Ratings Group ("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 Moody's
or AAA or AA by S&P). The Fund may also enter into repurchase agreements, and,
for temporary or emergency purposes, may borrow up to 10% of the value of its
total assets from banks.
Ivy Cundill Value Fund may purchase put and call options on 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 equivalent exposure in such contracts does
not exceed 15% of its total assets.
INVESTMENT RESTRICTIONS FOR IVY CUNDILL VALUE FUND
Ivy Cundill Value Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, together with the investment restrictions
set forth below, are fundamental policies of the Fund and may not be changed
without the approval of a majority of the outstanding voting shares of the Fund.
Ivy Cundill Value Fund has adopted the following fundamental investment
restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(iii) The Fund will not issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to be
an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages or
investments secured by real estate or interests therein), except that the
Fund may hold and sell real estate acquired as a result of the Fund's
ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating to
physical commodities, although the Fund may invest in commodities futures
contracts and options thereon to the extent permitted by its Prospectus
and this SAI.
(vii) The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular industry,
as the term "concentrate" is interpreted in connection with the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
ADDITIONAL RESTRICTIONS
Ivy Cundill Value 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) invest in oil, gas and/or mineral exploration or development programs;
(iv) purchase securities on margin, except such short-term credits as are
necessary for the clearance of transactions, and except that the Fund
may make margin deposits in connection with transactions in options,
futures and options on futures;
(v) make investments in securities for the purpose of exercising control
over or management of the issuer;
(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 Manager for the
sale or purchase of portfolio securities shall not be considered
participation in a joint securities trading account;
(vii) borrow amounts in excess of 10% of its total assets, taken at the lower
of cost or market value, and then only from banks as a temporary
measure for extraordinary or emergency purposes. All borrowings will be
repaid before any additional investments are made;
(viii) purchase any security if, as a result, the Fund would then have more
than 5% of its total assets (taken at current value) invested in
securities restricted as to disposition under the Federal securities
laws; or
(ix) purchase securities of another investment company, except in connection
with a merger, consolidation, reorganization or acquisition of assets,
and except that the Fund may invest in securities of other investment
companies subject to the restrictions in Section 12(d)(1) of the 1940
Act.
IVY NEXT WAVE INTERNET FUND
Ivy Next Wave Internet Fund's principal objective is long-term capital
growth. Any income realized will be incidental. Under normal conditions, the
Fund invests at least 65% of its assets in the equity securities of companies of
any size engaged in the design, development and/or marketing of Internet related
services or products. The Fund may also invest in companies that are expected to
benefit indirectly from the Internet and related business applications. The Fund
may purchase securities through initial public offerings.
Ivy Next Wave Internet Fund's management team believes that the
Internet is a fertile growth area, and actively seeks to position the Fund to
benefit from this growth by investing in companies engaged in Internet-related
business activities that may deliver rapid earnings growth and potentially high
investment returns. While this is no guarantee of future performance, the Fund's
management team believes that this industry offers substantial opportunities for
long-term capital appreciation.
Although the Fund generally invests in common stock, it may also invest
in preferred stock, securities convertible into common stock, sponsored or
unsponsored ADRs, GDRs, ADSs and GDSs and investment-grade debt securities
(i.e., those rated Baa or higher by Moody's or BBB or higher by S&P, or if
unrated, considered by IMI to be of comparable quality), including corporate
bonds, notes, debentures, convertible bonds and zero coupon bonds. The fund may
also invest up to 5% of its net assets in debt securities that are rated Ba or
below by Moody's or BB or below by S&P, or if unrated, are considered by IMI to
be of comparable quality (commonly referred to as "high yield" or "junk" bonds).
The Fund will not invest in debt securities rated less than C by either Moody's
or S&P.
The Fund may invest in warrants, purchase securities on a "when-issued"
or firm commitment basis, engage in foreign currency exchange transactions and
enter into forward foreign currency contracts. The Fund may also invest (i) in
other investment companies in accordance with the provisions of the 1940 Act and
(ii) up to 15% of its net assets in illiquid securities.
For temporary defensive purposes and during periods when IMI believes
that circumstances warrant, Ivy Next Wave Internet Fund may invest without limit
in U.S. Government securities, obligations issued by domestic or foreign banks
(including certificates of deposit, time deposits and bankers' acceptances), 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 Moody's or AAA or AA by S&P). The Fund may also enter into repurchase
agreements, and, for temporary or emergency purposes, may borrow up to 10% of
the value of its total assets from banks.
The Fund may purchase put and call options on stock indices and on
individual securities, provided the premium paid for such options does not
exceed 10% of the value of the Fund's net assets. The Fund may also sell covered
put options with respect to up to 50% of the value of its net assets, and may
write covered call options so long as not more than 20% 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
equivalent exposure in such contracts does not exceed 20% of the value of its
total assets.
INVESTMENT RESTRICTIONS FOR IVY NEXT WAVE INTERNET FUND
Ivy Next Wave Internet Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, together with the investment restrictions
set forth below, are fundamental policies of the Fund and may not be changed
without the approval of a majority of the outstanding voting shares of the Fund.
Ivy Next Wave Internet Fund has adopted the following fundamental investment
restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii) The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of the
Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by its
Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular industry,
as the term "concentrate" is interpreted in connection with the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time, except that the Fund may concentrate its investments in the
securities of companies engaged in the design, development and/or
marketing of Internet related services or products.
ADDITIONAL RESTRICTIONS
Ivy Next Wave Internet Fund has adopted the following additional
restrictions, which are not fundamental and which may be changed without
shareholder approval, to the extent permitted by applicable law, regulation or
regulatory policy.
Under these restrictions, the Fund may not:
(i) invest in oil, gas or other mineral leases or exploration or
development programs;
(ii) invest in companies for the purpose of exercising control of
management;
(iii) invest more than 5% of its total assets in warrants, valued at the
lower of cost or market, or more than 2% of its total assets in
warrants, so valued, which are not listed on either the New York or
American Stock Exchanges;
(iv) sell securities short, except for short sales, "against the box;"
(v) borrow amounts in excess of 10% of its total assets, taken at the lower
of cost or market value, and then only from banks as a temporary
measure for emergency purposes.
(vi) purchase from or sell to any of its officers or trustees, or firms of
which any of them are members or which they control, any securities
(other than capital stock of the Fund), but such persons or firms may
act as brokers for the Fund for customary commissions to the extent
permitted by the Investment Company Act of 1940;
(vii) 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; or
(viii) purchase the securities of any other open-end investment company,
except as part of a plan of merger or consolidations.
Under the 1940 Act, the Fund is permitted, subject to the above
investment restrictions, to borrow money only from banks. The Trust has no
current intention of borrowing amounts in excess of 5% of the Fund's assets. The
Fund will continue to interpret fundamental investment restriction (v) to
prohibit investment in real estate limited partnership interests; this
restriction shall not, however, prohibit investment readily marketable
securities of companies that invest in real estate or interests therein,
including real estate investment trusts.
EQUITY SECURITIES
Equity securities can be issued by companies to raise cash; all equity
securities shares represent a proportionate ownership interest in a company. As
a result, the value of equity securities rises and falls with a company's
success or failure. The market value of equity securities can fluctuate
significantly, with smaller companies being particularly susceptible to price
swings. Transaction costs in smaller company stocks may also be higher than
those of larger companies.
CONVERTIBLE SECURITIES
The convertible securities in which each Fund may invest include
corporate bonds, notes, debentures, preferred stock and other securities that
may be converted or exchanged at a stated or determinable exchange ratio into
underlying shares of equity securities. 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. 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 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
equity securities changes, and, therefore, also tends to follow movements in the
general market for equity securities. When the market price of the underlying
equity securities increases, the price of a convertible security tends to rise
as a reflection of the value of the underlying equity securities, although
typically not as much as the price of the underlying equity securities. While no
securities investments are without risk, investments in convertible securities
generally entail less risk than investments in equity securities of the same
issuer.
As debt securities, convertible securities are investments that provide
for a stream of income. 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.
SMALL- AND MEDIUM-SIZED 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 small or new
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.
INITIAL PUBLIC OFFERINGS
Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. Ivy Next Wave Internet Fund may engage in
short-term trading in connection with its IPO investments, which could produce
higher trading costs and adverse tax consequences. The number of securities
issued in an IPO is limited, so it is likely that IPO securities will represent
a smaller component of the Fund's portfolio as the Fund's assets increase (and
thus have a more limited effect on the Fund's performance).
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 Funds
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. 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), including many emerging markets bonds, 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. Such
securities carry a high degree of risk (including the possibility of default or
bankruptcy of the issuers of such securities), and generally involve greater
volatility of price and risk of principal and income (and may be less liquid)
than securities in the higher rating categories. (See Appendix A for a more
complete description of the ratings assigned by Moody's and S&P and their
respective characteristics.)
Lower rated and unrated securities are especially subject to adverse
changes in general economic conditions and to changes in the financial condition
of their issuers. Economic downturns may disrupt the high yield market and
impair the ability of issuers to repay principal and interest. Also, an increase
in interest rates would likely have an adverse impact on the value of such
obligations. During an economic downturn or period of rising interest rates,
highly leveraged issuers may experience financial stress which could adversely
affect their ability to service their principal and interest payment
obligations. Prices and yields of high yield securities will fluctuate over time
and, during periods of economic uncertainty, volatility of high yield securities
may adversely affect a Fund's net asset value. In addition, investments in high
yield zero coupon or pay-in-kind bonds, rather than income-bearing high yield
securities, may be more speculative and may be subject to greater fluctuations
in value due to changes in interest rates.
Changes in interest rates may have a less direct or dominant impact on
high yield bonds than on higher quality issues of similar maturities. However,
the price of high yield bonds can change significantly or suddenly due to a host
of factors including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth and, at times,
stock market activity. High yield bonds may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund may have to replace the security with a lower yielding security.
The trading market for high yield securities may be thin to the extent
that there is no established retail secondary market or because of a decline in
the value of such securities. A thin trading market may limit the ability of Ivy
Next Wave Internet Fund to accurately value high yield securities in the Fund's
portfolio, could adversely affect the price at which the Fund could sell such
securities, 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 low-rated debt
securities, 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.
These securities may also involve special registration responsibilities,
liabilities and costs, and liquidity and valuation difficulties.
Credit quality in the high yield securities market can change suddenly
and unexpectedly, and even recently issued credit ratings may not fully reflect
the actual risks posed by a particular high yield security. For these reasons,
it is the policy of IMI not to rely exclusively on ratings issued by established
credit rating agencies, but to supplement such ratings with its own independent
and on-going review of credit quality. The achievement of Ivy Next Wave Internet
Fund's investment objectives by investment in such securities may be more
dependent on IMI's credit analysis than is the case for higher quality bonds.
Should the rating of a portfolio security be downgraded, IMI will determine
whether it is in the best interest of the Fund to retain or dispose of such
security. However, should any individual bond held by the Fund be downgraded
below a rating of C, IMI currently intends to dispose of such bond based on then
existing market conditions.
Prices for high yield securities may be affected by legislative and
regulatory developments. For example, Federal rules require savings and loan
institutions to gradually reduce their holdings of this type of security. Also,
Congress has from time to time considered legislation that would restrict or
eliminate the corporate tax deduction for interest payments in these securities
and regulate corporate restructurings. Such legislation may significantly
depress the prices of outstanding securities of this type.
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, and may involve
significantly greater price and yield volatility than traditional debt
securities. 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.
ZERO COUPON BONDS. Zero coupon bonds are debt obligations issued
without any requirement for the periodic payment of interest. Zero coupon bonds
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 a Fund holds zero coupon bonds in its portfolio, it would recognize
income currently for Federal income tax purposes in the amount of the unpaid,
accrued interest and generally would be required to distribute dividends
representing such income to shareholders currently, even though funds
representing such income would not have been received by the Fund. Cash to pay
dividends representing unpaid, accrued interest may be obtained from, for
example, sales proceeds of portfolio securities and Fund shares and from loan
proceeds. The potential sale of portfolio securities to pay cash distributions
from income earned on zero coupon bonds may result in a Fund being forced to
sell portfolio securities at a time when it might otherwise choose not to sell
these securities and when 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 the securities of this
type is subject to greater fluctuations in response to changing interest rates
than the value of debt obligations which distribute income regularly.
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. A 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, a 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.
ILLIQUID SECURITIES
Each Fund may purchase securities other than in the open market. While
such purchases may often offer attractive opportunities for investment not
otherwise available on the open market, the securities so purchased are often
"restricted securities" or "not readily marketable" (i.e., they cannot be sold
to the public without registration under the Securities Act of 1933, as amended
(the "1933 Act"), or the availability of an exemption from registration (such as
Rule 144A) or because they are subject to other legal or contractual delays in
or restrictions on resale). This investment practice, therefore, could have the
effect of increasing the level of illiquidity of a Fund. It is each Fund's
policy that illiquid securities (including repurchase agreements of more than
seven days duration, certain restricted securities, and other securities which
are not readily marketable) may not constitute, at the time of purchase, more
than 15% of the value of the Fund's net assets. The Trust's Board of Trustees
has approved guidelines for use by IMI in determining whether a security is
illiquid.
Generally speaking, restricted securities may be sold (i) only to
qualified institutional buyers; (ii) in a privately negotiated transaction to a
limited number of purchasers; (iii) in limited quantities after they have been
held for a specified period of time and other conditions are met pursuant to an
exemption from registration; or (iv) in a public offering for which a
registration statement is in effect under the 1933 Act. Issuers of restricted
securities may not be subject to the disclosure and other investor protection
requirements that would be applicable if their securities were publicly traded.
If adverse market conditions were to develop during the period between a Fund's
decision to sell a restricted or illiquid security and the point at which that
Fund is permitted or able to sell such security, the Fund might obtain a price
less favorable than the price that prevailed when it decided to sell. Where a
registration statement is required for the resale of restricted securities, a
Fund may be required to bear all or part of the registration expenses. A Fund
may be deemed to be an "underwriter" for purposes of the 1933 Act when selling
restricted securities to the public and, if so, could be liable to purchasers of
such securities if the registration statement prepared by the issuer is
materially inaccurate or misleading.
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, IMI
will monitor such restricted securities subject to the supervision of the Board
of Trustees. Among the factors IMI may consider in reaching liquidity decisions
relating to Rule 144A securities are: (1) the frequency of trades and quotes for
the security; (2) the number of dealers wishing to purchase or sell the security
and the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of the
market for the security (i.e., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of the transfer).
FOREIGN SECURITIES
The securities of foreign issuers in which each Fund may invest include
non-U.S. dollar-denominated debt securities, Euro dollar securities, sponsored
and unsponsored American Depository Receipts ("ADRs"), Global Depository
Receipts ("GDRs") and related depository instruments, American Depository Shares
("ADSs"), Global Depository Shares ("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 each Fund's domestic investments.
Although IMI intends to invest each Fund's assets only in nations that
are generally considered to have relatively stable and friendly governments,
there is the possibility of expropriation, nationalization, repatriation or
confiscatory taxation, taxation on 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 on foreign
government securities, political or social instability or diplomatic
developments which 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. 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 governmental 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 each Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, each Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign bond 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 a Fund are uninvested and no return is earned thereon.
The inability of each Fund to make intended security purchases due to settlement
problems could cause that Fund to miss attractive investment opportunities.
Further, the inability to dispose of portfolio securities due to settlement
problems could result either in losses to a 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. It may be
more difficult for each 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 each Fund associated with the foregoing
considerations through investment variation and continuous professional
management.
DEPOSITORY RECEIPTS
ADRs, GDRs, ADSs, GDSs and related securities 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. ADRs are publicly
traded on exchanges or over-the-counter ("OTC") in the United States.
Unsponsored programs are organized independently and without the cooperation of
the issuer of the underlying securities. As a result, information concerning the
issuer may not be as current or as readily available as in the case of sponsored
depository instruments, and their prices may be more volatile than if they were
sponsored by the issuers of the underlying securities.
EMERGING MARKETS
Each Fund could have significant investments in securities traded in
emerging markets. Investors should recognize that investing in such countries
involves special considerations, in addition to those set forth above, that are
not typically associated with investing in United States securities and that may
affect each Fund's performance favorably or unfavorably.
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 each 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 in greater price volatility; (iii) certain
national policies that may restrict each 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 each 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, each 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 each 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
each 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, that 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 be increased in such countries.
FOREIGN CURRENCIES
Investment in foreign securities usually will involve currencies of
foreign countries. Moreover, each Fund may temporarily hold funds in bank
deposits in foreign currencies during the completion of investment programs and
may purchase forward foreign currency contracts. Because of these factors, the
value of the assets of each Fund as measured in U.S. dollars may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and each Fund may incur costs in connection with
conversions between various currencies. Although each Fund's custodian values
the Fund's assets daily in terms of U.S. dollars, each Fund does not intend to
convert its holdings of foreign currencies into U.S. dollars on a daily basis.
Each Fund will do so from time to time, however, 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
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one
rate, while offering a lesser rate of exchange should the Fund desire to resell
that currency to the dealer. Each Fund will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through entering into
forward contracts to purchase or sell foreign currencies.
Because each Fund normally will be invested in both U.S. and foreign
securities markets, changes in the Funds' share price may have a low correlation
with movements in U.S. markets. Each Fund's share price will reflect the
movements of the different stock and bond markets in which it is invested (both
U.S. and foreign), and of the currencies in which the investments are
denominated. Thus, the strength or weakness of the U.S. dollar against foreign
currencies may account for part of each 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.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Each Funds may enter into forward foreign currency contracts in order
to protect against uncertainty in the level of future foreign exchange rates in
the purchase and sale of securities. 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 each Fund may enter into forward contracts to reduce currency
exchange risks, changes in currency exchange rates may result in poorer overall
performance for each Fund than if it had not engaged in such transactions.
Moreover, there may be an imperfect correlation between a 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 each Fund from achieving the intended hedge or expose the Fund to the
risk of currency exchange loss.
Each Fund may purchase currency forwards and combine such purchases
with sufficient cash or short-term securities to create unleveraged substitutes
for investments in foreign markets when deemed advantageous. Each Fund may also
combine the foregoing with bond futures or interest rate futures contracts to
create the economic equivalent of an unhedged foreign bond position.
Each Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which each Fund has or in which each Fund
expects to have portfolio exposure.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to a Fund if it
is unable to deliver or receive currency or funds in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transactions costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
INVESTMENT CONCENTRATION
Since Ivy Next Wave Internet Fund focuses its investment in securities
of companies engaged in Internet-related business activities, the Fund could
experience wider fluctuations in value than funds with more diversified
portfolios.
Although Ivy Cundill Value Fund will not invest more than 25% of its
total assets in any one industry and does not expect to focus its investments in
a single country, it may at any given time have a significant percentage of its
total assets in one or more countries or market sectors. If this were to occur,
the Fund could experience a wider fluctuation in value than funds with more
diversified portfolios.
OTHER INVESTMENT COMPANIES
Each Fund may invest up to 10% of its total assets in the shares of
other investment companies. As a shareholder of an investment company, each Fund
would bear its ratable shares of the fund's expenses (which often include an
asset-based management fee). Each Fund could also lose money by investing in
other investment companies, since the value of their respective investments and
the income they generate will vary daily based on prevailing market conditions.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which a 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 Board, each 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 IMI has
approved for use as collateral for repurchase agreements and the collateral must
be marked-to-market daily. Each Fund will enter into repurchase agreements only
with banks and broker-dealers deemed to be creditworthy by IMI under the
above-referenced guidelines. In the unlikely event of failure of the executing
bank or broker-dealer, each 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.
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). In
addition to investing in certificates of deposit and bankers' acceptances, each
Fund may invest in time deposits in banks or savings and loan associations. Time
deposits are generally similar to certificates of deposit, but are
uncertificated. Each Fund's investments in certificates of deposit, time
deposits, and bankers' acceptance are limited to obligations of (i) banks having
total assets in excess of $1 billion, (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"), (iii) savings
and loan association which have total assets in excess of $1 billion and which
are members of the FDIC, and (iv) foreign banks if the obligation is, in IMI's
opinion, of an investment quality comparable to other debt securities which may
be purchased by the Fund. Each 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.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. Each Fund may invest in commercial paper that is rated Prime-1 by
Moody's or A-1 by S&P or, if not rated by Moody's or S&P, is issued by companies
having an outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by S&P.
BORROWING
Borrowing may exaggerate the effect on each Fund's net asset value of
any increase or decrease in the value of each 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 each Fund's borrowings will be fixed, each Fund's assets may change in value
during the time a borrowing is outstanding, thus increasing exposure to capital
risk.
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 a 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 a Fund was not exercised by the date of its expiration, the Fund would
lose the entire purchase price of the warrant.
OPTIONS TRANSACTIONS
IN GENERAL. 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 a U.S. exchange-traded 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. Closing purchase transactions are not available for OTC
transactions. In order to terminate an obligations in an OTC transaction, a Fund
would need to negotiate directly with the counterparty.
Each 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 a 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 a Fund, are taxable as ordinary income. See "Taxation."
Each 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 each Fund and its counterparty (usually a securities dealer or a
financial institution) with no clearing organization guarantee. When a 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. Each 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. Each 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 each Fund, it generally would write call options
only in circumstances where the investment adviser to the Fund does not
anticipate significant appreciation of the underlying security in the near
future or has otherwise determined to dispose of the security.
A "covered" call option means generally that so long as a 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, a 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 a 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. Each Fund may purchase a
put option on an underlying security owned by that Fund as a defensive technique
in order to protect against an anticipated decline in the value of the security.
Each 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 a 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 either Fund for leverage
purposes.
Each 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. A 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. Each Fund may write (sell) put options on individual securities only to
effect a "closing sale transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. Each 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. Call
options on indices are similar to call 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 a 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 a 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 a
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 a U.S. 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 a 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 a Fund
seeks to close out an option position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, a 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. Transfer of an
OTC option is usually prohibited absent the consent of the original
counterparty. There is no assurance that a Fund will be able to close out an OTC
option position at a favorable price prior to its expiration. An OTC
counterparty may fail to deliver or to pay, as the case may be. In the event of
insolvency of the counterparty, a Fund might be unable to close out an OTC
option position at any time prior to its expiration. Although a Fund may be able
to offset to some extent any adverse effects of being unable to liquidate an
option position, a Fund may experience losses in some cases as a result of such
inability.
When conducted outside the U.S., options transactions may not be
regulated as rigorously as in the U.S., 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, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions, (iii)
delays in each Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S., and (v) lower trading volume and liquidity.
Each Fund's options activities also may have an impact upon the level
of its portfolio turnover and brokerage commissions. See "Portfolio Turnover."
Each 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, timing of use and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. Each Fund may enter into futures contracts and options on
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 a Fund, that Fund is required to deposit with its
custodian (or broker, if legally permitted) a specified amount of cash or liquid
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 a 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 a 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, each Fund
will mark-to-market its open futures position.
Each Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option,
and other futures positions held by the Fund.
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, each 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, each 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, each 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. Alternatively,
each 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, or, if lower, may cover the difference with cash or
short-term securities.
When selling a futures contract, each 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, a 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).
When selling a call option on a futures contract, each 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, equal the total market value of the futures contract
underlying the call option. Alternatively, a Fund may cover its position by
entering into a long position in the same futures contract at a price no higher
than the strike price of the call option, by owning the instruments underlying
the futures contract, or by holding a separate call option permitting the Fund
to purchase the same futures contract at a price not higher than the strike
price of the call option sold by the Fund, or covering the difference if the
price is higher.
When selling a put option on a futures contract, each Fund will
maintain with its Custodian (and mark-to-market on a daily basis) cash or liquid
securities that equal the purchase price of the futures contract less any margin
on deposit. Alternatively, a Fund may cover the position either by entering into
a short position in the same futures contract, or by owning a separate put
option permitting it to sell the same futures contract so long as the strike
price of the purchased put option is the same or higher than the strike price of
the put option sold by the Fund, or, if lower, the Fund may hold securities to
cover the difference.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. Each Fund may
engage in foreign currency futures contracts and related options transactions
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.
An option on a foreign currency futures contract gives the holder the
right, in return for the premium paid, to assume a long position (call) or short
position (put) in a futures contract at a specified exercise price at any time
during the period of the option. Upon the exercise of a call option, the holder
acquires a long position in the futures contract and the writer is assigned the
opposite short position. In the case of a put option, the opposite is true.
Each Fund may purchase call and put options on foreign currencies as a
hedge against changes in the value of the U.S. dollar (or another currency) in
relation to a foreign currency in which portfolio securities of the Fund may be
denominated. A call option on a foreign currency gives the buyer the right to
buy, and a put option the right to sell, a certain amount of foreign currency at
a specified price during a fixed period of time. Each Fund may invest in options
on foreign currency which are either listed on a domestic securities exchange or
traded on a recognized foreign exchange.
In those situations where foreign currency options may not be readily
purchased (or where such options may be deemed illiquid) in the currency in
which the hedge is desired, the hedge may be obtained by purchasing an option on
a "surrogate" currency, i.e., a currency where there is tangible evidence of a
direct correlation in the trading value of the two currencies. A surrogate
currency's exchange rate movements parallel that of the primary currency.
Surrogate currencies are used to hedge an illiquid currency risk, when no liquid
hedge instruments exist in world currency markets for the primary currency.
Each Fund will only enter into futures contracts and futures options
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. Each Fund will not
enter into a futures contract or purchase an option thereon 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. A call option is "in-the-money" if the
value of the futures contract that is the subject of the option exceeds the
exercise price. A put option is "in-the-money" if the exercise price exceeds the
value of the futures contract that is the subject of the option. For additional
information about margin deposits required with respect to futures contracts and
options thereon, see "Futures Contracts and Options on Futures Contracts."
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in a 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 and futures options on securities, including technical
influences in futures trading and futures options, 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 a Fund seeks to close out a futures or a futures option 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 and options thereon 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 a
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.
SECURITIES INDEX FUTURES CONTRACTS
Each Fund may enter into securities index futures contracts as an
efficient means of regulating the Fund's exposure to the equity markets. Each
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 a 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 a 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 OF SECURITIES INDEX FUTURES. Each 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.
Each 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. Inasmuch as such securities will not duplicate the components of an
index, the correlation probably will not be perfect. Consequently, each 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 each 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 a 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,
a 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, a 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.
Each 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. Each
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, each 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.
Alternatively, a 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, each 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 an FCM as margin, are equal to
the market value of the instruments underlying the contract. Alternatively, a
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 cash or liquid
assets in a segregated account with the Fund's custodian).
COMBINED TRANSACTIONS. Each Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions and
multiple currency transactions (including forward currency contracts) and some
combination of futures, options, and currency 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.
PORTFOLIO TURNOVER
Each Fund purchases securities that are believed by IMI to have above
average potential for capital appreciation. Securities are disposed of in
situations where it is believed that potential for such appreciation has
lessened or that other securities have a greater potential. Therefore, each 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 a 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.
Each 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 each Fund's
portfolio turnover rate, all securities whose maturities at the time of
acquisition were one year or less are excluded.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction
of the Trustees. Information about each Fund's investment manager and other
service providers appears in the "Investment Advisory and Other Services"
section, below.
TRUSTEES AND OFFICERS
The Board of Trustees of the Trust is responsible for the overall
management of each Fund, including general supervision and review of the Fund's
investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
POSITION WITH BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE THE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and controls);
Wilmington, MA 01887 Director, Burr-Brown Corp.
Age: 75 (operational amplifiers);
Director, Metritage Incorporated
(level measuring instruments);
Trustee of Mackenzie Series Trust
(1992-1998).
James W. Broadfoot President President, Ivy Management, Inc.
700 South Federal Hwy. and (1996-present); Senior Vice President,
Suite 300 Trustee Ivy Management, Inc. (1992-1996);
Boca Raton, FL 33432 Director and Senior Vice President,
Age: 56 Mackenzie Investment Management Inc.
[*Deemed to be an (1995-present); Senior Vice President,
"interested person" Mackenzie Investment Management Inc.
of the Trust, as (1990-1995).
defined under the
1940 Act.]
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: 75 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
(1988-1998); Director of The
Mackenzie Funds Inc. (1988-1995).
Keith J. Carlson Chairman Senior Vice President of Mackenzie
700 South Federal Hwy. and Investment Management, Inc. (1996-
Suite 300 Trustee -present); Senior Vice President
Boca Raton, FL 33432 and Director of Mackenzie Investment
Age: 42 Management, Inc. (1994-1996);
[*Deemed to be an Senior Vice President and Treasurer
"interested person" of Mackenzie Investment Management,
of the Trust, as defined Inc. (1989-1994); Senior Vice
under the President and Director of Ivy
1940 Act.] 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 (1996-1998);
Vice President of Mackenzie Series
Trust (1994-1998); 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 (1996-1998).
Stanley Channick Trustee President and Chief
11 Bala Avenue Executive Officer, The
Bala Cynwyd, PA 19004 Whitestone Corporation
Age: 75 (insurance agency); Chairman,
Scott Management Company
(administrative services for
insurance companies);
President, The Channick Group
(consultants to insurance
companies and national trade
associations); Trustee of
Mackenzie Series Trust
(1994-1998); Director of
The Mackenzie Funds Inc.
(1994-1995).
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 (1994-1997).
Age: 73
Dianne Lister Trustee President and Chief Executive Officer,
556 University Avenue The Hospital for Sick Children
Toronto, Ontario L4J 2T4 Foundation (1993-present); Chief
Operating Officer, The Hospital for
Sick Children Foundation
(1992-1993); Executive Vice
President, The Hospital for
Sick Children Foundation
(1991-1992).
Joseph G. Rosenthal Trustee Chartered Accountant
110 Jardin Drive (1958-present); Trustee of
Unit #12 Mackenzie Series Trust
Concord, Ontario Canada (1985-1998); Director of
L4K 2T7 The Mackenzie Funds Inc.
Age: 64 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 75 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: 69 B.V. (an environmentally sensitive
packaging company); Director of
Polyglass LTD.; Director, The
Mackenzie Funds Inc. (1992-1995);
Trustee of Mackenzie Series Trust
(1992-1998).
Edward M. Tighe Trustee Chief Executive Officer,
5900 N. Andrews Avenue CITCO Technology Management, Inc.
Suite 700 ("CITCO") (computer software develop-
Ft. Lauderdale, FL 33309 ment and consulting) (1999-present);
President and Director, Global
Technology Management, Inc. (CITCO's
predecessor) (1992-1998); Managing
Director, Global Mutual Fund Services,
Ltd. (financial services firm);
President, Director and Chief
Executive Officer, Global Mutual Fund
Services, Inc. (1994-present).
C. William Ferris Secretary/ Senior Vice President, Chief Financial
700 South Federal Hwy. Treasurer Officer and Secretary/Treasurer of
Suite 300 Mackenzie Investment Management Inc.
Boca Raton, FL 33432 (1995-present); Senior Vice President,
Age: 54 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
(1994-1998).
<PAGE>
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1999)
TOTAL
PENSION OR COMPENSATION
RETIREMENT ESTIMATED FROM TRUST
BENEFITS ANNUAL AND FUND
AGGREGATE ACCRUED AS BENEFITS COMPLEX PAID
NAME, COMPENSATION PART OF FUND UPON TO TRUSTEES**
POSITION FROM TRUST* EXPENSES RETIREMENT
John S. --- N/A N/A ---
Anderegg, Jr.
(Trustee)
James W. --- N/A N/A ---
Broadfoot
(Trustee and
President)
Paul H. --- N/A N/A ---
Broyhill
(Trustee)
Keith J. --- N/A N/A ---
Carlson
(Trustee and
Chairman)
Stanley --- N/A N/A ---
Channick
(Trustee)
Roy J. --- N/A N/A ---
Glauber
(Trustee)
Dianne --- N/A N/A ---
Lister
(Trustee)
Joseph G. --- N/A N/A ---
Rosenthal
(Trustee)
Richard N. --- N/A N/A ---
Silverman
(Trustee)
J. Brendan --- N/A N/A ---
Swan
(Trustee)
C. William --- N/A N/A ---
Ferris
(Secretary/
Treasurer)
* Estimated for each Fund's initial fiscal year ending December 31, 2000.
** Estimated for each Fund's initial fiscal year ending December 31, 2000. The
Fund complex consists of Ivy Fund and Mackenzie Solutions.
As of the date of this SAI, the Officers and Trustees of the Trust as a
group owned no shares of the Funds.
<PAGE>
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST. IMI, IMDI and the
Trust have adopted a Code of Ethics and Business Conduct Policy (the "Code of
Ethics"), which is designed to identify and address certain conflicts of
interest between personal investment activities and the interests of investment
advisory clients such as each Fund, in compliance with Rule 17j-1 under the 1940
Act. The Code of Ethics permits employees of IMI, IMDI and the Trust to engage
in personal securities transactions, including with respect to securities held
by one or more Funds, subject to certain requirements and restrictions. Among
other things, the Code of Ethics, which applies to portfolio managers, traders,
research analysts and others involved in the investment advisory process,
prohibits certain types of transactions absent prior approval, imposes time
periods during which personal transactions in certain securities may not be
made, and requires the submission of duplicate broker confirmations and
quarterly and annual reporting of securities transactions. Exceptions to certain
provisions of the Code of Ethics may be granted in particular circumstances
after review by appropriate officers or compliance personnel.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI"), Via Mizner Financial Plaza, 700 South
Federal Highway, Boca Raton, Florida 33432, provides investment advisory and
business management services to each Fund pursuant to a Business Management and
Investment Advisory Agreement (the "Advisory Agreement"). The Advisory Agreement
was approved by the sole shareholder of each of the Funds on _________, 2000.
Before that, the Advisory Agreement was approved at meetings held on February
3-4, 2000 (for Ivy Cundill Value Fund) and _________, 2000 (for Ivy Next Wave
Internet Fund) by the Funds' Board of Trustees, including a majority of the
Trustees who are neither "interested persons" (as defined in the 1940 Act) of
the Funds nor have any direct or indirect financial interest in the operation of
each Fund's distribution plan (see "Distribution Services") or in any related
agreement (referred to herein as the "Independent Trustees").
IMI is a wholly owned subsidiary of Mackenzie Investment Management
Inc. ("MIMI"), Via Mizner Financial Plaza, 700 South Federal Highway, Boca
Raton, Florida 33432, a Delaware corporation with approximately 10% of its
outstanding common stock listed on the Toronto Stock Exchange ("TSE"). MIMI is a
subsidiary of Mackenzie Financial Corporation ("MFC"), 150 Bloor Street West,
Toronto, Ontario, Canada, a public corporation organized under the laws of
Ontario whose shares are listed for trading on the TSE. MFC is registered in
Ontario as a mutual fund dealer. IMI currently acts as manager and investment
adviser to the other series of Ivy Fund and the five series of Mackenzie
Solutions.
The Advisory Agreement obligates IMI to make investments for the
account of each 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 Internal Revenue Code of 1986, as amended (the
"Code"), relating to regulated investment companies, and subject to policy
decisions adopted by the Trustees. IMI has delegated to Cundill the primary
responsibility for determining which securities Ivy Cundill Value Fund should
purchase and sell (see "Sub-Advisor," below.)
Under the Advisory Agreement, IMI is also obligated to (1) coordinate
with each Fund's Custodian and monitor the services it provides to the Fund; (2)
coordinate with and monitor any other third parties furnishing services to each
Fund; (3) provide each Fund with necessary office space, telephones and other
communications facilities as needed; (4) provide the services of individuals
competent to perform administrative and clerical functions that are not
performed by employees or other agents engaged by each 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 each Fund 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 Fund to serve in such
capacities; and (7) take such other action with respect to the Fund, upon the
approval of its trustees, as may be required by applicable law, including
without limitation the rules and regulations of the Securities and Exchange
Commission (the "SEC") and of state securities commissions and other regulatory
agencies.
Each Fund pays IMI a fee for its services under the Advisory Agreement
at an annual rate of 1.00% of each Fund's average net assets.
Under the Advisory Agreement, the Trust is also responsible for 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.
SUB-ADVISOR
Cundill, an SEC-registered investment advisor located at P.O. Box SN
117, Southhampton, Bermuda SN BX, serves as sub- advisor to Ivy Cundill Value
Fund under a subadvisory agreement with IMI (the "Subadvisory Agreement").
Cundill began operations in 1984, and as of the end of 1999 (along with its
affiliates) had approximately $1 billion in assets under management. The
Subadvisory Agreement was approved by the sole shareholder of the Fund on
__________, 2000. Before that, the Subadvisory Agreement was approved at a
meeting held on February 3-4, 2000 by the Fund's Board of Trustees, including a
majority of the Independent Trustees. For its services, Cundill receives a fee
from the Advisor that is equal, on an annual basis, to .50% of the Fund's
average net assets. The subadviser's fee will be paid by IMI out of the advisory
fees that it receives from Ivy Cundill Value Fund.
TERM AND TERMINATION OF ADVISORY AGREEMENT AND SUBADVISORY AGREEMENT
The initial term of the Advisory Agreement is two years from ________,
2000. The initial term of the Subadvisory Agreement is two years from _________,
2000. Each Agreement will continue in effect with respect to each Fund from year
to year, or for more than the initial period, as the case may be, only so long
as such continuance is specifically approved at least annually (i) by the vote
of a majority of the Independent Trustees and (ii) either (a) by the vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
that Fund or (b) by the vote of a majority of the entire Board. If the question
of continuance of either Agreement (or adoption of any new agreement) is
presented to shareholders, continuance (or adoption) shall occur only if
approved by the affirmative vote of a majority of the outstanding voting
securities of that Fund. (See "Capitalization and Voting Rights.")
The Agreements may be terminated with respect to each 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
Advisory Agreement shall terminate automatically in the event of its assignment.
DISTRIBUTION SERVICES
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, serves as the exclusive distributor of each Fund's shares pursuant to an
Amended and Restated Distribution Agreement with the Trust dated March 16, 1999,
as amended from time to time (the "Distribution Agreement"). 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 each Fund continuously, but reserves the
right to suspend or discontinue distribution on that basis. IMDI is not
obligated to sell any specific amount of Fund shares.
Each Fund has authorized IMDI to accept purchase and redemption orders
on its behalf. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on each Fund's behalf. Each Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at each Fund's Net Asset Value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
Pursuant to the Distribution Agreement, IMDI is entitled to deduct a
commission on all Class A Fund shares sold equal to the difference, if any,
between the public offering price, as set forth in each Fund's then-current
prospectus, and the net asset value on which such price is based. Out of that
commission, IMDI may reallow to dealers such concession as IMDI may determine
from time to time. In addition, IMDI is entitled to deduct a CDSC on the
redemption of Class A shares sold without an initial sales charge and Class B
and Class C shares, in accordance with, and in the manner set forth in, the
Prospectus.
Under the Distribution Agreement, each Fund bears, among other
expenses, the expenses of registering and qualifying its shares for sale under
federal and state securities laws and preparing and distributing to existing
shareholders periodic reports, proxy materials and prospectuses.
As of the date of this SAI, IMDI had not received any payments under
the Distribution Agreement with respect to the Funds.
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 each
Fund. The Distribution Agreement may be terminated with respect to either Fund
at any time, without payment of any penalty, by IMDI on 60 days' written notice
to the Fund or by a 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 and filed with the SEC. At meetings held
on February 3-4, 2000 and _______, 2000, the Trustees adopted a Rule 18f-3 plan
on behalf of Ivy Cundill Value Fund and Ivy Next Wave Internet Fund,
respectively. The key features of the Rule 18f-3 plan are as follows: (i) shares
of each class of each Fund represent an equal pro rata interest in that Fund and
generally have identical voting, dividend, liquidation, and other rights,
preferences, powers, restrictions, limitations, qualifications, terms and
conditions, except that each class bears certain class-specific expenses and has
separate voting rights on certain matters that relate solely to that class or in
which the interests of shareholders of one class differ from the interests of
shareholders of another class; (ii) subject to certain limitations described in
the Prospectus, shares of a particular class of each Fund may be exchanged for
shares of the same class of another Ivy fund; and (iii) each Fund's Class B
shares will convert automatically into Class A shares of that Fund after a
period of eight years, based on the relative net asset value of such shares at
the time of conversion.
RULE 12B-1 DISTRIBUTION PLANS. The Trust has adopted on behalf of each
Fund, in accordance with Rule 12b-1 under the 1940 Act, separate Rule 12b-1
distribution plans pertaining to each Fund's Class A, Class B and Class C shares
(each, a "Plan"). In adopting each Plan, a majority of the Independent Trustees
have concluded in accordance with the requirements of Rule 12b-1 that there is a
reasonable likelihood that each Plan will benefit each Fund and its
shareholders. The Trustees of the Trust believe that the Plans should result in
greater sales and/or fewer redemptions of each Fund's shares, although it is
impossible to know for certain the level of sales and redemptions of either
Fund's shares in the absence of a Plan or under an alternative distribution
arrangement.
Under each Plan, each Fund pays to IMDI a service fee, accrued daily
and paid monthly, at the annual rate of up to 0.25% of the average daily net
assets attributable to its Class A, Class B or Class C shares, respectively. The
services for which service fees may be paid include, among other things,
advising clients or customers regarding the purchase, sale or retention of Fund
shares, answering routine inquiries concerning the 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 each Fund's Class B and Class C Plans, each Fund also pays IMDI a
distribution fee, accrued daily and paid monthly, at the annual rate of 0.75% of
the average daily net assets attributable to its Class B or Class C shares. IMDI
may reallow to dealers all or a portion of the service and distribution fees as
IMDI may determine from time to time. The distribution fees compensate IMDI for
expenses incurred in connection with activities primarily intended to result in
the sale of 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 each Class B and Class C Plan, IMDI may include interest,
carrying or other finance charges in its calculation of distribution expenses,
if not prohibited from doing so pursuant to an order of or a regulation adopted
by the SEC.
Among other things, each Plan provides that (1) IMDI will submit to the
Board at least quarterly, and the Trustees will review, written reports
regarding all amounts expended under the Plan and the purposes for which such
expenditures were made; (2) each Plan will continue in effect only so long as
such continuance is approved at least annually, and any material amendment
thereto is approved, by the votes of a majority of the Board, including the
Independent Trustees, cast in person at a meeting called for that purpose; (3)
payments by each Fund under each Plan shall not be materially increased without
the affirmative vote of the holders of a majority of the outstanding shares of
the relevant class; and (4) while each Plan is in effect, the selection and
nomination of Trustees who are not "interested persons" (as defined in the 1940
Act) of the Fund shall be committed to the discretion of Trust who are not
"interested persons" of the Fund.
IMDI may make payments for distribution assistance and for
administrative and accounting services from resources that may include the
management fees paid by each Fund. IMDI also may make payments (such as the
service fee payments described above) to unaffiliated broker-dealers banks,
investment advisers, financial institutions and other entities for services
rendered in the distribution of each 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 or other party if at the end of
each year the amount of shares held does not exceed a minimum amount. The
minimum holding period and minimum level of holdings will be determined from
time to time by IMDI.
A report of the amount expended pursuant to each Plan, and the purposes
for which such expenditures were incurred, must be made to the Board for its
review at least quarterly. As of the date of this SAI, no payments had been made
under the Plans with respect to the Fund.
The Class B Plan and underwriting agreement permit IMDI to sell its
right to receive distribution fees under the Class B Plan and CDSCs to third
parties. IMDI enters into such transactions to finance the payment of
commissions to brokers at the time of sale and other distribution-related
expenses. The Trust has agreed that the distribution fee will not be terminated
or modified (including a modification by change in the rules relating to the
conversion of Class B shares into shares of another class) for any reason
(including a termination of the underwriting agreement) except:
(i) to the extent required by a change in the 1940 Act, the rules
or regulations under the 1940 Act, or the Conduct Rules of the
NASD, in each case enacted, issued, or promulgated after March
16, 1999;
(ii) on a basis which does not alter the amount of the distribution
payments to IMDI computed with reference to Class B shares the
date of original issuance of which occurred on or before
December 31, 1998;
(iii) in connection with a Complete Termination (as defined in the
Class B Plan); or
(iv) on a basis determined by the Board of Trustees acting in good
faith, so long as (a) neither the Trust nor any successor
trust or fund or any trust or fund acquiring a substantial
portion of the assets of the Trust (collectively, the
"Affected Funds") nor the sponsors of the Affected Funds pay,
directly or indirectly, as a fee, a trailer fee, or by way of
reimbursement, any fee, however denominated, to any person for
personal services, account maintenance services or other
shareholder services rendered to the holder of Class B shares
of the Affected Funds from and after the effective date of
such modification or termination, and (b) the termination or
modification of the distribution fee applies with equal effect
to all outstanding Class B shares from time to time of all
Affected Funds regardless of the date of issuance thereof.
In the underwriting agreement, the Trust has also agreed that it will
not take any action to waive or change any CDSC in respect of any Class B share
the date of original issuance of which occurred on or before December 31, 1998,
except as provided in the Trust's prospectus or statement of additional
information, without the consent of IMDI and its transferees.
Each Plan may be amended at any time with respect to the class of
shares of the Fund to which the Plan relates by vote of the Trustees, including
a majority of the Independent Trustees, cast in person at a meeting called for
the purpose of considering such amendment. Each Plan may be terminated at any
time with respect to the class of shares of the Fund to which the Plan relates,
without payment of any penalty, by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding voting securities of that
class.
If the Distribution Agreement or any Plan is terminated (or not
renewed) with respect to any of the Ivy funds (or class of shares thereof), each
may continue in effect with respect to any other fund (or Class of shares
thereof) as to which they have not been terminated (or have been renewed).
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown Brothers
Harriman & Co. (the "Custodian"), a private bank and member of the principal
securities exchanges, located at 40 Water Street, Boston, Massachusetts 02109
(the "Custodian"), maintains custody of each Fund's assets. 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, the Custodian has entered into subcustodial agreements for the
holding of each Fund's foreign securities. With respect to each Fund, the
Custodian may receive, as partial payment for its services to each Fund, a
portion of the Trust's brokerage business, subject to its ability to provide
best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement, MIMI provides certain
accounting and pricing services for each Fund. As compensation for those
services, each Fund pays MIMI a monthly fee plus out-of-pocket expenses as
incurred. The monthly fee is based upon the net assets of 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. As of the date of this SAI, no payments have been
made under the agreement.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service Agreement, Ivy
Mackenazie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI, is the
transfer agent for each Fund. Under the Agreement, each Fund pays a monthly fee
at an annual rate of $20.00 for each open Class A, Class B, Class C and Advisor
Class account. Each Fund pays $10.25 per open Class I account. In addition, each
Fund pays a monthly fee at an annual rate of $4.58 per account that is closed
plus certain out-of-pocket expenses. As of the date of this SAI, no payments
have been made by either Fund for transfer agency services. Certain
broker-dealers that maintain shareholder accounts with each 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 (e.g., .10%) fee, based on the average daily
net asset value of the omnibus account (or a combination thereof). As of the
date of this SAI, no payments have been made by either Fund with respect to the
provision of these services for the Funds.
ADMINISTRATOR
Pursuant to an Administrative Services Agreement, MIMI provides certain
administrative services to the Funds. As compensation for these services, each
Fund (except with respect to its Class I shares) pays MIMI a monthly fee at the
annual rate of 0.10% of the Fund's average daily net assets. Each Fund pays MIMI
a monthly fee at the annual rate of 0.01% of its average daily net assets for
Class I shares.
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 Class B and Class C shares of each Fund.
As of the date of this SAI, no payments have been made by either Fund with
respect to the provision of these services for the Funds.
AUDITORS
PricewaterhouseCoopers LLP, independent certified public accountants,
have been selected as auditors for each Fund. The audit services performed by
PricewaterhouseCoopers LLP include audits of the annual financial statements of
each Fund. Other services provided principally relate to filings with the SEC
and the preparation of each Fund's tax returns.
BROKERAGE ALLOCATION
Subject to the overall supervision of the President and the Board, IMI
(and/or for Ivy Cundill Value Fund, Cundill) places orders for the purchase and
sale of each 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 Funds 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
(and/or Cundill) attempts to deal directly with the principal market makers,
except in those circumstances where IMI (and/or Cundill) believes that a better
price and execution are available elsewhere.
IMI (and/or Cundill) 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 (and/or
Cundill) in servicing all of its accounts. In addition, not all of these
services may be used by IMI (and/or Cundill) in connection with the services it
provides to the Fund or the Trust. IMI (and/or Cundill) may consider sales of
shares of other Ivy, IMI or Cundill managed funds as a factor in the selection
of broker-dealers and may select broker-dealers who provide it with research
services. IMI (and/or Cundill) will not, however, execute brokerage transactions
other than at the best price and execution.
Each Fund may, under some circumstances, accept securities in lieu of
cash as payment for Fund shares. Each 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 (and/or Cundill) deems to be a desirable
investment for each Fund. While no minimum has been established, it is expected
that each 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 each Fund, and each Fund shares will be sold for net
asset value determined at the same time the accepted securities are valued. The
Trust will only accept securities delivered in proper form and will not accept
securities subject to legal restrictions on transfer. The acceptance of
securities by the Trust must comply with the applicable laws of certain states.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Fund consists of an unlimited number of
shares of beneficial interest (no par value per share). When issued, shares of
each class of each Fund are fully paid, non-assessable, redeemable and fully
transferable. No class of shares of the Funds has preemptive rights or
subscription rights.
The Amended and Restated Declaration of Trust (the "Declaration of
Trust") permits the Trustees to create separate series or portfolios and to
divide any series or portfolio into one or more classes. Pursuant to the
Declaration of Trust, the Trustees may terminate a Fund upon written notice to
shareholders. This might occur, for example, if a Fund does not reach an
economically viable size. The Trustees have authorized twenty-one series, each
of which represents a fund. The Trustees have further authorized the issuance of
Class A, Class B, and Class C shares for Ivy International Fund and the Ivy
Money Market Fund and Class A, Class B, Class C and Advisor Class shares for the
Fund, Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy
Developing Nations Fund, Ivy European Opportunities 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 II, Ivy International
Small Companies Fund, Ivy International Strategic Bond Fund, Ivy Pan-Europe
Fund, Ivy South America Fund, Ivy US Blue Chip Fund and Ivy US Emerging Growth
Fund, as well as Class I shares for the Fund, Ivy Bond Fund, Ivy European
Opportunities Fund, Ivy Global Science & Technology Fund, Ivy International
Fund, Ivy International Fund II, Ivy International Small Companies Fund, Ivy
International Strategic Bond Fund and Ivy US Blue Chip Fund.
Shareholders have the right to vote for the election of Trustees of the
Trust and on any and all matters on which they may be entitled to vote by law or
by the provisions of the Trust's By-Laws. The Trust is not required to hold a
regular annual meeting of shareholders, and it does not intend to do so. Shares
of each class of each Fund entitle their holders to one vote per share (with
proportionate voting for fractional shares). Shareholders of each Fund are
entitled to vote alone on matters that only affect that Fund. All classes of
shares of each Fund will vote together, except with respect to the distribution
plan applicable to the Fund's Class A, Class B or Class C shares or when a class
vote is required by the 1940 Act. On matters relating to all funds of the Trust,
but affecting them differently, separate votes by the shareholders of each fund
are required. Approval of an investment advisory agreement and a change in
fundamental policies would be regarded as matters requiring separate voting by
the shareholders of each fund of the Trust. If the Trustees of the Trust
determine that a matter does not affect the interests of a particular fund, then
the shareholders of that fund will not be entitled to vote on that matter.
Matters that affect the Trust in general will be voted upon collectively by the
shareholders of all funds 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 that Fund (or of the Trust).
With respect to the submission to shareholder vote of a matter
requiring separate voting by each fund of the Trust, the matter shall have been
effectively acted upon with respect to that fund if a majority of the
outstanding voting securities of the fund votes for the approval of the matter,
notwithstanding that: (1) the matter has not been approved by a majority of the
outstanding voting securities of any other fund of the Trust; or (2) the matter
has not been approved by a majority of the outstanding voting securities of the
Trust.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust. Shareholders will be assisted in communicating with other shareholders in
connection with the removal of a Trustee.
The Trust's shares do not have cumulative voting rights and accordingly
the holders of more than 50% of the outstanding shares could elect the entire
Board, in which case the holders of the remaining shares would not be able to
elect any Trustees.
As of the date of this SAI, there were no Fund shares outstanding other
than those issued to the sole shareholder.
Under Massachusetts law, the Trust's shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims liability of the shareholders,
Trustees or officers of the Trust for acts or obligations of the Trust, which
are binding only on the assets and property of the Trust, and requires that
notice of the disclaimer be given in each contract or obligation entered into or
executed by the Trust or its Trustees. The Declaration of Trust also provides
for indemnification out of Fund property for all loss and expense of any
shareholder of either Fund held personally liable for the obligations of that
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 any other series of the Trust.
SPECIAL RIGHTS AND PRIVILEGES
Information as to how to purchase Fund shares is contained in the
Prospectus. The Trust offers (and except as noted below) bears the cost of
providing, to investors the following additional 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 Funds, whose shares are also distributed by IMDI. These funds
are: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy Developing
Nations Fund, Ivy European Opportunities 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 Fund II,
Ivy International Small Companies Fund, Ivy International Strategic Bond Fund,
Ivy Money Market Fund, Ivy Pan-Europe Fund, Ivy South America Fund, Ivy US Blue
Chip Fund and Ivy US Emerging Growth Fund (the other nineteen series of the
Trust). Shareholders should obtain a current prospectus before exercising any
right or privilege that may relate to these funds.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a Fund shareholder to
have specified amounts automatically drawn each month from his or her bank for
investment in Fund shares, is available for all classes of shares except Class
I. The minimum initial and subsequent investment under this method is $50 per
month (except in the case of a tax qualified retirement plan for which the
minimum initial and subsequent investment is $25 per month). A shareholder may
terminate the Automatic Investment Method at any time upon delivery to Ivy
Mackenzie Services Corp. ("IMSC") of telephone instructions or written notice.
To use this privilege, please complete Sections 6A and 7B of the Account
Application that is included with the Prospectus.
EXCHANGE OF SHARES
As described in the Prospectus, shareholders of each Fund have an
exchange privilege with other Ivy funds (except Ivy International Fund unless
they have an existing Ivy International Fund account). Before effecting an
exchange, shareholders of a Fund should obtain and read the currently effective
prospectus for the Ivy 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
fund ("new Class A Shares") on the basis of the relative net asset value per
Class A share, plus an amount equal to the difference, if any, between the sales
charge previously paid on the outstanding Class A shares and the sales charge
payable at the time of the exchange on the new Class A shares. (The additional
sales charge will be waived for Class A shares that have been invested for a
period of 12 months or longer.)
Class A shareholders may also exchange their shares for shares of Ivy
Money Market Fund (no initial sales charge will be assessed at the time of such
an exchange).
Each Fund may, from time to time, waive the initial sales charge on its
Class A shares sold to clients of The Legend Group and United Planners Financial
Services of America, Inc. This privilege will apply on to Class A Shares of a
Fund that are purchased using all or a portion of the proceeds obtained by such
clients through redemptions of shares of a mutual fund (other than one of the
Funds) on which a sales charge was paid (the "NAV transfer privilege").
Purchases eligible for the NAV transfer privilege must be made within 60 days of
redemption from the other fund, and the Class A shares purchased are subject to
a 1.00% CDSC on shares redeemed within the first year after purchase. The NAV
transfer privilege also applies to Fund shares purchased directly by clients of
such dealers as long as their accounts are linked to the dealer's master
account. The normal service fee, as described in the "Initial Sales Charge
Alternative - Class A Shares" section of the Prospectus, will be paid to those
dealers in connection with these purchases. IMDI may from time to time pay a
special cash incentive to The Legend Group or United Planners Financial Services
of America, Inc. in connection with sales of shares of the Fund by its
registered representatives under the NAV transfer privilege. Additional
information on sales charge reductions or waivers may be obtained from IMDI at
the address listed on the cover of this Statement of Additional Information.
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
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 a Fund
exercising the exchange privilege will continue to be subject to that Fund's
CDSC period following an exchange if such period is longer than the CDSC period,
if any, 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 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 a Fund exercising the
exchange privilege will continue to be subject to that 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 a Fund acquired through an exchange of Class B shares
of another Ivy fund will be subject to that 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 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 applies to Class B shares of the Ivy Cundill
Value Fund, Ivy Next Wave Internet Fund, Ivy Asia Pacific Fund, Ivy Bond Fund,
Ivy China Region Fund, Ivy Developing Nations Fund, Ivy European Opportunities
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 II, Ivy International Fund, Ivy International Small Companies Fund, Ivy
International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy South America Fund,
Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund.
CONTINGENT DEFERRED SALES
DOLLAR AMOUNT SUBJECT TO CHARGE CHARGE AS A PERCENTAGE OF
YEAR SINCE PURCHASE
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
CLASS C: Class C shareholders may exchange their Class C shares
("outstanding Class C shares") for Class C shares of another Ivy 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 1.00% if redeemed within one year of
the date of purchase.)
CLASS I: Subject to the restrictions set forth in the following
paragraph, Class I shareholders may exchange their outstanding Class I shares
for Class I shares of another Ivy fund on the basis of the relative net asset
value per share.
ALL CLASSES: The minimum value of shares which may be exchanged into an
Ivy fund in which shares are not already held is $1,000. No exchange out of a
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.
Each exchange will be made on the basis of the relative net asset value
per share of the Ivy funds involved in the exchange next computed following
receipt by IMSC of telephone instructions by IMSC 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 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
a 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 a Fund. A Letter of Intent may
be submitted at the time of an initial purchase of Class A shares of a Fund or
within 90 days of the initial purchase, in which case the Letter of Intent will
be backdated. A shareholder may include, as an accumulation credit, the value
(at the applicable offering price) of all Class A shares of Ivy Cundill Value
Fund, Ivy Next Wave Internet Fund, Fund, Ivy Asia Pacific Fund, Ivy Bond Fund,
Ivy China Region Fund, Ivy Developing Nations Fund, Ivy European Opportunities
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 II, Ivy International Fund, Ivy International Small Companies Fund, Ivy
International Strategic Bond Fund, Ivy Pan-Europe Fund, Ivy South America Fund,
Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund (and shares that have been
exchanged into Ivy Money Market Fund from any of the other funds in the Ivy
funds) held of record by him or her as of the date of his or her Letter of
Intent. During the term of the Letter of Intent, IMSC will hold Class A shares
representing 5% of the indicated amount (less any accumulation credit value) in
escrow. The escrowed Class A shares will be released when the full indicated
amount has been purchased. If the full indicated amount is not purchased during
the term of the Letter of Intent, the investor is required to pay IMDI an amount
equal to the difference between the dollar amount of sales charge that he or she
has paid and that which he or she would have paid on his or her aggregate
purchases if the total of such purchases had been made at a single time. Such
payment will be made by an automatic liquidation of Class A shares in the escrow
account. A Letter of Intent does not obligate the investor to buy (or the Trust)
to sell the indicated amount of Class A shares, and the investor should read
carefully all the provisions of the letter before signing.
RETIREMENT PLANS
Shares of each Fund 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 account
under the plan, and shares held in such an account may be exchanged among the
Ivy funds in accordance with the terms of the applicable plan and the exchange
privilege available to all shareholders. Initial and subsequent purchase
payments in connection with tax-deferred retirement plans must be at least $25
per participant.
The following fees will be charged to individual shareholder accounts
as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per fund account
For shareholders whose retirement accounts are diversified across
several Ivy funds, the annual maintenance fee will be limited to not more than
$20.
The following discussion describes some aspects of the tax treatment of
certain tax-deferred retirement plans under current Federal income tax law.
State income tax consequences may vary. An individual considering the
establishment of a retirement plan should consult with an attorney and/or an
accountant with respect to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of each Fund may be used as a
funding medium for an Individual Retirement Account ("IRA"). Eligible
individuals may establish an IRA by adopting a model custodial account available
from IMSC, who may impose a charge for establishing the account. Individuals
should consult their tax advisers before investing IRA assets in a fund if that
fund primarily distributes exempt-interest dividends.
An individual who has not reached age 70-1/2 and who receives
compensation or earned income is eligible to contribute to an IRA, whether or
not he or she is an active participant in a retirement plan. An individual who
receives a distribution from another IRA, a qualified retirement plan, a
qualified annuity plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible to establish an
IRA by rolling over the distribution either directly or within 60 days after its
receipt. Tax advice should be obtained in connection with planning a rollover
contribution to an IRA.
In general, an eligible individual may contribute up to the lesser of
$2,000 or 100% of his or her compensation or earned income to an IRA each year.
If a husband and wife are both employed, and both are under age 70-1/2, each may
set up his or her own IRA within these limits. If both earn at least $2,000 per
year, the maximum potential contribution is $4,000 per year for both. For years
after 1996, the result is similar even if one spouse has no earned income; if
the joint earned income of the spouses is at least $4,000, a contribution of up
to $2,000 may be made to each spouse's IRA. Rollover contributions are not
subject to these limits.
An individual may deduct his or her annual contributions to an IRA in
computing his or her Federal income tax within the limits described above,
provided he or she (and his or her spouse, if they file a joint Federal income
tax return) is not an active participant in a qualified retirement plan (such as
a qualified corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan, 403(b) plan,
simplified employee pension, or governmental plan. If he or she (or his or her
spouse) is an active participant, whether the individual's contribution to an
IRA is fully deductible, partially deductible or not deductible depends on (i)
adjusted gross income and (ii) whether it is the individual or the individual's
spouse who is an active participant, in the case of married individuals filing
jointly. Contributions may be made up to the maximum permissible amount even if
they are not deductible. Rollover contributions are not includible in income for
Federal income tax purposes and therefore are not deductible from it.
Generally, earnings on an IRA are not subject to current Federal income
tax until distributed. Distributions attributable to tax-deductible
contributions and to IRA earnings are taxed as ordinary income. Distributions of
non-deductible contributions are not subject to Federal income tax. There are
special rules for determining what portion of any distribution is allocable to
deductible and to non-deductible contributions. In general, distributions from
an IRA to an individual before he or she reaches age 59-1/2 are subject to a
nondeductible penalty tax equal to 10% of the taxable amount of the
distribution. The 10% penalty tax does not apply to amounts withdrawn from an
IRA after the individual reaches age 59-1/2, becomes disabled or dies, or if
withdrawn in the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated beneficiary, if any, or
rolled over into another IRA, amounts withdrawn and used to pay for deductible
medical expenses, amounts withdrawn by certain unemployed individuals not in
excess of amounts paid for certain health insurance premiums, amounts used to
pay certain qualified higher education expenses, and amounts used within 120
days of the date the distribution is received to pay for certain first-time
homebuyer expenses. Distributions must begin to be withdrawn not later than
April 1 of the calendar year following the calendar year in which the individual
reaches age 70-1/2. Failure to take certain minimum required distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAs: Shares of each Fund also may be used as a funding medium for
a Roth Individual Retirement Account ("Roth IRA"). A Roth IRA is similar in
numerous ways to the regular (traditional) IRA, described above. Some of the
primary differences are as follows.
A single individual earning below $95,000 can contribute up to $2,000
per year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000. An individual whose adjusted gross income exceeds the maximum
phase-out amount cannot contribute to a Roth IRA.
An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
Contributions to a Roth IRA are not deductible. Contributions to a Roth IRA may
be made even after the individual for whom the account is maintained has
attained age 70 1/2.
No distributions are required to be taken prior to the death of the
original account holder. If a Roth IRA has been established for a minimum of
five years, distributions can be taken tax-free after reaching age 59 1/2, for a
first-time home purchase ($10,000 maximum, one time use), or upon death or
disability. All other distributions from a Roth IRA are taxable and subject to a
10% tax penalty unless an exception applies. Exceptions to the 10% penalty
include: disability, deductible medical expenses, certain purchases of health
insurance for an unemployed individual and qualified higher education expenses.
An individual with an income of less than $100,000 (who is not married
filing separately) can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount in his or her traditional
IRA. After 1998, all taxes on such a rollover will have to be paid in the tax
year in which the rollover is made.
QUALIFIED PLANS: For those self-employed individuals who wish to
purchase shares of one or more Ivy funds through a qualified retirement plan, a
Adoption 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 Adoption 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 Adoption Agreement and
Retirement Plan for the benefit of their eligible employees. Similar
contribution and deduction rules apply to corporate employers.
Distributions from the Retirement Plan generally are made after a
participant's separation from service. A 10% penalty tax generally applies to
distributions to an individual before he or she reaches age 59-1/2, unless the
individual (1) has reached age 55 and separated from service; (2) dies; (3)
becomes disabled; (4) uses the withdrawal to pay tax-deductible medical
expenses; (5) takes the withdrawal as part of a series of substantially equal
payments over his or her life expectancy or the joint life expectancy of himself
or herself and a designated beneficiary; or (6) rolls over the distribution.
The Transfer Agent will arrange for Investors Bank & Trust to furnish
custodial services to the employer and any participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE ORGANIZATIONS
("403(B)(7) ACCOUNT"): Section 403(b)(7) of the Code permits public school
systems and certain charitable organizations to use mutual fund shares held in a
custodial account to fund deferred compensation arrangements with their
employees. A custodial account agreement is available for those employers whose
employees wish to purchase shares of the Fund in conjunction with such an
arrangement. The special application for a 403(b)(7) Account is available from
IMSC.
Distributions from the 403(b)(7) Account may be made only following
death, disability, separation from service, attainment of age 59-1/2, or
incurring a financial hardship. A 10% penalty tax generally applies to
distributions to an individual before he or she reaches age 59-1/2, unless the
individual (1) has reached age 55 and separated from service; (2) dies or
becomes disabled; (3) uses the withdrawal to pay tax-deductible medical
expenses; (4) takes the withdrawal as part of a series of substantially equal
payments over his or her life expectancy or the joint life expectancy of himself
or herself and a designated beneficiary; or (5) rolls over the distribution.
There is no set-up fee for 403(b)(7) Accounts and the annual maintenance fee is
$20.00 per account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAs: An employer may deduct
contributions to a SEP up to the lesser of $30,000 or 15% of compensation. SEP
accounts generally are subject to all rules applicable to IRA accounts, except
the deduction limits, and are subject to certain employee participation
requirements. No new salary reduction SEPs ("SARSEPs") may be established after
1996, but existing SARSEPs may continue to be maintained, and non-salary
reduction SEPs may continue to be established as well as maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a SIMPLE 401(k)
for years after 1996. An employee can make pre-tax salary reduction
contributions to a SIMPLE Plan, up to $6,000 a year (as indexed). Subject to
certain limits, the employer will either match a portion of employee
contributions, or will make a contribution equal to 2% of each employee's
compensation without regard to the amount the employee contributes. An employer
cannot maintain a SIMPLE Plan for its employees if any contributions or benefits
are credited to those employees under any other qualified retirement plan
maintained by the employer.
REINVESTMENT PRIVILEGE
Shareholders who have redeemed Class A shares of a Fund may reinvest
all or a part of the proceeds of the redemption back into Class A shares of the
same Fund at net asset value (without a sales charge) within 60 days from the
date of redemption. This privilege may be exercised only once. The reinvestment
will be made at the net asset value next determined after receipt by IMSC of the
reinvestment order accompanied by the funds to be reinvested. No compensation
will be paid to any sales personnel or dealer in connection with the
transaction.
Any redemption is a taxable event. A loss realized on a redemption
generally may be disallowed for tax purposes if the reinvestment privilege is
exercised within 30 days after the redemption. In certain circumstances,
shareholders will be ineligible to take sales charges into account in computing
taxable gain or loss on a redemption if the reinvestment privilege is exercised.
See "Taxation."
REDUCED SALES CHARGES AND RIGHTS OF ACCUMULATION
A scale of reduced sales charges applies to any investment of $50,000
or more in Class A shares of each 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).
"Rights of Accumulation" are also applicable to current purchases of
all of the funds of Ivy Fund (except Ivy Money Market Fund) by any of the
persons enumerated above where the aggregate quantity of Class A shares of the
Fund 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 all funds other than Ivy Bond Fund; or $100,000
or more for Ivy Bond Fund.
At the time an investment takes place, IMSC must be notified by the
investor or his or her dealer that the investment qualifies for the reduced
sales charge on the basis of previous investments. The reduced sales charge is
subject to confirmation of the investor's holdings through a check of the
particular 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 such shareholder's name,
properly endorsed by the shareholder. To be eligible to elect a Withdrawal Plan,
a shareholder must have at least $5,000 in his or her account. A Withdrawal Plan
may not be established if the investor is currently participating in the
Automatic Investment Method. A Withdrawal Plan may involve the depletion of a
shareholder's principal, depending on the amount withdrawn.
A redemption under a Withdrawal Plan is a taxable event. Shareholders
contemplating participating in a Withdrawal Plan should consult their tax
advisers.
Additional investments made by investors participating in a Withdrawal
Plan must equal at least $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 Fund 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
Fund 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, 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 Fund 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
Fund may collect such fee (and any fees due to IMI) through a deduction from
distributions to the shareholders involved or by causing on the date the fee is
assessed a redemption in each such shareholder account sufficient to pay such
fee. The Fund reserves the right to change these fees from time to time without
advance notice.
Class A shares of the Fund are made available to Merrill Lynch Daily K
Plan (the "Plan") participants at NAV without an initial sales charge if:
(i) the Plan is recordkept on a daily valuation basis by Merrill
Lynch and, on the date the Plan Sponsor signs the Merrill
Lynch Recordkeeping Service Agreement, the Plan has $3 million
or more in assets invested in broker/dealer funds not advised
or managed by Merrill Lynch Asset Management, L.P. ("MLAM")
that are made available pursuant to a Service Agreement
between Merrill Lynch and the fund's principal underwriter or
distributor and in funds advised or managed by MLAM
(collectively, the "Applicable Investments");
(ii) the Plan is recordkept on a daily valuation basis by an
independent recordkeeper whose services are provided through a
contract or alliance arrangement with Merrill Lynch, and on
the date the Plan Sponsor signs the Merrill Lynch
Recordkeeping Service Agreement, the Plan has $3 million or
more in assets, excluding money market funds, invested in
Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by
Merrill Lynch plan conversion manager, on the date the Plan
Sponsor signs the Merrill Lynch Recordkeeping Service
Agreement.
Alternatively, Class B shares of the Fund are made available to Plan
participants at NAV without a CDSC if the Plan conforms with the requirements
for eligibility set forth in (i) through (iii) above but either does not meet
the $3 million asset threshold or does not have 500 or more eligible employees.
Plans recordkept on a daily basis by Merrill Lynch or an independent
recordkeeper under a contract with Merrill Lynch that are currently investing in
Class B shares of the Fund convert to Class A shares once the Plan has reached
$5 million invested in Applicable Investments, or 10 years after the date of the
initial purchase by a participant under the Plan--the Plan will receive a Plan
level share conversion.
REDEMPTIONS
Shares of the 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 Fund 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.
The Trust may redeem those accounts of shareholders who have maintained
an investment, including sales charges paid, of less than $1,000 in the Fund for
a period of more than 12 months. All accounts below that minimum will be
redeemed simultaneously when MIMI deems it advisable. The $1,000 balance will be
determined by actual dollar amounts invested by the shareholder, unaffected by
market fluctuations. The Trust will notify any such shareholder by certified
mail of its intention to redeem such account, and the shareholder shall have 60
days from the date of such letter to invest such additional sums as shall raise
the value of such account above that minimum. Should the shareholder fail to
forward such sum within 60 days of the date of the Trust's letter of
notification, the Trust will redeem the shares held in such account and transmit
the redemption in value thereof to the shareholder. However, those shareholders
who are investing pursuant to the Automatic Investment Method will not be
redeemed automatically unless they have ceased making payments pursuant to the
plan for a period of at least six consecutive months, and these shareholders
will be given six-months' notice by the Trust before such redemption.
Shareholders in a qualified retirement, pension or profit sharing plan who wish
to avoid tax consequences must "rollover" any sum so redeemed into another
qualified plan within 60 days. The Trustees of the Trust may change the minimum
account size.
If a shareholder has given authorization for telephonic redemption
privilege, shares can be redeemed and proceeds sent by Federal wire to a single
previously designated bank account. The Fund may delay for up to seven days
delivery of the proceeds of a wire redemption request of $250,000 or more if
considered appropriate under then-current market conditions. The Trust reserves
the right to change this minimum or to terminate the telephonic redemption
privilege without prior notice. The Trust cannot be responsible for the
efficiency of the Federal wire system of the shareholder's dealer of record or
bank. The shareholder is responsible for any charges by the shareholder's bank.
The 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.
NET ASSET VALUE
The net asset value per share of the Fund is computed by dividing the
value of the Fund's aggregate net assets (i.e., its total assets less its
liabilities) by the number of the Fund's shares outstanding. For purposes of
determining the Fund's aggregate net assets, receivables are valued at their
realizable amounts. The Fund's liabilities, if not identifiable as belonging to
a particular class of the Fund, are allocated among the Fund's several classes
based on their relative net asset size. Liabilities attributable to a particular
class are charged to that class directly. The total liabilities for a class are
then deducted from the class's proportionate interest in the Fund's assets, and
the resulting amount is divided by the number of shares of the class outstanding
to produce its net asset value per share.
A security listed or traded on a recognized stock exchange or The
Nasdaq Stock Market, Inc. ("Nasdaq") is valued at the security's last sale price
on the exchange on which the security is principally traded. If no sale is
reported at that time, the average between the last bid and asked price (the
"Calculated Mean") is used. Unless otherwise noted herein, 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. All other securities for which OTC market quotations are readily
available are valued at the Calculated Mean.
A debt security normally is valued on the basis of quotes obtained from
at least two dealers (or one dealer who has made a market in the security) or
pricing services that take into account appropriate valuation factors. Interest
is accrued daily. Money market instruments are valued at amortized cost, which
the Board believes approximates market value.
An exchange-traded option is valued at the last sale price on the
exchange on which it is principally traded, if available, and otherwise is
valued at the last sale price on the other exchange(s). If there were no sales
on any exchange, the option shall be valued at the Calculated Mean, if possible,
and otherwise at the last offering price, in the case of a written option, and
the last bid price, in the case of a purchased option. An OTC option is valued
at the last offering price, in the case of a written option, and the last bid
price, in the case of a purchased option. Exchange listed and widely-traded OTC
futures (and options thereon) are valued at the most recent settlement price.
Securities and other assets for which market prices are not readily
available are priced at their "fair value" as determined by IMI in accordance
with procedures approved by the Board. Trading in securities on many foreign
securities exchanges is normally completed before the close of regular trading
on the Exchange. Trading on foreign exchanges may not take place on all days on
which there is regular trading on the Exchange, or may take place on days on
which there is no regular trading on the Exchange (e.g., any of the national
business holidays identified below). If events materially affecting the value of
the Fund's portfolio securities occur between the time when a foreign exchange
closes and the time when the Fund's net asset value is calculated (see following
paragraph), such securities may be valued at their "fair value" as determined by
IMI in accordance with procedures approved by the Board.
Portfolio securities are valued (and net asset value per share is
determined) as of the close of regular trading on the Exchange (normally 4:00
p.m., eastern time) on each day the Exchange is open for trading. The Exchange
and the Trust's offices are expected to be closed, and net asset value will not
be calculated, on the following national business holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. On those days
when either or both of the Fund's Custodian or the Exchange close early as a
result of a partial holiday or otherwise, the Trust reserves the right to
advance the time on that day by which purchase and redemption requests must be
received.
The number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based on the
Fund's net asset value next determined after your instructions are received in
proper form by IMSC or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge. Since the Fund
invests in securities that are listed on foreign exchanges that may trade on
weekends or other days when the Funds do not price their shares, the Fund's net
asset value may change on days when shareholders will not be able to purchase or
redeem the Fund's shares. The sale of the Fund's 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 Fund's best interest to do so.
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 adviser about the tax consequences to them of investing
in the Fund. The Fund is not managed for tax-efficiency.
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; and (b) 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, as described below, 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 the Fund that did not engage
in such transactions.
Notwithstanding any of the foregoing, the Fund may recognize gain (but
not loss) from a constructive sale of certain "appreciated financial positions"
if the Fund enters into a short sale, offsetting notional principal contract,
futures or forward contract transaction with respect to the appreciated position
or substantially identical property. Appreciated financial positions subject to
this constructive sale treatment are interests (including options, futures and
forward contracts and short sales) in stock, partnership interests, certain
actively traded trust instruments and certain debt instruments. Constructive
sale treatment of appreciated financial positions does not apply to certain
transactions closed in the 90-day period ending with the 30th day after the
close of the Fund's taxable year, if certain conditions are met.
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.
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. The Fund may elect to mark to market its PFIC shares,
resulting in the shares being treated as sold at fair market value on the last
business day of each taxable year. Any resulting gain would be reported as
ordinary income; any resulting loss and any loss from an actual disposition of
the shares would be reported as ordinary loss to the extent of any net gains
reported in prior years. Under another 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.
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.
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
includable 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 to shareholders as long-term
capital gains whether paid in cash or in shares, and regardless of how long the
shareholder has held the Fund's shares; such distributions are not eligible for
the dividends received deduction. Shareholders receiving distributions in the
form of newly issued shares will have a cost basis in each share received equal
to the net asset value of a share of 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, if so, will be long-term or
short-term, depending upon the shareholder's holding period for the shares. Any
loss realized on a redemption sale or exchange will be disallowed to the extent
the shares disposed of are replaced (including through reinvestment of
dividends) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Any loss realized by a
shareholder on the sale of Fund shares held by the shareholder for six-months or
less will be treated for tax purposes as a long-term capital loss to the extent
of any distributions of capital gain dividends received or treated as having
been received by the shareholder with respect to such shares.
In some cases, shareholders will not be permitted to take all or
portion of their sales loads into account for purposes of determining the amount
of gain or loss realized on the disposition of their shares. This prohibition
generally applies where (1) the shareholder incurs a sales load in acquiring the
shares of 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 same 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 its 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, except in the case of certain electing individual taxpayers
who have limited creditable foreign taxes and no foreign source income other
than passive investment-type income, 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.
Furthermore, the foreign tax credit is eliminated with respect to foreign taxes
withheld on dividends if the dividend-paying shares or the shares of the Fund
are held by the Fund or the shareholder, as the case may be, for less than 16
days (46 days in the case of preferred shares) during the 30-day period (90-day
period for preferred shares) beginning 15 days (45 days for preferred shares)
before the shares become ex-dividend. In addition, if the Fund fails to satisfy
these holding period requirements, it cannot elect to pass through to
shareholders the ability to claim a deduction for related foreign taxes.
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
Performance information for the classes of shares of the Fund may be
compared, in reports and promotional literature, to: (i) the S&P 500 Index, the
Dow Jones Industrial Average ("DJIA"), or other unmanaged indices so that
investors may compare the Fund's results with those of a group of unmanaged
securities widely regarded by investors as representative of the securities
markets in general; (ii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm that ranks mutual
funds by overall performance, investment objectives and assets, or tracked by
other services, companies, publications or other criteria; and (iii) the
Consumer Price Index (measure for inflation) to assess the real rate of return
from an investment in the Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions or administrative and
management costs and expenses. Performance rankings are based on historical
information and are not intended to indicate future performance.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of 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
and Class C shares, the applicable CDSC imposed upon redemption of Class B or
Class C shares held for the period is deducted. Standardized Return quotations
for 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.
CUMULATIVE TOTAL RETURN. Cumulative total return is the cumulative rate
of return on a hypothetical initial investment of $1,000 in a specific class of
shares of the Fund for a specified period. Cumulative total return quotations
reflect changes in the price of the Fund's shares and assume that all dividends
and capital gains distributions during the period were reinvested in the Fund's
shares. Cumulative total return is calculated by computing the cumulative rates
of return of a hypothetical investment in a specific class of shares of the Fund
over such periods, according to the following formula (cumulative total return
is then expressed as a percentage):
C = (ERV/P) - 1
Where: C = cumulative total return
P = a hypothetical initial investment of $1,000
to purchase shares of a specific class
ERV = ending redeemable value: ERV is
the value, at the end of the
applicable period, of a hypothetical
$1,000 investment made at the
beginning of the applicable period.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION. The foregoing
computation methods are prescribed for advertising and other communications
subject to SEC Rule 482. Communications not subject to this rule may contain a
number of different measures of performance, computation methods and
assumptions, including but not limited to: historical total returns; results of
actual or hypothetical investments; changes in dividends, distributions or share
values; or any graphic illustration of such data. These data may cover any
period of the Fund'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 its
performance rankings and listings reported in such newspapers or business or
consumer publications as, among others: AAII Journal, Barron's, Boston Business
Journal, Boston Globe, Boston Herald, Business Week, Consumer's Digest, Consumer
Guide Publications, Changing Times, Financial Planning, Financial World, Forbes,
Fortune, Growth Fund Guide, Houston Post, Institutional Investor, International
Fund Monitor, Investor's Daily, Los Angeles Times, Medical Economics, Miami
Herald, Money Mutual Fund Forecaster, Mutual Fund Letter, Mutual Fund Source
Book, Mutual Fund Values, National Underwriter, Nelson's Directory of Investment
Managers, New York Times, Newsweek, No Load Fund Investor, No Load Fund* X,
Oakland Tribune, Pension World, Pensions and Investment Age, Personal Investor,
Rugg and Steele, Time, U.S. News and World Report, USA Today, The Wall Street
Journal, and Washington Post.
FINANCIAL STATEMENTS
Each Fund's Statement of Assets and Liabilities, as of March 14, 2000,
and Report of Independent Accountants are attached hereto as Appendix B.
<PAGE>
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S RATINGS SERVICES ("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 1997
Issue (McGraw Hill, New York, 1997).]
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. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues. 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 to be 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. Issuers rated Prime-2 are deemed to have
a strong ability for repayment while issuers voted Prime-3 are deemed to have an
acceptable ability for repayment. Issuers rated Not Prime do not fall within any
of the Prime rating categories.
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 has the highest rating assigned by S&P. 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.
The rating CI is reserved for income bonds on which no interest is
being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term in
the relevant market.
The commercial paper rating A-1 by S&P indicates that the degree of
safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation. For commercial paper with an A-2 rating, the capacity for timely
payment on issues is satisfactory, but not as high as for issues designated A-1.
Issues rated A-3 have adequate capacity for timely payment, but are more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying higher designations.
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. Debt rated D is in payment default. The D rating category
is used when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless S&P believes
such payments will be made during such grace period.
<PAGE>
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF MARCH 14, 2000
AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
IVY CUNDILL VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 14, 2000
ASSETS
Cash............................................................. $ 50
Prepaid offering costs........................................... 12,500
Prepaid blue sky fees............................................ 10,000
Total assets................................................. 22,550
--------
LIABILITIES
Due to affiliate................................................. 22,500
--------
NET ASSETS............................................................ $ 50
=======
CLASS A:
Net asset value and redemption price per share
($10.00 / 1 share outstanding)............................... $ 10.00
=======
Maximum offering price per share
($10.00 x 100 / 94.25)*...................................... $ 10.61
=======
CLASS B:
Net asset value, offering price and redemption
price** per share ($10.00 / 1 share outstandin.............. $ 10.00
=======
CLASS C:
Net asset value, offering price and redemption price*** per share
($10.00 / 1 share outstanding)............................... $ 10.00
=======
CLASS I:
Net asset value, offering price and redemption price per share
($10.00 / 1 share outstanding)............................... $ 10.00
=======
ADVISOR CLASS:
Net asset value, offering price and redemption price per share
($10.00 / 1 share outstanding)............................... $ 10.00
=======
NET ASSETS CONSISTS OF:
Capital paid-in $ 50
=======
<PAGE>
* 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%. ***
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 1%.
The accompanying notes are an integral part of the financial statement.
IVY CUNDILL VALUE FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
MARCH 14, 2000
1. ORGANIZATION: Ivy Cundill Value Fund is a diversified series of shares
of Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C, Class I and Advisor
Class 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 an open-end management investment
company.
The Fund will commence operations on or about April 15, 2000. 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. ORGANIZATIONAL COSTS: The Fund incurred organizational expenses of
$14,653 comprised of $2,500 for auditing and $12,153 for legal. The full amount
of organizational expenses were assumed by MIMI and the Fund is not required to
reimburse MIMI.
3. OFFERING COSTS AND PREPAID BLUE SKY FEES: Offering costs, consisting of
prospectus printing costs, and blue sky fees, will be amortized over a one year
period beginning on or about April 15, 2000, the date the Fund is expected to
commence operations. Offering costs and blue sky fees of $12,500 and $10,000,
respectively, will be paid by MIMI and will be reimbursed by the Fund. Offering
costs representing legal fees of $48,613 and blue sky fees of $42,940 were
assumed by MIMI and the Fund is not required to reimburse MIMI.
4. TRANSACTIONS WITH AFFILIATES: Ivy Management, Inc. (IMI), a wholly
owned subsidiary of MIMI, is the Manager and Investment Adviser of the Fund.
Currently, IMI contractually limits the Fund's total operating expenses
(excluding 12b-1 fees and certain other expenses) to an annual rate of 1.95% of
its average net assets. This reimbursement rate is determined annually.
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. No such amounts have been incurred as
of March 14, 2000.
<PAGE>
[PricewaterhouseCoopers letterhead]
Report of Independent Certified Public Accountants
To the Board of Trustees and
Shareholders of Ivy Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Ivy Cundill
Value Fund (the "Fund") at March 14, 2000, in conformity with accounting
principles generally accepted in the United States. This financial statement is
the responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
March 15, 2000
<PAGE>
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF MARCH 14, 2000
AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
IVY NEXT WAVE INTERNET FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 14, 2000
ASSETS
Cash...............................................................$ 50
Prepaid offering costs............................................. 24,500
Prepaid blue sky fees.............................................. 42,000
Total Assets................................................... 66,550
--------
LIABILITIES
Due to affiliate................................................... 66,500
--------
NET ASSETS..............................................................$ 50
=======
CLASS A:
Net asset value and redemption price per share
($10.00 / 1 share outstanding).................................$ 10.00
=======
Maximum offering price per share
($10.00 x 100 / 94.25)*........................................$ 10.61
=======
CLASS B:
Net asset value, offering price and redemption price** per share
($10.00 / 1 share outstanding).................................$ 10.00
=======
CLASS C:
Net asset value, offering price and redemption price*** per share
($10.00 / 1 share outstanding).................................$ 10.00
=======
CLASS I:
Net asset value, offering price and redemption price per share
($10.00 / 1 share outstanding).................................$ 10.00
=======
ADVISOR CLASS:
Net asset value, offering price and redemption price per share
($10.00 / 1 share outstanding).................................$ 10.00
=======
NET ASSETS CONSISTS OF:
Capital paid-in $ 50
=======
<PAGE>
- -78-* 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%. ***
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 1%.
The accompanying notes are an integral part of the financial statement.
IVY NEXT WAVE INTERNET FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
MARCH 14, 2000
1. ORGANIZATION: Ivy Next Wave Internet Fund is a diversified series of
shares of Ivy Fund. The shares of beneficial interest are assigned no par value
and an unlimited number of shares of Class A, Class B, Class C, Class I and
Advisor Class 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 an open-end management
investment company.
The Fund will commence operations on or about April 15, 2000. 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. ORGANIZATIONAL COSTS: The Fund incurred organizational expenses of
$5,500, comprised of $2,500 for auditing and $3,000 for legal. The full amount
of organizational expenses were assumed by MIMI and the Fund is not required to
reimburse MIMI.
3. OFFERING COSTS AND PREPAID BLUE SKY FEES: Offering costs, consisting of
legal fees and prospectus printing costs, and blue sky fees will be amortized
over a one year period beginning on or about April 15, 2000, the date the Fund
is expected to commence operations. Offering costs and blue sky fees of $24,500
and $42,000, respectively, will be paid by MIMI and will be reimbursed by the
Fund.
4. TRANSACTIONS WITH AFFILIATES: Ivy Management, Inc. (IMI), a wholly
owned subsidiary of MIMI, is the Manager and Investment Adviser of the Fund.
Currently, IMI contractually limits the Fund's total operating expenses
(excluding 12b-1 fees and certain other expenses) to an annual rate of 1.95% of
its average net assets. This reimbursement rate is determined annually.
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. No such amounts have been incurred as
of March 14, 2000.
<PAGE>
[PricewaterhouseCoopers letterhead]
Report of Independent Certified Public Accountants
To the Board of Trustees and
Shareholders of Ivy Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Ivy Next Wave
Internet Fund (the "Fund") at March 14, 2000, in conformity with accounting
principles generally accepted in the United States. This financial statement is
the responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
March 15, 2000
IVY CUNDILL VALUE FUND
IVY NEXT WAVE INTERNET FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
ADVISOR CLASS SHARES
__________ __, 2000
Ivy Fund (the "Trust") is an open-end management investment company
that currently consists of twenty-one fully managed portfolios, each of which
(except for Ivy South America Fund and Ivy International Strategic Bond Fund) is
diversified. This Statement of Additional Information ("SAI") relates to the
Advisor Class shares of Ivy Cundill Value Fund and Ivy Next Wave Internet Fund
(each a "Fund"). The other nineteen portfolios of the Trust are described in
separate prospectuses and SAIs.
This SAI is not a prospectus and should be read in conjunction with the
prospectus for the Funds dated ________ __, 2000 (the "Prospectus"), which may
be obtained upon request and without charge from the Trust at the Distributor's
address and telephone number printed below. Advisor Class shares are only
offered to certain investors (see the Prospectus). The Funds also offer Class A,
B, C and I shares, which are described in a separate prospectus and SAI that may
also be obtained without charge from the Distributor.
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. ("IMDI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
<PAGE>
TABLE OF CONTENTS
Page
GENERAL INFORMATION............................................................4
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS....................................4
EQUITY SECURITIES....................................................10
CONVERTIBLE SECURITIES...............................................11
SMALL- AND MEDIUM-SIZED COMPANIES....................................11
SMALL COMPANIES......................................................11
DEBT SECURITIES......................................................12
IN GENERAL..................................................12
INVESTMENT-GRADE DEBT SECURITIES............................12
LOW-RATED DEBT SECURITIES...................................12
U.S.GOVERNMENT SECURITIES...................................14
ZERO COUPON BONDS...........................................15
FIRM COMMITMENT AGREEMENTS AND
"WHEN-ISSUED" SECURITIES..................................15
ILLIQUID SECURITIES..................................................15
FOREIGN SECURITIES...................................................16
DEPOSITORY RECEIPTS..................................................17
EMERGING MARKETS.....................................................17
FOREIGN CURRENCIES...................................................19
FOREIGN CURRENCY EXCHANGE TRANSACTIONS...............................19
INVESTMENT CONCENTRATION.............................................20
OTHER INVESTMENT COMPANIES...........................................21
REPURCHASE AGREEMENTS................................................21
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS....................21
COMMERCIAL PAPER.....................................................21
BORROWING............................................................22
WARRANTS.............................................................22
OPTIONS TRANSACTIONS.................................................22
IN GENERAL..................................................22
WRITING OPTIONS ON INDIVIDUAL SECURITIES....................23
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES.................24
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES........24
RISKS OF OPTIONS TRANSACTIONS...............................25
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS...................26
IN GENERAL..................................................26
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS......27
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS...........28
SECURITIES INDEX FUTURES CONTRACTS...................................29
SECURITIES INDEX FUTURES CONTRACTS..........................29
RISKS OF SECURITIES INDEX FUTURES...........................30
COMBINED TRANSACTIONS.......................................31
PORTFOLIO TURNOVER............................................................31
MANAGEMENT OF THE FUNDS.......................................................32
TRUSTEES AND OFFICERS................................................32
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST.........39
INVESTMENT ADVISORY AND OTHER SERVICES........................................39
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES.................39
INVESTMENT MANAGER...................................................39
SUB-ADVISOR..........................................................40
TERM AND TERMINATION OF ADVISORY AGREEMENT AND SUBADVISORY AGREEMENT.41
DISTRIBUTION SERVICES................................................41
RULE 18F-3 PLAN.............................................42
CUSTODIAN............................................................42
FUND ACCOUNTING SERVICES.............................................42
TRANSFER AGENT AND DIVIDEND PAYING AGENT.............................43
ADMINISTRATOR........................................................43
AUDITORS.............................................................43
BROKERAGE ALLOCATION..........................................................43
CAPITALIZATION AND VOTING RIGHTS..............................................44
SPECIAL RIGHTS AND PRIVILEGES.................................................46
AUTOMATIC INVESTMENT METHOD..........................................46
EXCHANGE OF SHARES...................................................47
RETIREMENT PLANS.....................................................47
INDIVIDUAL RETIREMENT ACCOUNTS..............................47
ROTH IRAs...................................................48
QUALIFIED PLANS.............................................49
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT")......................50
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAs....................50
SIMPLE PLANS................................................50
SYSTEMATIC WITHDRAWAL PLAN...........................................51
GROUP SYSTEMATIC INVESTMENT PROGRAM..................................51
REDEMPTIONS..........................................................52
NET ASSET VALUE...............................................................53
TAXATION 54
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS..............55
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES...............56
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES...................57
DEBT SECURITIES ACQUIRED AT A DISCOUNT...............................57
DISTRIBUTIONS........................................................58
DISPOSITION OF SHARES................................................58
FOREIGN WITHHOLDING TAXES............................................59
BACKUP WITHHOLDING...................................................60
PERFORMANCE INFORMATION.......................................................60
AVERAGE ANNUAL TOTAL RETURN.................................61
CUMULATIVE TOTAL RETURN.....................................62
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION.......62
FINANCIAL STATEMENTS..........................................................63
APPENDIX A....................................................................64
APPENDIX B....................................................................69
<PAGE>
GENERAL INFORMATION
Each Fund is organized as a separate, diversified portfolio of the
Trust, an open-end management investment company organized as a Massachusetts
business trust on December 21, 1983. Each Fund commenced operations on
____________ __, 2000.
Descriptions in this SAI of a particular investment practice or
technique in which each Fund may engage or a financial instrument which each
Fund may purchase are meant to describe the spectrum of investments that IMI, in
its discretion, might, but is not required to, use in managing each Fund's
portfolio assets. For example, IMI may, in its discretion, employ a given
practice, technique for one or more funds but not for all funds advised by it.
It is also possible that certain types of financial instruments or investment
techniques described herein may not be available, permissible, economically
feasible or effective for their intended purposes in some or all markets, in
which case a Fund would not use them. Investors should also be aware that
certain practices, techniques, or instruments could, regardless of their
relative importance in a Fund's overall investment strategy, from time to time
have a material impact on that Fund's performance.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each Fund has its own investment objectives and policies, which are
described in the Prospectus under the captions "Summary" and "Additional
Information About Strategies and Risks." Descriptions of each Fund's policies,
strategies and investment restrictions, as well as additional information
regarding the characteristics and risks associated with each Fund's investment
techniques, are set forth below.
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.
IVY CUNDILL VALUE FUND
Ivy Cundill Value Fund seeks long-term capital growth. Any income
realized will be incidental. The Fund seeks to achieve its principal objective
of long-term capital growth by investing primarily in the equity securities of
companies throughout the world. Under normal conditions, the Fund invests at
least 65% of its assets in equity securities. Although the Fund will not invest
more than 25% of its total assets in any one industry and does not expect to
focus its investments in a single country, it may at any given time have a
significant percentage of its total assets in one or more countries or market
sectors.
The investment approach of Peter Cundill & Associates (Bermuda) Ltd.,
the Fund's sub-advisor ("Cundill" or the "sub-advisor"), is based on a
contrarian "value" philosophy. The sub-advisor looks for securities that it
believes are trading below their estimated intrinsic value. To determine the
intrinsic value of a particular company, the sub-advisor focuses on the balance
sheet of the company rather than the income statement. In addition to reviewing
the assets, the sub-advisor considers the earnings, dividends, prospects and
management capabilities of the company. Essentially, the sub-advisor revalues
the assets and liabilities of the company to reflect the sub-advisor's estimate
of fair value. Securities are purchased where there is a substantial discount of
price to the estimate of the company's intrinsic value. Because the approach is
to look for undervalued securities, the sub-advisor does not forecast economies
or corporate earnings and does not rely on market timing.
Ivy Cundill Value Fund may invest in warrants, and securities issued on
a "when-issued" or firm commitment basis, and may engage in foreign currency
exchange transactions and enter into forward foreign currency contracts. The
Fund may also invest up to 10% of its total assets in other investment companies
and up to 15% of its net assets in illiquid securities. The Fund may not invest
more than 5% of its total assets in restricted securities.
For temporary defensive purposes and during periods when IMI believes
that circumstances warrant, the Fund may invest without limit in U.S. Government
securities, obligations issued by domestic or foreign banks (including
certificates of deposit, time deposits and bankers' acceptances), and domestic
or foreign commercial paper (which, if issued by a corporation, must be rated
Prime-1 by Moody's Investors Service, Inc. ("Moody's") or A-1 -by Standard &
Poor's Ratings Group ("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 Moody's
or AAA or AA by S&P). The Fund may also enter into repurchase agreements, and,
for temporary or emergency purposes, may borrow up to 10% of the value of its
total assets from banks.
Ivy Cundill Value Fund may purchase put and call options on 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 equivalent exposure in such contracts does
not exceed 15% of its total assets.
INVESTMENT RESTRICTIONS FOR IVY CUNDILL VALUE FUND
Ivy Cundill Value Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, together with the investment restrictions
set forth below, are fundamental policies of the Fund and may not be changed
without the approval of a majority of the outstanding voting shares of the Fund.
Ivy Cundill Value Fund has adopted the following fundamental investment
restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.
(iii) The Fund will not issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to be
an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages or
investments secured by real estate or interests therein), except that the
Fund may hold and sell real estate acquired as a result of the Fund's
ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating to
physical commodities, although the Fund may invest in commodities futures
contracts and options thereon to the extent permitted by its Prospectus
and this SAI.
(vii) The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular industry,
as the term "concentrate" is interpreted in connection with the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
ADDITIONAL RESTRICTIONS
Ivy Cundill Value 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) invest in oil, gas and/or mineral exploration or development programs;
(iv) purchase securities on margin, except such short-term credits as are
necessary for the clearance of transactions, and except that the Fund
may make margin deposits in connection with transactions in options,
futures and options on futures;
(v) make investments in securities for the purpose of exercising control
over or management of the issuer;
(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 Manager for the sale or
purchase of portfolio securities shall not be considered participation in
a joint securities trading account;
(vii) borrow amounts in excess of 10% of its total assets, taken at the lower
of cost or market value, and then only from banks as a temporary measure
for extraordinary or emergency purposes. All borrowings will be repaid
before any additional investments are made;
(viii) purchase any security if, as a result, the Fund would then have more than
5% of its total assets (taken at current value) invested in securities
restricted as to disposition under the Federal securities laws; or
(ix) purchase securities of another investment company, except in connection
with a merger, consolidation, reorganization or acquisition of assets,
and except that the Fund may invest in securities of other investment
companies subject to the restrictions in Section 12(d)(1) of the 1940
Act.
IVY NEXT WAVE INTERNET FUND
Ivy Next Wave Internet Fund's principal objective is long-term capital
growth. Any income realized will be incidental. Under normal conditions, the
Fund invests at least 65% of its assets in the equity securities of companies of
any size engaged in the design, development and/or marketing of Internet related
services or products. The Fund may also invest in companies that are expected to
benefit indirectly from the Internet and related business applications. The Fund
may purchase securities through initial public offerings.
Ivy Next Wave Internet Fund's management team believes that the
Internet is a fertile growth area, and actively seeks to position the Fund to
benefit from this growth by investing in companies engaged in Internet-related
business activities that may deliver rapid earnings growth and potentially high
investment returns. While this is no guarantee of future performance, the Fund's
management team believes that this industry offers substantial opportunities for
long-term capital appreciation.
Although the Fund generally invests in common stock, it may also invest
in preferred stock, securities convertible into common stock, sponsored or
unsponsored ADRs, GDRs, ADSs and GDSs and investment-grade debt securities
(i.e., those rated Baa or higher by Moody's or BBB or higher by S&P, or if
unrated, considered by IMI to be of comparable quality), including corporate
bonds, notes, debentures, convertible bonds and zero coupon bonds. The fund may
also invest up to 5% of its net assets in debt securities that are rated Ba or
below by Moody's or BB or below by S&P, or if unrated, are considered by IMI to
be of comparable quality (commonly referred to as "high yield" or "junk" bonds).
The Fund will not invest in debt securities rated less than C by either Moody's
or S&P.
The Fund may invest in warrants, purchase securities on a "when-issued"
or firm commitment basis, engage in foreign currency exchange transactions and
enter into forward foreign currency contracts. The Fund may also invest (i) in
other investment companies in accordance with the provisions of the 1940 Act and
(ii) up to 15% of its net assets in illiquid securities.
For temporary defensive purposes and during periods when IMI believes
that circumstances warrant, Ivy Next Wave Internet Fund may invest without limit
in U.S. Government securities, obligations issued by domestic or foreign banks
(including certificates of deposit, time deposits and bankers' acceptances), 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 Moody's or AAA or AA by S&P). The Fund may also enter into repurchase
agreements, and, for temporary or emergency purposes, may borrow up to 10% of
the value of its total assets from banks.
The Fund may purchase put and call options on stock indices and on
individual securities, provided the premium paid for such options does not
exceed 10% of the value of the Fund's net assets. The Fund may also sell covered
put options with respect to up to 50% of the value of its net assets, and may
write covered call options so long as not more than 20% 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
equivalent exposure in such contracts does not exceed 20% of the value of its
total assets.
INVESTMENT RESTRICTIONS FOR IVY NEXT WAVE INTERNET FUND
Ivy Next Wave Internet Fund's investment objectives as set forth in the
"Summary" section of the Prospectus, together with the investment restrictions
set forth below, are fundamental policies of the Fund and may not be changed
without the approval of a majority of the outstanding voting shares of the Fund.
Ivy Next Wave Internet Fund has adopted the following fundamental investment
restrictions:
(i) The Fund has elected to be classified as a diversified series of an
open-end investment company.
(ii) The Fund will not borrow money, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iii) The Fund will not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(iv) The Fund will not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(v) The Fund will not purchase or sell real estate (which term does not
include securities of companies that deal in real estate or mortgages
or investments secured by real estate or interests therein), except
that the Fund may hold and sell real estate acquired as a result of the
Fund's ownership of securities.
(vi) The Fund will not purchase physical commodities or contracts relating
to physical commodities, although the Fund may invest in commodities
futures contracts and options thereon to the extent permitted by its
Prospectus and this SAI.
(vii) The Fund will not make loans to other persons, except (a) loans of
portfolio securities, and (b) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.
(viii) The Fund will not concentrate its investments in a particular industry,
as the term "concentrate" is interpreted in connection with the
Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time, except that the Fund may concentrate its investments in the
securities of companies engaged in the design, development and/or
marketing of Internet related services or products.
ADDITIONAL RESTRICTIONS
Ivy Next Wave Internet Fund has adopted the following additional
restrictions, which are not fundamental and which may be changed without
shareholder approval, to the extent permitted by applicable law, regulation or
regulatory policy.
Under these restrictions, the Fund may not:
(i) invest in oil, gas or other mineral leases or exploration or
development programs;
(ii) invest in companies for the purpose of exercising control of
management;
(iii) invest more than 5% of its total assets in warrants, valued at the
lower of cost or market, or more than 2% of its total assets in
warrants, so valued, which are not listed on either the New York or
American Stock Exchanges;
(iv) sell securities short, except for short sales, "against the box;"
(v) borrow amounts in excess of 10% of its total assets, taken at the lower
of cost or market value, and then only from banks as a temporary
measure for emergency purposes.
(vi) purchase from or sell to any of its officers or trustees, or firms of
which any of them are members or which they control, any securities
(other than capital stock of the Fund), but such persons or firms may
act as brokers for the Fund for customary commissions to the extent
permitted by the Investment Company Act of 1940;
(vii) 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; or
(viii) purchase the securities of any other open-end investment company,
except as part of a plan of merger or consolidations.
Under the 1940 Act, the Fund is permitted, subject to the above
investment restrictions, to borrow money only from banks. The Trust has no
current intention of borrowing amounts in excess of 5% of the Fund's assets. The
Fund will continue to interpret fundamental investment restriction (v) to
prohibit investment in real estate limited partnership interests; this
restriction shall not, however, prohibit investment readily marketable
securities of companies that invest in real estate or interests therein,
including real estate investment trusts.
EQUITY SECURITIES
Equity securities can be issued by companies to raise cash; all equity
securities shares represent a proportionate ownership interest in a company. As
a result, the value of equity securities rises and falls with a company's
success or failure. The market value of equity securities can fluctuate
significantly, with smaller companies being particularly susceptible to price
swings. Transaction costs in smaller company stocks may also be higher than
those of larger companies.
CONVERTIBLE SECURITIES
The convertible securities in which each Fund may invest include
corporate bonds, notes, debentures, preferred stock and other securities that
may be converted or exchanged at a stated or determinable exchange ratio into
underlying shares of equity securities. 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. 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 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
equity securities changes, and, therefore, also tends to follow movements in the
general market for equity securities. When the market price of the underlying
equity securities increases, the price of a convertible security tends to rise
as a reflection of the value of the underlying equity securities, although
typically not as much as the price of the underlying equity securities. While no
securities investments are without risk, investments in convertible securities
generally entail less risk than investments in equity securities of the same
issuer.
As debt securities, convertible securities are investments that provide
for a stream of income. 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.
SMALL- AND MEDIUM-SIZED 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 small or new
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.
INITIAL PUBLIC OFFERINGS
Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. Ivy Next Wave Internet Fund may engage in
short-term trading in connection with its IPO investments, which could produce
higher trading costs and adverse tax consequences. The number of securities
issued in an IPO is limited, so it is likely that IPO securities will represent
a smaller component of the Fund's portfolio as the Fund's assets increase (and
thus have a more limited effect on the Fund's performance).
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 Funds
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. 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), including many emerging markets bonds, 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. Such
securities carry a high degree of risk (including the possibility of default or
bankruptcy of the issuers of such securities), and generally involve greater
volatility of price and risk of principal and income (and may be less liquid)
than securities in the higher rating categories. (See Appendix A for a more
complete description of the ratings assigned by Moody's and S&P and their
respective characteristics.)
Lower rated and unrated securities are especially subject to adverse
changes in general economic conditions and to changes in the financial condition
of their issuers. Economic downturns may disrupt the high yield market and
impair the ability of issuers to repay principal and interest. Also, an increase
in interest rates would likely have an adverse impact on the value of such
obligations. During an economic downturn or period of rising interest rates,
highly leveraged issuers may experience financial stress which could adversely
affect their ability to service their principal and interest payment
obligations. Prices and yields of high yield securities will fluctuate over time
and, during periods of economic uncertainty, volatility of high yield securities
may adversely affect a Fund's net asset value. In addition, investments in high
yield zero coupon or pay-in-kind bonds, rather than income-bearing high yield
securities, may be more speculative and may be subject to greater fluctuations
in value due to changes in interest rates.
Changes in interest rates may have a less direct or dominant impact on
high yield bonds than on higher quality issues of similar maturities. However,
the price of high yield bonds can change significantly or suddenly due to a host
of factors including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth and, at times,
stock market activity. High yield bonds may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund may have to replace the security with a lower yielding security.
The trading market for high yield securities may be thin to the extent
that there is no established retail secondary market or because of a decline in
the value of such securities. A thin trading market may limit the ability of Ivy
Next Wave Internet Fund to accurately value high yield securities in the Fund's
portfolio, could adversely affect the price at which the Fund could sell such
securities, 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 low-rated debt
securities, 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.
These securities may also involve special registration responsibilities,
liabilities and costs, and liquidity and valuation difficulties.
Credit quality in the high yield securities market can change suddenly
and unexpectedly, and even recently issued credit ratings may not fully reflect
the actual risks posed by a particular high yield security. For these reasons,
it is the policy of IMI not to rely exclusively on ratings issued by established
credit rating agencies, but to supplement such ratings with its own independent
and on-going review of credit quality. The achievement of Ivy Next Wave Internet
Fund's investment objectives by investment in such securities may be more
dependent on IMI's credit analysis than is the case for higher quality bonds.
Should the rating of a portfolio security be downgraded, IMI will determine
whether it is in the best interest of the Fund to retain or dispose of such
security. However, should any individual bond held by the Fund be downgraded
below a rating of C, IMI currently intends to dispose of such bond based on then
existing market conditions.
Prices for high yield securities may be affected by legislative and
regulatory developments. For example, Federal rules require savings and loan
institutions to gradually reduce their holdings of this type of security. Also,
Congress has from time to time considered legislation that would restrict or
eliminate the corporate tax deduction for interest payments in these securities
and regulate corporate restructurings. Such legislation may significantly
depress the prices of outstanding securities of this type.
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, and may involve
significantly greater price and yield volatility than traditional debt
securities. 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.
ZERO COUPON BONDS. Zero coupon bonds are debt obligations issued
without any requirement for the periodic payment of interest. Zero coupon bonds
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 a Fund holds zero coupon bonds in its portfolio, it would recognize
income currently for Federal income tax purposes in the amount of the unpaid,
accrued interest and generally would be required to distribute dividends
representing such income to shareholders currently, even though funds
representing such income would not have been received by the Fund. Cash to pay
dividends representing unpaid, accrued interest may be obtained from, for
example, sales proceeds of portfolio securities and Fund shares and from loan
proceeds. The potential sale of portfolio securities to pay cash distributions
from income earned on zero coupon bonds may result in a Fund being forced to
sell portfolio securities at a time when it might otherwise choose not to sell
these securities and when 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 the securities of this
type is subject to greater fluctuations in response to changing interest rates
than the value of debt obligations which distribute income regularly.
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. A 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, a 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.
ILLIQUID SECURITIES
Each Fund may purchase securities other than in the open market. While
such purchases may often offer attractive opportunities for investment not
otherwise available on the open market, the securities so purchased are often
"restricted securities" or "not readily marketable" (i.e., they cannot be sold
to the public without registration under the Securities Act of 1933, as amended
(the "1933 Act"), or the availability of an exemption from registration (such as
Rule 144A) or because they are subject to other legal or contractual delays in
or restrictions on resale). This investment practice, therefore, could have the
effect of increasing the level of illiquidity of a Fund. It is each Fund's
policy that illiquid securities (including repurchase agreements of more than
seven days duration, certain restricted securities, and other securities which
are not readily marketable) may not constitute, at the time of purchase, more
than 15% of the value of the Fund's net assets. The Trust's Board of Trustees
has approved guidelines for use by IMI in determining whether a security is
illiquid.
Generally speaking, restricted securities may be sold (i) only to
qualified institutional buyers; (ii) in a privately negotiated transaction to a
limited number of purchasers; (iii) in limited quantities after they have been
held for a specified period of time and other conditions are met pursuant to an
exemption from registration; or (iv) in a public offering for which a
registration statement is in effect under the 1933 Act. Issuers of restricted
securities may not be subject to the disclosure and other investor protection
requirements that would be applicable if their securities were publicly traded.
If adverse market conditions were to develop during the period between a Fund's
decision to sell a restricted or illiquid security and the point at which that
Fund is permitted or able to sell such security, the Fund might obtain a price
less favorable than the price that prevailed when it decided to sell. Where a
registration statement is required for the resale of restricted securities, a
Fund may be required to bear all or part of the registration expenses. A Fund
may be deemed to be an "underwriter" for purposes of the 1933 Act when selling
restricted securities to the public and, if so, could be liable to purchasers of
such securities if the registration statement prepared by the issuer is
materially inaccurate or misleading.
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, IMI
will monitor such restricted securities subject to the supervision of the Board
of Trustees. Among the factors IMI may consider in reaching liquidity decisions
relating to Rule 144A securities are: (1) the frequency of trades and quotes for
the security; (2) the number of dealers wishing to purchase or sell the security
and the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of the
market for the security (i.e., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of the transfer).
FOREIGN SECURITIES
The securities of foreign issuers in which each Fund may invest include
non-U.S. dollar-denominated debt securities, Euro dollar securities, sponsored
and unsponsored American Depository Receipts ("ADRs"), Global Depository
Receipts ("GDRs") and related depository instruments, American Depository Shares
("ADSs"), Global Depository Shares ("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 each Fund's domestic investments.
Although IMI intends to invest each Fund's assets only in nations that
are generally considered to have relatively stable and friendly governments,
there is the possibility of expropriation, nationalization, repatriation or
confiscatory taxation, taxation on 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 on foreign
government securities, political or social instability or diplomatic
developments which 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. 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 governmental 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 each Fund may invest may also be smaller, less
liquid and subject to greater price volatility than those in the United States.
In addition, each Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign bond 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 a Fund are uninvested and no return is earned thereon.
The inability of each Fund to make intended security purchases due to settlement
problems could cause that Fund to miss attractive investment opportunities.
Further, the inability to dispose of portfolio securities due to settlement
problems could result either in losses to a 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. It may be
more difficult for each 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 each Fund associated with the foregoing
considerations through investment variation and continuous professional
management.
DEPOSITORY RECEIPTS
ADRs, GDRs, ADSs, GDSs and related securities 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. ADRs are publicly
traded on exchanges or over-the-counter ("OTC") in the United States.
Unsponsored programs are organized independently and without the cooperation of
the issuer of the underlying securities. As a result, information concerning the
issuer may not be as current or as readily available as in the case of sponsored
depository instruments, and their prices may be more volatile than if they were
sponsored by the issuers of the underlying securities.
EMERGING MARKETS
Each Fund could have significant investments in securities traded in
emerging markets. Investors should recognize that investing in such countries
involves special considerations, in addition to those set forth above, that are
not typically associated with investing in United States securities and that may
affect each Fund's performance favorably or unfavorably.
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 each 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 in greater price volatility; (iii) certain
national policies that may restrict each 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 each 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, each 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 each 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
each 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, that 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 be increased in such countries.
FOREIGN CURRENCIES
Investment in foreign securities usually will involve currencies of
foreign countries. Moreover, each Fund may temporarily hold funds in bank
deposits in foreign currencies during the completion of investment programs and
may purchase forward foreign currency contracts. Because of these factors, the
value of the assets of each Fund as measured in U.S. dollars may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and each Fund may incur costs in connection with
conversions between various currencies. Although each Fund's custodian values
the Fund's assets daily in terms of U.S. dollars, each Fund does not intend to
convert its holdings of foreign currencies into U.S. dollars on a daily basis.
Each Fund will do so from time to time, however, 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
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one
rate, while offering a lesser rate of exchange should the Fund desire to resell
that currency to the dealer. Each Fund will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through entering into
forward contracts to purchase or sell foreign currencies.
Because each Fund normally will be invested in both U.S. and foreign
securities markets, changes in the Funds' share price may have a low correlation
with movements in U.S. markets. Each Fund's share price will reflect the
movements of the different stock and bond markets in which it is invested (both
U.S. and foreign), and of the currencies in which the investments are
denominated. Thus, the strength or weakness of the U.S. dollar against foreign
currencies may account for part of each 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.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Each Funds may enter into forward foreign currency contracts in order
to protect against uncertainty in the level of future foreign exchange rates in
the purchase and sale of securities. 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 each Fund may enter into forward contracts to reduce currency
exchange risks, changes in currency exchange rates may result in poorer overall
performance for each Fund than if it had not engaged in such transactions.
Moreover, there may be an imperfect correlation between a 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 each Fund from achieving the intended hedge or expose the Fund to the
risk of currency exchange loss.
Each Fund may purchase currency forwards and combine such purchases
with sufficient cash or short-term securities to create unleveraged substitutes
for investments in foreign markets when deemed advantageous. Each Fund may also
combine the foregoing with bond futures or interest rate futures contracts to
create the economic equivalent of an unhedged foreign bond position.
Each Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which each Fund has or in which each Fund
expects to have portfolio exposure.
Currency transactions are subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to a Fund if it
is unable to deliver or receive currency or funds in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transactions costs.
Buyers and sellers of currency futures are subject to the same risks that apply
to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
INVESTMENT CONCENTRATION
Since Ivy Next Wave Internet Fund focuses its investment in securities
of companies engaged in Internet-related business activities, the Fund could
experience wider fluctuations in value than funds with more diversified
portfolios.
Although Ivy Cundill Value Fund will not invest more than 25% of its
total assets in any one industry and does not expect to focus its investments in
a single country, it may at any given time have a significant percentage of its
total assets in one or more countries or market sectors. If this were to occur,
the Fund could experience a wider fluctuation in value than funds with more
diversified portfolios.
OTHER INVESTMENT COMPANIES
Each Fund may invest up to 10% of its total assets in the shares of
other investment companies. As a shareholder of an investment company, each Fund
would bear its ratable shares of the fund's expenses (which often include an
asset-based management fee). Each Fund could also lose money by investing in
other investment companies, since the value of their respective investments and
the income they generate will vary daily based on prevailing market conditions.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which a 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 Board, each 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 IMI has
approved for use as collateral for repurchase agreements and the collateral must
be marked-to-market daily. Each Fund will enter into repurchase agreements only
with banks and broker-dealers deemed to be creditworthy by IMI under the
above-referenced guidelines. In the unlikely event of failure of the executing
bank or broker-dealer, each 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.
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). In
addition to investing in certificates of deposit and bankers' acceptances, each
Fund may invest in time deposits in banks or savings and loan associations. Time
deposits are generally similar to certificates of deposit, but are
uncertificated. Each Fund's investments in certificates of deposit, time
deposits, and bankers' acceptance are limited to obligations of (i) banks having
total assets in excess of $1 billion, (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"), (iii) savings
and loan association which have total assets in excess of $1 billion and which
are members of the FDIC, and (iv) foreign banks if the obligation is, in IMI's
opinion, of an investment quality comparable to other debt securities which may
be purchased by the Fund. Each 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.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. Each Fund may invest in commercial paper that is rated Prime-1 by
Moody's or A-1 by S&P or, if not rated by Moody's or S&P, is issued by companies
having an outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA by S&P.
BORROWING
Borrowing may exaggerate the effect on each Fund's net asset value of
any increase or decrease in the value of each 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 each Fund's borrowings will be fixed, each Fund's assets may change in value
during the time a borrowing is outstanding, thus increasing exposure to capital
risk.
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 a 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 a Fund was not exercised by the date of its expiration, the Fund would
lose the entire purchase price of the warrant.
OPTIONS TRANSACTIONS
IN GENERAL. 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 a U.S. exchange-traded 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. Closing purchase transactions are not available for OTC
transactions. In order to terminate an obligations in an OTC transaction, a Fund
would need to negotiate directly with the counterparty.
Each 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 a 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 a Fund, are taxable as ordinary income. See "Taxation."
Each 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 each Fund and its counterparty (usually a securities dealer or a
financial institution) with no clearing organization guarantee. When a 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. Each 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. Each 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 each Fund, it generally would write call options
only in circumstances where the investment adviser to the Fund does not
anticipate significant appreciation of the underlying security in the near
future or has otherwise determined to dispose of the security.
A "covered" call option means generally that so long as a 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, a 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 a 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. Each Fund may purchase a
put option on an underlying security owned by that Fund as a defensive technique
in order to protect against an anticipated decline in the value of the security.
Each 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 a 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 either Fund for leverage
purposes.
Each 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. A 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. Each Fund may write (sell) put options on individual securities only to
effect a "closing sale transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. Each 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. Call
options on indices are similar to call 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 a 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 a 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 a
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 a U.S. 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 a 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 a Fund
seeks to close out an option position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, a 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. Transfer of an
OTC option is usually prohibited absent the consent of the original
counterparty. There is no assurance that a Fund will be able to close out an OTC
option position at a favorable price prior to its expiration. An OTC
counterparty may fail to deliver or to pay, as the case may be. In the event of
insolvency of the counterparty, a Fund might be unable to close out an OTC
option position at any time prior to its expiration. Although a Fund may be able
to offset to some extent any adverse effects of being unable to liquidate an
option position, a Fund may experience losses in some cases as a result of such
inability.
When conducted outside the U.S., options transactions may not be
regulated as rigorously as in the U.S., 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, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions, (iii)
delays in each Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
U.S., and (v) lower trading volume and liquidity.
Each Fund's options activities also may have an impact upon the level
of its portfolio turnover and brokerage commissions. See "Portfolio Turnover."
Each 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, timing of use and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
IN GENERAL. Each Fund may enter into futures contracts and options on
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 a Fund, that Fund is required to deposit with its
custodian (or broker, if legally permitted) a specified amount of cash or liquid
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 a 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 a 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, each Fund
will mark-to-market its open futures position.
Each Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option,
and other futures positions held by the Fund.
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, each 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, each 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, each 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. Alternatively,
each 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, or, if lower, may cover the difference with cash or
short-term securities.
When selling a futures contract, each 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, a 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).
When selling a call option on a futures contract, each 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, equal the total market value of the futures contract
underlying the call option. Alternatively, a Fund may cover its position by
entering into a long position in the same futures contract at a price no higher
than the strike price of the call option, by owning the instruments underlying
the futures contract, or by holding a separate call option permitting the Fund
to purchase the same futures contract at a price not higher than the strike
price of the call option sold by the Fund, or covering the difference if the
price is higher.
When selling a put option on a futures contract, each Fund will
maintain with its Custodian (and mark-to-market on a daily basis) cash or liquid
securities that equal the purchase price of the futures contract less any margin
on deposit. Alternatively, a Fund may cover the position either by entering into
a short position in the same futures contract, or by owning a separate put
option permitting it to sell the same futures contract so long as the strike
price of the purchased put option is the same or higher than the strike price of
the put option sold by the Fund, or, if lower, the Fund may hold securities to
cover the difference.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. Each Fund may
engage in foreign currency futures contracts and related options transactions
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.
An option on a foreign currency futures contract gives the holder the
right, in return for the premium paid, to assume a long position (call) or short
position (put) in a futures contract at a specified exercise price at any time
during the period of the option. Upon the exercise of a call option, the holder
acquires a long position in the futures contract and the writer is assigned the
opposite short position. In the case of a put option, the opposite is true.
Each Fund may purchase call and put options on foreign currencies as a
hedge against changes in the value of the U.S. dollar (or another currency) in
relation to a foreign currency in which portfolio securities of the Fund may be
denominated. A call option on a foreign currency gives the buyer the right to
buy, and a put option the right to sell, a certain amount of foreign currency at
a specified price during a fixed period of time. Each Fund may invest in options
on foreign currency which are either listed on a domestic securities exchange or
traded on a recognized foreign exchange.
In those situations where foreign currency options may not be readily
purchased (or where such options may be deemed illiquid) in the currency in
which the hedge is desired, the hedge may be obtained by purchasing an option on
a "surrogate" currency, i.e., a currency where there is tangible evidence of a
direct correlation in the trading value of the two currencies. A surrogate
currency's exchange rate movements parallel that of the primary currency.
Surrogate currencies are used to hedge an illiquid currency risk, when no liquid
hedge instruments exist in world currency markets for the primary currency.
Each Fund will only enter into futures contracts and futures options
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. Each Fund will not
enter into a futures contract or purchase an option thereon 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. A call option is "in-the-money" if the
value of the futures contract that is the subject of the option exceeds the
exercise price. A put option is "in-the-money" if the exercise price exceeds the
value of the futures contract that is the subject of the option. For additional
information about margin deposits required with respect to futures contracts and
options thereon, see "Futures Contracts and Options on Futures Contracts."
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in a 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 and futures options on securities, including technical
influences in futures trading and futures options, 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 a Fund seeks to close out a futures or a futures option 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 and options thereon 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 a
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.
SECURITIES INDEX FUTURES CONTRACTS
Each Fund may enter into securities index futures contracts as an
efficient means of regulating the Fund's exposure to the equity markets. Each
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 a 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 a 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 OF SECURITIES INDEX FUTURES. Each 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.
Each 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. Inasmuch as such securities will not duplicate the components of an
index, the correlation probably will not be perfect. Consequently, each 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 each 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 a 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,
a 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, a 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.
Each 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. Each
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, each 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.
Alternatively, a 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, each 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 an FCM as margin, are equal to
the market value of the instruments underlying the contract. Alternatively, a
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 cash or liquid
assets in a segregated account with the Fund's custodian).
COMBINED TRANSACTIONS. Each Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions and
multiple currency transactions (including forward currency contracts) and some
combination of futures, options, and currency 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.
PORTFOLIO TURNOVER
Each Fund purchases securities that are believed by IMI to have above
average potential for capital appreciation. Securities are disposed of in
situations where it is believed that potential for such appreciation has
lessened or that other securities have a greater potential. Therefore, each 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 a 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.
Each 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 each Fund's
portfolio turnover rate, all securities whose maturities at the time of
acquisition were one year or less are excluded.
MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction
of the Trustees. Information about each Fund's investment manager and other
service providers appears in the "Investment Advisory and Other Services"
section, below.
TRUSTEES AND OFFICERS
The Board of Trustees of the Trust is responsible for the overall
management of each Fund, including general supervision and review of the Fund's
investment activities. The Board, in turn, elects the officers who are
responsible for administering each Fund's day-to-day operations.
The Trustees and Executive Officers of the Trust, their business
addresses and principal occupations during the past five years are:
POSITION WITH BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE THE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and controls);
Wilmington, MA 01887 Director, Burr-Brown Corp.
Age: 75 (operational amplifiers);
Director, Metritage Incorporated
(level measuring instruments);
Trustee of Mackenzie Series Trust
(1992-1998).
James W. Broadfoot President President, Ivy Management, Inc.
700 South Federal Hwy. and (1996-present); Senior Vice President,
Suite 300 Trustee Ivy Management, Inc. (1992-1996);
Boca Raton, FL 33432 Director and Senior Vice President,
Age: 56 Mackenzie Investment Management Inc.
[*Deemed to be an (1995-present); Senior Vice President,
"interested person" Mackenzie Investment Management Inc.
of the Trust, as (1990-1995).
defined under the
1940 Act.]
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: 75 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
(1988-1998); Director of The
Mackenzie Funds Inc. (1988-1995).
Keith J. Carlson Chairman Senior Vice President of Mackenzie
700 South Federal Hwy. and Investment Management, Inc. (1996-
Suite 300 Trustee -present); Senior Vice President
Boca Raton, FL 33432 and Director of Mackenzie Investment
Age: 42 Management, Inc. (1994-1996);
[*Deemed to be an Senior Vice President and Treasurer
"interested person" of Mackenzie Investment Management,
of the Trust, as defined Inc. (1989-1994); Senior Vice
under the President and Director of Ivy
1940 Act.] 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 (1996-1998);
Vice President of Mackenzie Series
Trust (1994-1998); 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 (1996-1998).
Stanley Channick Trustee President and Chief
11 Bala Avenue Executive Officer, The
Bala Cynwyd, PA 19004 Whitestone Corporation
Age: 75 (insurance agency); Chairman,
Scott Management Company
(administrative services for
insurance companies);
President, The Channick Group
(consultants to insurance
companies and national trade
associations); Trustee of
Mackenzie Series Trust
(1994-1998); Director of
The Mackenzie Funds Inc.
(1994-1995).
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 (1994-1997).
Age: 73
Dianne Lister Trustee President and Chief Executive Officer,
556 University Avenue The Hospital for Sick Children
Toronto, Ontario L4J 2T4 Foundation (1993-present); Chief
Operating Officer, The Hospital for
Sick Children Foundation
(1992-1993); Executive Vice
President, The Hospital for
Sick Children Foundation
(1991-1992).
Joseph G. Rosenthal Trustee Chartered Accountant
110 Jardin Drive (1958-present); Trustee of
Unit #12 Mackenzie Series Trust
Concord, Ontario Canada (1985-1998); Director of
L4K 2T7 The Mackenzie Funds Inc.
Age: 64 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 75 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: 69 B.V. (an environmentally sensitive
packaging company); Director of
Polyglass LTD.; Director, The
Mackenzie Funds Inc. (1992-1995);
Trustee of Mackenzie Series Trust
(1992-1998).
Edward M. Tighe Trustee Chief Executive Officer,
5900 N. Andrews Avenue CITCO Technology Management, Inc.
Suite 700 ("CITCO") (computer software develop-
Ft. Lauderdale, FL 33309 ment and consulting) (1999-present);
President and Director, Global
Technology Management, Inc. (CITCO's
predecessor) (1992-1998); Managing
Director, Global Mutual Fund Services,
Ltd. (financial services firm);
President, Director and Chief
Executive Officer, Global Mutual Fund
Services, Inc. (1994-present).
C. William Ferris Secretary/ Senior Vice President, Chief Financial
700 South Federal Hwy. Treasurer Officer and Secretary/Treasurer of
Suite 300 Mackenzie Investment Management Inc.
Boca Raton, FL 33432 (1995-present); Senior Vice President,
Age: 54 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
(1994-1998).
<PAGE>
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1999)
TOTAL
PENSION OR COMPENSATION
RETIREMENT ESTIMATED FROM TRUST
BENEFITS ANNUAL AND FUND
AGGREGATE ACCRUED AS BENEFITS COMPLEX PAID
NAME, COMPENSATION PART OF FUND UPON TO TRUSTEES**
POSITION FROM TRUST* EXPENSES RETIREMENT
John S. --- N/A N/A ---
Anderegg, Jr.
(Trustee)
James W. --- N/A N/A ---
Broadfoot
(Trustee and
President)
Paul H. --- N/A N/A ---
Broyhill
(Trustee)
Keith J. --- N/A N/A ---
Carlson
(Trustee and
Chairman)
Stanley --- N/A N/A ---
Channick
(Trustee)
Roy J. --- N/A N/A ---
Glauber
(Trustee)
Dianne --- N/A N/A ---
Lister
(Trustee)
Joseph G. --- N/A N/A ---
Rosenthal
(Trustee)
Richard N. --- N/A N/A ---
Silverman
(Trustee)
J. Brendan --- N/A N/A ---
Swan
(Trustee)
C. William --- N/A N/A ---
Ferris
(Secretary/
Treasurer)
* Estimated for each Fund's initial fiscal year ending December 31, 2000.
** Estimated for each Fund's initial fiscal year ending December 31, 2000. The
Fund complex consists of Ivy Fund and Mackenzie Solutions.
As of the date of this SAI, the Officers and Trustees of the Trust as a
group owned no shares of the Funds.
<PAGE>
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI, IMDI AND THE TRUST. IMI, IMDI and the
Trust have adopted a Code of Ethics and Business Conduct Policy (the "Code of
Ethics"), which is designed to identify and address certain conflicts of
interest between personal investment activities and the interests of investment
advisory clients such as each Fund, in compliance with Rule 17j-1 under the 1940
Act. The Code of Ethics permits employees of IMI, IMDI and the Trust to engage
in personal securities transactions, including with respect to securities held
by one or more Funds, subject to certain requirements and restrictions. Among
other things, the Code of Ethics, which applies to portfolio managers, traders,
research analysts and others involved in the investment advisory process,
prohibits certain types of transactions absent prior approval, imposes time
periods during which personal transactions in certain securities may not be
made, and requires the submission of duplicate broker confirmations and
quarterly and annual reporting of securities transactions. Exceptions to certain
provisions of the Code of Ethics may be granted in particular circumstances
after review by appropriate officers or compliance personnel.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI"), Via Mizner Financial Plaza, 700 South
Federal Highway, Boca Raton, Florida 33432, provides investment advisory and
business management services to each Fund pursuant to a Business Management and
Investment Advisory Agreement (the "Advisory Agreement"). The Advisory Agreement
was approved by the sole shareholder of each of the Funds on _________, 2000.
Before that, the Advisory Agreement was approved at meetings held on February
3-4, 2000 (for Ivy Cundill Value Fund) and _________, 2000 (for Ivy Next Wave
Internet Fund) by the Funds' Board of Trustees, including a majority of the
Trustees who are neither "interested persons" (as defined in the 1940 Act) of
the Funds nor have any direct or indirect financial interest in the operation of
each Fund's distribution plan (see "Distribution Services") or in any related
agreement (referred to herein as the "Independent Trustees").
IMI is a wholly owned subsidiary of Mackenzie Investment Management
Inc. ("MIMI"), Via Mizner Financial Plaza, 700 South Federal Highway, Boca
Raton, Florida 33432, a Delaware corporation with approximately 10% of its
outstanding common stock listed on the Toronto Stock Exchange ("TSE"). MIMI is a
subsidiary of Mackenzie Financial Corporation ("MFC"), 150 Bloor Street West,
Toronto, Ontario, Canada, a public corporation organized under the laws of
Ontario whose shares are listed for trading on the TSE. MFC is registered in
Ontario as a mutual fund dealer. IMI currently acts as manager and investment
adviser to the other series of Ivy Fund and the five series of Mackenzie
Solutions.
The Advisory Agreement obligates IMI to make investments for the
account of each 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 Internal Revenue Code of 1986, as amended (the
"Code"), relating to regulated investment companies, and subject to policy
decisions adopted by the Trustees. IMI has delegated to Cundill the primary
responsibility for determining which securities Ivy Cundill Value Fund should
purchase and sell (see "Sub-Advisor," below.)
Under the Advisory Agreement, IMI is also obligated to (1) coordinate
with each Fund's Custodian and monitor the services it provides to the Fund; (2)
coordinate with and monitor any other third parties furnishing services to each
Fund; (3) provide each Fund with necessary office space, telephones and other
communications facilities as needed; (4) provide the services of individuals
competent to perform administrative and clerical functions that are not
performed by employees or other agents engaged by each 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 each Fund 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 Fund to serve in such
capacities; and (7) take such other action with respect to the Fund, upon the
approval of its trustees, as may be required by applicable law, including
without limitation the rules and regulations of the Securities and Exchange
Commission (the "SEC") and of state securities commissions and other regulatory
agencies.
Each Fund pays IMI a fee for its services under the Advisory Agreement
at an annual rate of 1.00% of each Fund's average net assets.
Under the Advisory Agreement, the Trust is also responsible for 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.
SUB-ADVISOR
Cundill, an SEC-registered investment advisor located at P.O. Box SN
117, Southhampton, Bermuda SN BX, serves as sub- advisor to Ivy Cundill Value
Fund under a subadvisory agreement with IMI (the "Subadvisory Agreement").
Cundill began operations in 1984, and as of the end of 1999 (along with its
affiliates) had approximately $1 billion in assets under management. The
Subadvisory Agreement was approved by the sole shareholder of the Fund on
__________, 2000. Before that, the Subadvisory Agreement was approved at a
meeting held on February 3-4, 2000 by the Fund's Board of Trustees, including a
majority of the Independent Trustees. For its services, Cundill receives a fee
from the Advisor that is equal, on an annual basis, to .50% of the Fund's
average net assets. The subadviser's fee will be paid by IMI out of the advisory
fees that it receives from Ivy Cundill Value Fund.
TERM AND TERMINATION OF ADVISORY AGREEMENT AND SUBADVISORY AGREEMENT
The initial term of the Advisory Agreement is two years from ________,
2000. The initial term of the Subadvisory Agreement is two years from _________,
2000. Each Agreement will continue in effect with respect to each Fund from year
to year, or for more than the initial period, as the case may be, only so long
as such continuance is specifically approved at least annually (i) by the vote
of a majority of the Independent Trustees and (ii) either (a) by the vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
that Fund or (b) by the vote of a majority of the entire Board. If the question
of continuance of either Agreement (or adoption of any new agreement) is
presented to shareholders, continuance (or adoption) shall occur only if
approved by the affirmative vote of a majority of the outstanding voting
securities of that Fund. (See "Capitalization and Voting Rights.")
The Agreements may be terminated with respect to each 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
Advisory Agreement shall terminate automatically in the event of its assignment.
DISTRIBUTION SERVICES
Ivy Mackenzie Distributors, Inc. ("IMDI"), a wholly owned subsidiary of
MIMI, serves as the exclusive distributor of each Fund's shares pursuant to an
Amended and Restated Distribution Agreement with the Trust dated March 16, 1999,
as amended from time to time (the "Distribution Agreement"). 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 each Fund continuously, but reserves the
right to suspend or discontinue distribution on that basis. IMDI is not
obligated to sell any specific amount of Fund shares.
Each Fund has authorized IMDI to accept purchase and redemption orders
on its behalf. IMDI is also authorized to designate other intermediaries to
accept purchase and redemption orders on each Fund's behalf. Each Fund will be
deemed to have received a purchase or redemption order when an authorized
intermediary or, if applicable, an intermediary's authorized designee, accepts
the order. Client orders will be priced at each Fund's Net Asset Value next
computed after an authorized intermediary or the intermediary's authorized
designee accepts them.
Under the Distribution Agreement, each Fund bears, among other
expenses, the expenses of registering and qualifying its shares for sale under
federal and state securities laws and preparing and distributing to existing
shareholders periodic reports, proxy materials and prospectuses.
As of the date of this SAI, IMDI had not received any payments under
the Distribution Agreement with respect to the Funds.
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 each
Fund. The Distribution Agreement may be terminated with respect to either Fund
at any time, without payment of any penalty, by IMDI on 60 days' written notice
to the Fund or by a 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 and filed with the SEC. At meetings held
on February 3-4, 2000 and _______, 2000, the Trustees adopted a Rule 18f-3 plan
on behalf of Ivy Cundill Value Fund and Ivy Next Wave Internet Fund,
respectively. The key features of the Rule 18f-3 plan are as follows: (i) shares
of each class of each Fund represent an equal pro rata interest in that Fund and
generally have identical voting, dividend, liquidation, and other rights,
preferences, powers, restrictions, limitations, qualifications, terms and
conditions, except that each class bears certain class-specific expenses and has
separate voting rights on certain matters that relate solely to that class or in
which the interests of shareholders of one class differ from the interests of
shareholders of another class; (ii) subject to certain limitations described in
the Prospectus, shares of a particular class of each Fund may be exchanged for
shares of the same class of another Ivy fund; and (iii) each Fund's Class B
shares will convert automatically into Class A shares of that Fund after a
period of eight years, based on the relative net asset value of such shares at
the time of conversion.
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown Brothers
Harriman & Co. (the "Custodian"), a private bank and member of the principal
securities exchanges, located at 40 Water Street, Boston, Massachusetts 02109
(the "Custodian"), maintains custody of each Fund's assets. 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, the Custodian has entered into subcustodial agreements for the
holding of each Fund's foreign securities. With respect to each Fund, the
Custodian may receive, as partial payment for its services to each Fund, a
portion of the Trust's brokerage business, subject to its ability to provide
best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement, MIMI provides certain
accounting and pricing services for each Fund. As compensation for those
services, each Fund pays MIMI a monthly fee plus out-of-pocket expenses as
incurred. The monthly fee is based upon the net assets of 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. As of the date of this SAI, no payments have been
made under the agreement.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service Agreement, Ivy
Mackenazie Services Corp. ("IMSC"), a wholly owned subsidiary of MIMI, is the
transfer agent for each Fund. Under the Agreement, each Fund pays a monthly fee
at an annual rate of $20.00 for each open Class A, Class B, Class C and Advisor
Class account. Each Fund pays $10.25 per open Class I account. In addition, each
Fund pays a monthly fee at an annual rate of $4.58 per account that is closed
plus certain out-of-pocket expenses. As of the date of this SAI, no payments
have been made by either Fund for transfer agency services. Certain
broker-dealers that maintain shareholder accounts with each 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 (e.g., .10%) fee, based on the average daily
net asset value of the omnibus account (or a combination thereof). As of the
date of this SAI, no payments have been made by either Fund with respect to the
provision of these services for the Funds.
ADMINISTRATOR
Pursuant to an Administrative Services Agreement, MIMI provides certain
administrative services to the Funds. As compensation for these services, each
Fund (except with respect to its Class I shares) pays MIMI a monthly fee at the
annual rate of 0.10% of the Fund's average daily net assets. Each Fund pays MIMI
a monthly fee at the annual rate of 0.01% of its average daily net assets for
Class I shares.
AUDITORS
PricewaterhouseCoopers LLP, independent certified public accountants,
have been selected as auditors for each Fund. The audit services performed by
PricewaterhouseCoopers LLP include audits of the annual financial statements of
each Fund. Other services provided principally relate to filings with the SEC
and the preparation of each Fund's tax returns.
BROKERAGE ALLOCATION
Subject to the overall supervision of the President and the Board, IMI
(and/or for Ivy Cundill Value Fund, Cundill) places orders for the purchase and
sale of each 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 Funds 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
(and/or Cundill) attempts to deal directly with the principal market makers,
except in those circumstances where IMI (and/or Cundill) believes that a better
price and execution are available elsewhere.
IMI (and/or Cundill) 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 (and/or
Cundill) in servicing all of its accounts. In addition, not all of these
services may be used by IMI (and/or Cundill) in connection with the services it
provides to the Fund or the Trust. IMI (and/or Cundill) may consider sales of
shares of other Ivy, IMI or Cundill managed funds as a factor in the selection
of broker-dealers and may select broker-dealers who provide it with research
services. IMI (and/or Cundill) will not, however, execute brokerage transactions
other than at the best price and execution.
Each Fund may, under some circumstances, accept securities in lieu of
cash as payment for Fund shares. Each 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 (and/or Cundill) deems to be a desirable
investment for each Fund. While no minimum has been established, it is expected
that each 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 each Fund, and each Fund shares will be sold for net
asset value determined at the same time the accepted securities are valued. The
Trust will only accept securities delivered in proper form and will not accept
securities subject to legal restrictions on transfer. The acceptance of
securities by the Trust must comply with the applicable laws of certain states.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Fund consists of an unlimited number of
shares of beneficial interest (no par value per share). When issued, shares of
each class of each Fund are fully paid, non-assessable, redeemable and fully
transferable. No class of shares of the Funds has preemptive rights or
subscription rights.
The Amended and Restated Declaration of Trust (the "Declaration of
Trust") permits the Trustees to create separate series or portfolios and to
divide any series or portfolio into one or more classes. Pursuant to the
Declaration of Trust, the Trustees may terminate a Fund upon written notice to
shareholders. This might occur, for example, if a Fund does not reach an
economically viable size. The Trustees have authorized twenty-one series, each
of which represents a fund. The Trustees have further authorized the issuance of
Class A, Class B, and Class C shares for Ivy International Fund and the Ivy
Money Market Fund and Class A, Class B, Class C and Advisor Class shares for the
Fund, Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy
Developing Nations Fund, Ivy European Opportunities 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 II, Ivy International
Small Companies Fund, Ivy International Strategic Bond Fund, Ivy Pan-Europe
Fund, Ivy South America Fund, Ivy US Blue Chip Fund and Ivy US Emerging Growth
Fund, as well as Class I shares for the Fund, Ivy Bond Fund, Ivy European
Opportunities Fund, Ivy Global Science & Technology Fund, Ivy International
Fund, Ivy International Fund II, Ivy International Small Companies Fund, Ivy
International Strategic Bond Fund and Ivy US Blue Chip Fund.
Shareholders have the right to vote for the election of Trustees of the
Trust and on any and all matters on which they may be entitled to vote by law or
by the provisions of the Trust's By-Laws. The Trust is not required to hold a
regular annual meeting of shareholders, and it does not intend to do so. Shares
of each class of each Fund entitle their holders to one vote per share (with
proportionate voting for fractional shares). Shareholders of each Fund are
entitled to vote alone on matters that only affect that Fund. All classes of
shares of each Fund will vote together, except with respect to the distribution
plan applicable to the Fund's Class A, Class B or Class C shares or when a class
vote is required by the 1940 Act. On matters relating to all funds of the Trust,
but affecting them differently, separate votes by the shareholders of each fund
are required. Approval of an investment advisory agreement and a change in
fundamental policies would be regarded as matters requiring separate voting by
the shareholders of each fund of the Trust. If the Trustees of the Trust
determine that a matter does not affect the interests of a particular fund, then
the shareholders of that fund will not be entitled to vote on that matter.
Matters that affect the Trust in general will be voted upon collectively by the
shareholders of all funds 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 that Fund (or of the Trust).
With respect to the submission to shareholder vote of a matter
requiring separate voting by each fund of the Trust, the matter shall have been
effectively acted upon with respect to that fund if a majority of the
outstanding voting securities of the fund votes for the approval of the matter,
notwithstanding that: (1) the matter has not been approved by a majority of the
outstanding voting securities of any other fund of the Trust; or (2) the matter
has not been approved by a majority of the outstanding voting securities of the
Trust.
The Declaration of Trust provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust. Shareholders will be assisted in communicating with other shareholders in
connection with the removal of a Trustee.
The Trust's shares do not have cumulative voting rights and accordingly
the holders of more than 50% of the outstanding shares could elect the entire
Board, in which case the holders of the remaining shares would not be able to
elect any Trustees.
As of the date of this SAI, there were no Fund shares outstanding other
than those issued to the sole shareholder.
Under Massachusetts law, the Trust's shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims liability of the shareholders,
Trustees or officers of the Trust for acts or obligations of the Trust, which
are binding only on the assets and property of the Trust, and requires that
notice of the disclaimer be given in each contract or obligation entered into or
executed by the Trust or its Trustees. The Declaration of Trust also provides
for indemnification out of Fund property for all loss and expense of any
shareholder of either Fund held personally liable for the obligations of that
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 any other series of the Trust.
SPECIAL RIGHTS AND PRIVILEGES
Information as to how to purchase Fund shares is contained in the
Prospectus. The Trust offers (and except as noted below) bears the cost of
providing, to investors the following additional 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 Funds, whose shares are also distributed by IMDI. These funds
are: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy Developing
Nations Fund, Ivy European Opportunities 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 Fund II,
Ivy International Small Companies Fund, Ivy International Strategic Bond Fund,
Ivy Money Market Fund, Ivy Pan-Europe Fund, Ivy South America Fund, Ivy US Blue
Chip Fund and Ivy US Emerging Growth Fund (the other nineteen series of the
Trust). Shareholders should obtain a current prospectus before exercising any
right or privilege that may relate to these funds.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a Fund shareholder to
have specified amounts automatically drawn each month from his or her bank for
investment in Fund shares, is available for all classes of shares except Class
I. The minimum initial and subsequent investment under this method is $50 per
month (except in the case of a tax qualified retirement plan for which the
minimum initial and subsequent investment is $25 per month). A shareholder may
terminate the Automatic Investment Method at any time upon delivery to Ivy
Mackenzie Services Corp. ("IMSC") of telephone instructions or written notice.
To use this privilege, please complete Sections 6A and 7B of the Account
Application that is included with the Prospectus.
EXCHANGE OF SHARES
As described in the Prospectus, shareholders of each Fund have an
exchange privilege with other Ivy funds (except Ivy International Fund unless
they have an existing Ivy International Fund account). Before effecting an
exchange, shareholders of a Fund should obtain and read the currently effective
prospectus for the Ivy fund into which the exchange is to be made.
RETIREMENT PLANS
Shares of each Fund 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 account
under the plan, and shares held in such an account may be exchanged among the
Ivy funds in accordance with the terms of the applicable plan and the exchange
privilege available to all shareholders. Initial and subsequent purchase
payments in connection with tax-deferred retirement plans must be at least $25
per participant.
The following fees will be charged to individual shareholder accounts
as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per fund account
For shareholders whose retirement accounts are diversified across
several Ivy funds, the annual maintenance fee will be limited to not more than
$20.
The following discussion describes some aspects of the tax treatment of
certain tax-deferred retirement plans under current Federal income tax law.
State income tax consequences may vary. An individual considering the
establishment of a retirement plan should consult with an attorney and/or an
accountant with respect to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of each Fund may be used as a
funding medium for an Individual Retirement Account ("IRA"). Eligible
individuals may establish an IRA by adopting a model custodial account available
from IMSC, who may impose a charge for establishing the account. Individuals
should consult their tax advisers before investing IRA assets in a fund if that
fund primarily distributes exempt-interest dividends.
An individual who has not reached age 70-1/2 and who receives
compensation or earned income is eligible to contribute to an IRA, whether or
not he or she is an active participant in a retirement plan. An individual who
receives a distribution from another IRA, a qualified retirement plan, a
qualified annuity plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible to establish an
IRA by rolling over the distribution either directly or within 60 days after its
receipt. Tax advice should be obtained in connection with planning a rollover
contribution to an IRA.
In general, an eligible individual may contribute up to the lesser of
$2,000 or 100% of his or her compensation or earned income to an IRA each year.
If a husband and wife are both employed, and both are under age 70-1/2, each may
set up his or her own IRA within these limits. If both earn at least $2,000 per
year, the maximum potential contribution is $4,000 per year for both. For years
after 1996, the result is similar even if one spouse has no earned income; if
the joint earned income of the spouses is at least $4,000, a contribution of up
to $2,000 may be made to each spouse's IRA. Rollover contributions are not
subject to these limits.
An individual may deduct his or her annual contributions to an IRA in
computing his or her Federal income tax within the limits described above,
provided he or she (and his or her spouse, if they file a joint Federal income
tax return) is not an active participant in a qualified retirement plan (such as
a qualified corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan, 403(b) plan,
simplified employee pension, or governmental plan. If he or she (or his or her
spouse) is an active participant, whether the individual's contribution to an
IRA is fully deductible, partially deductible or not deductible depends on (i)
adjusted gross income and (ii) whether it is the individual or the individual's
spouse who is an active participant, in the case of married individuals filing
jointly. Contributions may be made up to the maximum permissible amount even if
they are not deductible. Rollover contributions are not includible in income for
Federal income tax purposes and therefore are not deductible from it.
Generally, earnings on an IRA are not subject to current Federal income
tax until distributed. Distributions attributable to tax-deductible
contributions and to IRA earnings are taxed as ordinary income. Distributions of
non-deductible contributions are not subject to Federal income tax. There are
special rules for determining what portion of any distribution is allocable to
deductible and to non-deductible contributions. In general, distributions from
an IRA to an individual before he or she reaches age 59-1/2 are subject to a
nondeductible penalty tax equal to 10% of the taxable amount of the
distribution. The 10% penalty tax does not apply to amounts withdrawn from an
IRA after the individual reaches age 59-1/2, becomes disabled or dies, or if
withdrawn in the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated beneficiary, if any, or
rolled over into another IRA, amounts withdrawn and used to pay for deductible
medical expenses, amounts withdrawn by certain unemployed individuals not in
excess of amounts paid for certain health insurance premiums, amounts used to
pay certain qualified higher education expenses, and amounts used within 120
days of the date the distribution is received to pay for certain first-time
homebuyer expenses. Distributions must begin to be withdrawn not later than
April 1 of the calendar year following the calendar year in which the individual
reaches age 70-1/2. Failure to take certain minimum required distributions will
result in the imposition of a 50% non-deductible penalty tax.
ROTH IRAs: Shares of each Fund also may be used as a funding medium for
a Roth Individual Retirement Account ("Roth IRA"). A Roth IRA is similar in
numerous ways to the regular (traditional) IRA, described above. Some of the
primary differences are as follows.
A single individual earning below $95,000 can contribute up to $2,000
per year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000. An individual whose adjusted gross income exceeds the maximum
phase-out amount cannot contribute to a Roth IRA.
An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
Contributions to a Roth IRA are not deductible. Contributions to a Roth IRA may
be made even after the individual for whom the account is maintained has
attained age 70 1/2.
No distributions are required to be taken prior to the death of the
original account holder. If a Roth IRA has been established for a minimum of
five years, distributions can be taken tax-free after reaching age 59 1/2, for a
first-time home purchase ($10,000 maximum, one time use), or upon death or
disability. All other distributions from a Roth IRA are taxable and subject to a
10% tax penalty unless an exception applies. Exceptions to the 10% penalty
include: disability, deductible medical expenses, certain purchases of health
insurance for an unemployed individual and qualified higher education expenses.
An individual with an income of less than $100,000 (who is not married
filing separately) can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount in his or her traditional
IRA. After 1998, all taxes on such a rollover will have to be paid in the tax
year in which the rollover is made.
QUALIFIED PLANS: For those self-employed individuals who wish to
purchase shares of one or more Ivy funds through a qualified retirement plan, a
Adoption 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 Adoption 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 Adoption Agreement and
Retirement Plan for the benefit of their eligible employees. Similar
contribution and deduction rules apply to corporate employers.
Distributions from the Retirement Plan generally are made after a
participant's separation from service. A 10% penalty tax generally applies to
distributions to an individual before he or she reaches age 59-1/2, unless the
individual (1) has reached age 55 and separated from service; (2) dies; (3)
becomes disabled; (4) uses the withdrawal to pay tax-deductible medical
expenses; (5) takes the withdrawal as part of a series of substantially equal
payments over his or her life expectancy or the joint life expectancy of himself
or herself and a designated beneficiary; or (6) rolls over the distribution.
The Transfer Agent will arrange for Investors Bank & Trust to furnish
custodial services to the employer and any participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE ORGANIZATIONS
("403(B)(7) ACCOUNT"): Section 403(b)(7) of the Code permits public school
systems and certain charitable organizations to use mutual fund shares held in a
custodial account to fund deferred compensation arrangements with their
employees. A custodial account agreement is available for those employers whose
employees wish to purchase shares of the Fund in conjunction with such an
arrangement. The special application for a 403(b)(7) Account is available from
IMSC.
Distributions from the 403(b)(7) Account may be made only following
death, disability, separation from service, attainment of age 59-1/2, or
incurring a financial hardship. A 10% penalty tax generally applies to
distributions to an individual before he or she reaches age 59-1/2, unless the
individual (1) has reached age 55 and separated from service; (2) dies or
becomes disabled; (3) uses the withdrawal to pay tax-deductible medical
expenses; (4) takes the withdrawal as part of a series of substantially equal
payments over his or her life expectancy or the joint life expectancy of himself
or herself and a designated beneficiary; or (5) rolls over the distribution.
There is no set-up fee for 403(b)(7) Accounts and the annual maintenance fee is
$20.00 per account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAs: An employer may deduct
contributions to a SEP up to the lesser of $30,000 or 15% of compensation. SEP
accounts generally are subject to all rules applicable to IRA accounts, except
the deduction limits, and are subject to certain employee participation
requirements. No new salary reduction SEPs ("SARSEPs") may be established after
1996, but existing SARSEPs may continue to be maintained, and non-salary
reduction SEPs may continue to be established as well as maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a SIMPLE 401(k)
for years after 1996. An employee can make pre-tax salary reduction
contributions to a SIMPLE Plan, up to $6,000 a year (as indexed). Subject to
certain limits, the employer will either match a portion of employee
contributions, or will make a contribution equal to 2% of each employee's
compensation without regard to the amount the employee contributes. An employer
cannot maintain a SIMPLE Plan for its employees if any contributions or benefits
are credited to those employees under any other qualified retirement plan
maintained by the employer.
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 such shareholder's name,
properly endorsed by the shareholder. To be eligible to elect a Withdrawal Plan,
a shareholder must have at least $10,000 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 $250 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 Fund 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
Fund 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, 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 Fund 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
Fund may collect such fee (and any fees due to IMI) through a deduction from
distributions to the shareholders involved or by causing on the date the fee is
assessed a redemption in each such shareholder account sufficient to pay such
fee. The Fund reserves the right to change these fees from time to time without
advance notice.
REDEMPTIONS
Shares of the Fund are redeemed at their net asset value next
determined after a proper redemption request has been received by IMSC. 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 Fund 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.
The Trust may redeem those Advisor Class accounts of shareholders who
have maintained an investment, including sales charges paid, of less than
$10,000 in the Fund for a period of more than 12 months. All Advisor Class
accounts below that minimum will be redeemed simultaneously when MIMI deems it
advisable. The $10,000 balance will be determined by actual dollar amounts
invested by the shareholder, unaffected by market fluctuations. The Trust will
notify any such shareholder by certified mail of its intention to redeem such
account, and the shareholder shall have 60 days from the date of such letter to
invest such additional sums as shall raise the value of such account above that
minimum. Should the shareholder fail to forward such sum within 60 days of the
date of the Trust's letter of notification, the Trust will redeem the shares
held in such account and transmit the redemption in value thereof to the
shareholder. However, those shareholders who are investing pursuant to the
Automatic Investment Method will not be redeemed automatically unless they have
ceased making payments pursuant to the plan for a period of at least six
consecutive months, and these shareholders will be given six-months' notice by
the Trust before such redemption. Shareholders in a qualified retirement,
pension or profit sharing plan who wish to avoid tax consequences must
"rollover" any sum so redeemed into another qualified plan within 60 days. The
Trustees of the Trust may change the minimum account size.
If a shareholder has given authorization for telephonic redemption
privilege, shares can be redeemed and proceeds sent by Federal wire to a single
previously designated bank account. The Fund may delay for up to seven days
delivery of the proceeds of a wire redemption request of $250,000 or more if
considered appropriate under then-current market conditions. The Trust reserves
the right to change this minimum or to terminate the telephonic redemption
privilege without prior notice. The Trust cannot be responsible for the
efficiency of the Federal wire system of the shareholder's dealer of record or
bank. The shareholder is responsible for any charges by the shareholder's bank.
The 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.
NET ASSET VALUE
The net asset value per share of the Fund is computed by dividing the
value of the Fund's aggregate net assets (i.e., its total assets less its
liabilities) by the number of the Fund's shares outstanding. For purposes of
determining the Fund's aggregate net assets, receivables are valued at their
realizable amounts. The Fund's liabilities, if not identifiable as belonging to
a particular class of the Fund, are allocated among the Fund's several classes
based on their relative net asset size. Liabilities attributable to a particular
class are charged to that class directly. The total liabilities for a class are
then deducted from the class's proportionate interest in the Fund's assets, and
the resulting amount is divided by the number of shares of the class outstanding
to produce its net asset value per share.
A security listed or traded on a recognized stock exchange or The
Nasdaq Stock Market, Inc. ("Nasdaq") is valued at the security's last sale price
on the exchange on which the security is principally traded. If no sale is
reported at that time, the average between the last bid and asked price (the
"Calculated Mean") is used. Unless otherwise noted herein, 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. All other securities for which OTC market quotations are readily
available are valued at the Calculated Mean.
A debt security normally is valued on the basis of quotes obtained from
at least two dealers (or one dealer who has made a market in the security) or
pricing services that take into account appropriate valuation factors. Interest
is accrued daily. Money market instruments are valued at amortized cost, which
the Board believes approximates market value.
An exchange-traded option is valued at the last sale price on the
exchange on which it is principally traded, if available, and otherwise is
valued at the last sale price on the other exchange(s). If there were no sales
on any exchange, the option shall be valued at the Calculated Mean, if possible,
and otherwise at the last offering price, in the case of a written option, and
the last bid price, in the case of a purchased option. An OTC option is valued
at the last offering price, in the case of a written option, and the last bid
price, in the case of a purchased option. Exchange listed and widely-traded OTC
futures (and options thereon) are valued at the most recent settlement price.
Securities and other assets for which market prices are not readily
available are priced at their "fair value" as determined by IMI in accordance
with procedures approved by the Board. Trading in securities on many foreign
securities exchanges is normally completed before the close of regular trading
on the Exchange. Trading on foreign exchanges may not take place on all days on
which there is regular trading on the Exchange, or may take place on days on
which there is no regular trading on the Exchange (e.g., any of the national
business holidays identified below). If events materially affecting the value of
the Fund's portfolio securities occur between the time when a foreign exchange
closes and the time when the Fund's net asset value is calculated (see following
paragraph), such securities may be valued at their "fair value" as determined by
IMI in accordance with procedures approved by the Board.
Portfolio securities are valued (and net asset value per share is
determined) as of the close of regular trading on the Exchange (normally 4:00
p.m., eastern time) on each day the Exchange is open for trading. The Exchange
and the Trust's offices are expected to be closed, and net asset value will not
be calculated, on the following national business holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. On those days
when either or both of the Fund's Custodian or the Exchange close early as a
result of a partial holiday or otherwise, the Trust reserves the right to
advance the time on that day by which purchase and redemption requests must be
received.
The number of shares you receive when you place a purchase order, and
the payment you receive after submitting a redemption request, is based on the
Fund's net asset value next determined after your instructions are received in
proper form by IMSC or by your registered securities dealer. Each purchase and
redemption order is subject to any applicable sales charge. Since the Fund
invests in securities that are listed on foreign exchanges that may trade on
weekends or other days when the Funds do not price their shares, the Fund's net
asset value may change on days when shareholders will not be able to purchase or
redeem the Fund's shares. The sale of the Fund's 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 Fund's best interest to do so.
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 adviser about the tax consequences to them of investing
in the Fund. The Fund is not managed for tax-efficiency.
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; and (b) 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, as described below, 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 the Fund that did not engage
in such transactions.
Notwithstanding any of the foregoing, the Fund may recognize gain (but
not loss) from a constructive sale of certain "appreciated financial positions"
if the Fund enters into a short sale, offsetting notional principal contract,
futures or forward contract transaction with respect to the appreciated position
or substantially identical property. Appreciated financial positions subject to
this constructive sale treatment are interests (including options, futures and
forward contracts and short sales) in stock, partnership interests, certain
actively traded trust instruments and certain debt instruments. Constructive
sale treatment of appreciated financial positions does not apply to certain
transactions closed in the 90-day period ending with the 30th day after the
close of the Fund's taxable year, if certain conditions are met.
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.
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. The Fund may elect to mark to market its PFIC shares,
resulting in the shares being treated as sold at fair market value on the last
business day of each taxable year. Any resulting gain would be reported as
ordinary income; any resulting loss and any loss from an actual disposition of
the shares would be reported as ordinary loss to the extent of any net gains
reported in prior years. Under another 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.
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.
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
includable 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 to shareholders as long-term
capital gains whether paid in cash or in shares, and regardless of how long the
shareholder has held the Fund's shares; such distributions are not eligible for
the dividends received deduction. Shareholders receiving distributions in the
form of newly issued shares will have a cost basis in each share received equal
to the net asset value of a share of 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, if so, will be long-term or
short-term, depending upon the shareholder's holding period for the shares. Any
loss realized on a redemption sale or exchange will be disallowed to the extent
the shares disposed of are replaced (including through reinvestment of
dividends) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Any loss realized by a
shareholder on the sale of Fund shares held by the shareholder for six-months or
less will be treated for tax purposes as a long-term capital loss to the extent
of any distributions of capital gain dividends received or treated as having
been received by the shareholder with respect to such shares.
In some cases, shareholders will not be permitted to take all or
portion of their sales loads into account for purposes of determining the amount
of gain or loss realized on the disposition of their shares. This prohibition
generally applies where (1) the shareholder incurs a sales load in acquiring the
shares of 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 same 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 its 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, except in the case of certain electing individual taxpayers
who have limited creditable foreign taxes and no foreign source income other
than passive investment-type income, 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.
Furthermore, the foreign tax credit is eliminated with respect to foreign taxes
withheld on dividends if the dividend-paying shares or the shares of the Fund
are held by the Fund or the shareholder, as the case may be, for less than 16
days (46 days in the case of preferred shares) during the 30-day period (90-day
period for preferred shares) beginning 15 days (45 days for preferred shares)
before the shares become ex-dividend. In addition, if the Fund fails to satisfy
these holding period requirements, it cannot elect to pass through to
shareholders the ability to claim a deduction for related foreign taxes.
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
Performance information for the classes of shares of the Fund may be
compared, in reports and promotional literature, to: (i) the S&P 500 Index, the
Dow Jones Industrial Average ("DJIA"), or other unmanaged indices so that
investors may compare the Fund's results with those of a group of unmanaged
securities widely regarded by investors as representative of the securities
markets in general; (ii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm that ranks mutual
funds by overall performance, investment objectives and assets, or tracked by
other services, companies, publications or other criteria; and (iii) the
Consumer Price Index (measure for inflation) to assess the real rate of return
from an investment in the Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions or administrative and
management costs and expenses. Performance rankings are based on historical
information and are not intended to indicate future performance.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized average annual
total return ("Standardized Return") for a specific class of shares of 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
and Class C shares, the applicable CDSC imposed upon redemption of Class B or
Class C shares held for the period is deducted. Standardized Return quotations
for 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.
CUMULATIVE TOTAL RETURN. Cumulative total return is the cumulative rate
of return on a hypothetical initial investment of $1,000 in a specific class of
shares of the Fund for a specified period. Cumulative total return quotations
reflect changes in the price of the Fund's shares and assume that all dividends
and capital gains distributions during the period were reinvested in the Fund's
shares. Cumulative total return is calculated by computing the cumulative rates
of return of a hypothetical investment in a specific class of shares of the Fund
over such periods, according to the following formula (cumulative total return
is then expressed as a percentage):
C = (ERV/P) - 1
Where: C = cumulative total return
P = a hypothetical initial investment of $1,000 to
purchase shares of a specific class
ERV = ending redeemable value: ERV is
the value, at the end of the
applicable period, of a hypothetical
$1,000 investment made at the
beginning of the applicable period.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION. The foregoing
computation methods are prescribed for advertising and other communications
subject to SEC Rule 482. Communications not subject to this rule may contain a
number of different measures of performance, computation methods and
assumptions, including but not limited to: historical total returns; results of
actual or hypothetical investments; changes in dividends, distributions or share
values; or any graphic illustration of such data. These data may cover any
period of the Fund'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 its
performance rankings and listings reported in such newspapers or business or
consumer publications as, among others: AAII Journal, Barron's, Boston Business
Journal, Boston Globe, Boston Herald, Business Week, Consumer's Digest, Consumer
Guide Publications, Changing Times, Financial Planning, Financial World, Forbes,
Fortune, Growth Fund Guide, Houston Post, Institutional Investor, International
Fund Monitor, Investor's Daily, Los Angeles Times, Medical Economics, Miami
Herald, Money Mutual Fund Forecaster, Mutual Fund Letter, Mutual Fund Source
Book, Mutual Fund Values, National Underwriter, Nelson's Directory of Investment
Managers, New York Times, Newsweek, No Load Fund Investor, No Load Fund* X,
Oakland Tribune, Pension World, Pensions and Investment Age, Personal Investor,
Rugg and Steele, Time, U.S. News and World Report, USA Today, The Wall Street
Journal, and Washington Post.
FINANCIAL STATEMENTS
Each Fund's Statement of Assets and Liabilities, as of March 14, 2000,
and Report of Independent Accountants are attached hereto as Appendix B.
<PAGE>
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S RATINGS SERVICES ("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 1997
Issue (McGraw Hill, New York, 1997).]
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. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues. 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 to be 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. Issuers rated Prime-2 are deemed to have
a strong ability for repayment while issuers voted Prime-3 are deemed to have an
acceptable ability for repayment. Issuers rated Not Prime do not fall within any
of the Prime rating categories.
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 has the highest rating assigned by S&P. 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.
The rating CI is reserved for income bonds on which no interest is
being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term in
the relevant market.
The commercial paper rating A-1 by S&P indicates that the degree of
safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation. For commercial paper with an A-2 rating, the capacity for timely
payment on issues is satisfactory, but not as high as for issues designated A-1.
Issues rated A-3 have adequate capacity for timely payment, but are more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying higher designations.
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. Debt rated D is in payment default. The D rating category
is used when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless S&P believes
such payments will be made during such grace period.
<PAGE>
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF MARCH 14, 2000
AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
IVY CUNDILL VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 14, 2000
ASSETS
Cash..............................................................$ 50
Prepaid offering costs............................................ 12,500
Prepaid blue sky fees............................................. 10,000
Total assets.................................................. 22,550
---------
LIABILITIES
Due to affiliate.................................................. 22,500
---------
NET ASSETS.............................................................$ 50
=======
CLASS A:
Net asset value and redemption price per share
($10.00 / 1 share outstanding)................................$ 10.00
=======
Maximum offering price per share
($10.00 x 100 / 94.25)*.......................................$ 10.61
=======
CLASS B:
Net asset value, offering price and redemption price** per share
($10.00 / 1 share outstanding)................................$ 10.00
=======
CLASS C:
Net asset value, offering price and redemption price*** per share
($10.00 / 1 share outstanding)...............................$ 10.00
=======
CLASS I:
Net asset value, offering price and redemption price per share
($10.00 / 1 share outstanding)................................$ 10.00
=======
ADVISOR CLASS:
Net asset value, offering price and redemption price per share
($10.00 / 1 share outstanding)................................$ 10.00
=======
NET ASSETS CONSISTS OF:
Capital paid-in $ 50
=======
<PAGE>
* 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%. ***
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 1%.
The accompanying notes are an integral part of the financial statement.
IVY CUNDILL VALUE FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
MARCH 14, 2000
1. ORGANIZATION: Ivy Cundill Value Fund is a diversified series of shares
of Ivy Fund. The shares of beneficial interest are assigned no par value and an
unlimited number of shares of Class A, Class B, Class C, Class I and Advisor
Class 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 an open-end management investment
company.
The Fund will commence operations on or about April 15, 2000. 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. ORGANIZATIONAL COSTS: The Fund incurred organizational expenses of
$14,653 comprised of $2,500 for auditing and $12,153 for legal. The full amount
of organizational expenses were assumed by MIMI and the Fund is not required to
reimburse MIMI.
3. OFFERING COSTS AND PREPAID BLUE SKY FEES: Offering costs, consisting of
prospectus printing costs, and blue sky fees, will be amortized over a one year
period beginning on or about April 15, 2000, the date the Fund is expected to
commence operations. Offering costs and blue sky fees of $12,500 and $10,000,
respectively, will be paid by MIMI and will be reimbursed by the Fund. Offering
costs representing legal fees of $48,613 and blue sky fees of $42,940 were
assumed by MIMI and the Fund is not required to reimburse MIMI.
4. TRANSACTIONS WITH AFFILIATES: Ivy Management, Inc. (IMI), a wholly
owned subsidiary of MIMI, is the Manager and Investment Adviser of the Fund.
Currently, IMI contractually limits the Fund's total operating expenses
(excluding 12b-1 fees and certain other expenses) to an annual rate of 1.95% of
its average net assets. This reimbursement rate is determined annually.
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. No such amounts have been incurred as
of March 14, 2000.
<PAGE>
[PricewaterhouseCoopers letterhead]
Report of Independent Certified Public Accountants
To the Board of Trustees and
Shareholders of Ivy Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Ivy Cundill
Value Fund (the "Fund") at March 14, 2000, in conformity with accounting
principles generally accepted in the United States. This financial statement is
the responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
March 15, 2000
<PAGE>
APPENDIX B
STATEMENT OF ASSETS AND LIABILITIES
AS OF MARCH 14, 2000
AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
IVY NEXT WAVE INTERNET FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 14, 2000
ASSETS
Cash.............................................................$ 50
Prepaid offering costs........................................... 24,500
Prepaid blue sky fees............................................ 42,000
Total Assets................................................. 66,550
----------
LIABILITIES
Due to affiliate................................................. 66,500
---------
NET ASSETS............................................................ $ 50
======
CLASS A:
Net asset value and redemption price per share
($10.00 / 1 share outstanding)............................... $ 10.00
=======
Maximum offering price per share
($10.00 x 100 / 94.25)*...................................... $ 10.61
=======
CLASS B:
Net asset value, offering price and redemption price** per share
($10.00 / 1 share outstanding)............................... $ 10.00
=======
CLASS C:
Net asset value, offering price and redemption price*** per share
($10.00 / 1 share outstanding)............................... $ 10.00
=======
CLASS I:
Net asset value, offering price and redemption price per share
($10.00 / 1 share outstanding)............................... $ 10.00
=======
ADVISOR CLASS:
Net asset value, offering price and redemption price per share
($10.00 / 1 share outstanding)............................... $ 10.00
=======
NET ASSETS CONSISTS OF:
Capital paid-in $ 50
=======
<PAGE>
- -70-* 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%. ***
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 1%.
The accompanying notes are an
integral part of the financial statement.
IVY NEXT WAVE INTERNET FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
MARCH 14, 2000
1. ORGANIZATION: Ivy Next Wave Internet Fund is a diversified series of
shares of Ivy Fund. The shares of beneficial interest are assigned no par value
and an unlimited number of shares of Class A, Class B, Class C, Class I and
Advisor Class 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 an open-end management
investment company.
The Fund will commence operations on or about April 15, 2000. 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. ORGANIZATIONAL COSTS: The Fund incurred organizational expenses of
$5,500, comprised of $2,500 for auditing and $3,000 for legal. The full amount
of organizational expenses were assumed by MIMI and the Fund is not required to
reimburse MIMI.
3. OFFERING COSTS AND PREPAID BLUE SKY FEES: Offering costs, consisting of
legal fees and prospectus printing costs, and blue sky fees will be amortized
over a one year period beginning on or about April 15, 2000, the date the Fund
is expected to commence operations. Offering costs and blue sky fees of $24,500
and $42,000, respectively, will be paid by MIMI and will be reimbursed by the
Fund.
4. TRANSACTIONS WITH AFFILIATES: Ivy Management, Inc. (IMI), a wholly
owned subsidiary of MIMI, is the Manager and Investment Adviser of the Fund.
Currently, IMI contractually limits the Fund's total operating expenses
(excluding 12b-1 fees and certain other expenses) to an annual rate of 1.95% of
its average net assets. This reimbursement rate is determined annually.
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. No such amounts have been incurred as
of March 14, 2000.
<PAGE>
[PricewaterhouseCoopers letterhead]
Report of Independent Certified Public Accountants
To the Board of Trustees and
Shareholders of Ivy Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Ivy Next Wave
Internet Fund (the "Fund") at March 14, 2000, in conformity with accounting
principles generally accepted in the United States. This financial statement is
the responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
March 15, 2000
PART C. OTHER INFORMATION
Item 23: Exhibits:
(a) Articles of Incorporation:
(1) Amended and Restated Declaration of Trust dated
December 10, 1992, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(2) Redesignation of Shares of Beneficial Interest and
Establishment and Designation of Additional Series
and Classes of Shares of Beneficial Interest (No
Par Value) filed with Post-Effective Amendment No.
102 and incorporated by reference herein.
(3) Amendment to Amended and Restated Declaration of
Trust, filed with Post-Effective Amendment No. 102
and incorporated by reference herein.
(4) Amendment to Amended and Restated Declaration of
Trust, filed with Post-Effective Amendment No. 102
and incorporated by reference herein.
(5) Establishment and Designation of Additional Series
(Ivy Emerging Growth Fund), filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(6) 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. 102 and incorporated by reference
herein.
(7) 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. 102 and incorporated
by reference herein.
(8) Establishment and Designation of Additional Series
(Ivy China Region Fund), filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(9) 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. 102 and incorporated
by reference herein.
(10) Establishment and Designation of Additional Class
(Ivy International Fund--Class I), filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(11) 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.
102 and incorporated by reference herein.
(12) Establishment and Designation of Series and
Classes (Ivy International Bond Fund--Class A and
Class B), filed with Post-Effective Amendment No.
102 and incorporated by reference herein.
(13) Establishment and Designation of Series and
Classes (Ivy Bond Fund, Ivy Canada Fund, Ivy
Global Fund, Ivy Short-Term US Government
Securities Fund (now known as Ivy Short-Term Bond
Fund) -- Class A and Class B), filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(14) Redesignation of Ivy Short-Term U.S. Government
Securities Fund as Ivy Short-Term Bond Fund, filed
with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(15) Redesignation of Shares (Ivy Money Market
Fund--Class A and Ivy Money Market Fund--Class B),
filed with Post-Effective Amendment No. 84 and
incorporated by reference herein.
(16) 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 and incorporated
by reference herein.
(17) 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 and
incorporated by reference herein.
(18) 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 and incorporated by reference
herein.
(19) Establishment and designation of Series and
Classes (Ivy Pan-Europe Fund--Class A, Class B and
Class C), filed with Post-Effective Amendment No.
92 and incorporated by reference herein.
(20) Establishment and designation of Series and
Classes (Ivy International Fund II--Class A, Class
B, Class C and Class I), filed with Post-Effective
Amendment No. 94 and incorporated by reference
herein.
(21) Form of Establishment and Designation of
Additional Class (Ivy Asia Pacific Fund--Advisor
Class; Ivy Bond Fund--Advisor Class; Ivy Canada
Fund--Advisor Class; Ivy China Region
Fund--Advisor Class; Ivy Emerging Growth
Fund--Advisor Class; Ivy Global Fund--Advisor
Class; Ivy Global Natural Resources Fund--Advisor
Class; Ivy Global Science & Technology
Fund--Advisor Class; Ivy Growth Fund--Advisor
Class; Ivy Growth with Income Fund--Advisor Class;
Ivy International Bond Fund--Advisor Class; Ivy
International Fund II--Advisor Class; Ivy
International Small Companies Fund--Advisor Class;
Ivy Latin America Strategy Fund--Advisor Class;
Ivy New Century Fund--Advisor Class; Ivy
Pan-Europe Fund--Advisor Class), filed with
Post-Effective Amendment No. 96 and incorporated
by reference herein.
(22) Redesignations of Series and Classes (Ivy Emerging
Growth Fund redesignated as Ivy US Emerging Growth
Fund; Ivy New Century Fund redesignated as Ivy
Developing Nations Fund; and, Ivy Latin America
Strategy Fund redesignated as Ivy South America
Fund), filed with Post-Effective Amendment No. 97
to Registration Statement 2-17613 and incorporated
by reference herein.
(23) Redesignation of Series and Classes and
Establishment and Designation of Additional Class
(Ivy International Bond Fund redesignated as Ivy
High Yield Fund; Class I shares of Ivy High Yield
Fund established), filed with Post-Effective
Amendment No. 98 to Registration Statement 2-17613
and incorporated by reference herein.
(24) Establishment and designation of Series and
Classes (Ivy US Blue Chip Fund--Class A, Class B,
Class C, Class I and Advisor Class), filed with
Post-Effective Amendment No. 101 to Registration
Statement 2-17613 and incorporated by reference
herein.
(25) Redesignation of Series and Classes (Ivy High
Yield Fund redesignated as Ivy International
Strategic Bond Fund) filed with Post-Effective
Amendment No. 110 and incorporated by reference
herein.
(26) Establishment and designation of Series and
Classes (Ivy European Opportunities Fund -- Class
A, Class B, Class C, Class I and Advisor Class)
filed with Post-Effective Amendment No. 110 and
incorporated by reference herein.
(27) Establishment and designation of Series and
Classes (Ivy Cundill Value Fund -- Class A, Class
B, Class C, Class I and Advisor Class) filed with
this Post-Effective Amendment No. 113.
(28) Establishment and designation of Series and
Classes Ivy Next Wave Internet Fund -- Class A,
Class B, Class C, Class I and Advisor Class) filed
with this Post-Effective Amendment No. 113.
(b) By-laws:
(1) By-Laws, as amended, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(c) Instruments Defining the Rights of Security Holders:
(1) 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 and incorporated
by reference herein.
(2) Specimen Security for Ivy Emerging Growth Fund,
filed with Post-Effective Amendment No. 70 and
incorporated by reference herein.
(3) Specimen Security for Ivy China Region Fund, filed
with Post-Effective Amendment No. 74 and
incorporated by reference herein.
(4) Specimen Security for Ivy Latin American Strategy
Fund, filed with Post-Effective Amendment No. 75
and incorporated by reference herein.
(5) Specimen Security for Ivy New Century Fund, filed
with Post-Effective Amendment No. 75 and
incorporated by reference herein.
(6) Specimen Security for Ivy International Bond Fund,
filed with Post-Effective Amendment No. 76 and
incorporated by reference herein.
(7) 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 and incorporated
by reference herein.
(d) Investment Advisory Contracts:
(1) 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. 102 and incorporated
by reference herein.
(2) Subadvisory Contract by and among Ivy Fund, Ivy
Management, Inc. and Boston Overseas Investors,
Inc., filed with Post-Effective Amendment No. 102
and incorporated by reference herein.
(3) Assignment Agreement relating to Subadvisory
Contract, filed with Post-Effective Amendment No.
102 and incorporated by reference herein.
(4) Business Management and Investment Advisory
Agreement Supplement for Ivy Emerging Growth Fund,
filed with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(5) Business Management and Investment Advisory
Agreement Supplement for Ivy China Region Fund,
filed with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(6) Business Management and Investment Advisory
Supplement for Ivy Latin America Strategy Fund,
filed with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(7) Business Management and Investment Advisory
Agreement Supplement for Ivy New Century Fund,
filed with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(8) Business Management and Investment Advisory
Agreement Supplement for Ivy International Bond
Fund, filed with Post-Effective Amendment No. 102
and incorporated by reference herein.
(9) 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. 102
and incorporated by reference herein.
(10) Master Business Management Agreement between Ivy
Fund and Ivy Management, Inc., filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(11) Supplement to Master Business Agreement between
Ivy Fund and Ivy Management, Inc. (Ivy Canada
Fund), filed with Post-Effective Amendment No. 102
and incorporated by reference herein.
(12) Investment Advisory Agreement between Ivy Fund and
Mackenzie Financial Corporation, filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(13) 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 and incorporated by reference
herein.
(14) 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 and
incorporated by reference herein.
(15) 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 and
incorporated by reference herein.
(16) 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 and
incorporated by reference herein.
(17) Form of Supplement to Master Business Management
and Investment Advisory Agreement between Ivy Fund
and Ivy Management, Inc. (Ivy Pan-Europe Fund),
filed with Post-Effective Amendment No. 94 and
incorporated by reference herein.
(18) Form of Supplement to Master Business Management
and Investment Advisory Agreement between Ivy Fund
and Ivy Management, Inc. (Ivy International Fund
II), filed with Post-Effective Amendment No. 94
and incorporated by reference herein.
(19) Addendum to Master Business Management and
Investment Advisory Agreement between Ivy Fund and
Ivy Management, Inc. (Ivy Developing Nations Fund,
Ivy South America Fund, Ivy US Emerging Growth
Fund), filed with Post-Effective Amendment No. 98
and incorporated by reference herein.
(20) Supplement to Master Business Management and
Investment Advisory Agreement between Ivy Fund and
Ivy Management, Inc. (Ivy High Yield Fund), filed
with Post-Effective Amendment No. 98 and
incorporated by reference herein.
(21) Supplement to Master Business Management and
Investment Advisory Agreement between Ivy Fund and
Ivy Management, Inc. (Ivy US Blue Chip Fund),
filed with Post-Effective Amendment No. 101 to
Registration Statement 2-17613 and incorporated by
reference herein.
(22) Supplement to Master Business Management and
Investment Advisory Agreement between Ivy Fund and
Ivy Management, Inc. (Ivy International Strategic
Bond Fund) filed with Post-Effective Amendment No.
110 and incorporated by reference herein.
(23) Supplement to Master Business Management and
Investment Advisory Agreement between Ivy Fund and
Ivy Management, Inc. (Ivy European Opportunities
Fund) filed with Post-Effective Amendment No. 110
and incorporated by reference herein.
(24) Subadvisory Agreement between Ivy Management, Inc.
and Henderson Investment Management Limited (Ivy
International Small Companies Fund) filed with
Post-Effective Amendment No. 110 and incorporated
by reference herein.
(25) Amendment to Subadvisory Agreement between Ivy
Management, Inc. and Henderson Investment
Management Limited (Ivy European Opportunities
Fund) filed with Post-Effective Amendment No. 110
and incorporated by reference herein.
(26) Form of Supplement to Master Business Management
and Investment Advisory Agreement between Ivy Fund
and Ivy Management, Inc. (Ivy Cundill Value Fund
and Ivy Next Wave Internet Fund) filed with this
Post-Effective Amendment No. 113.
(27) Form of Subadvisory Agreement between Ivy
Management, Inc. and Peter Cundill & Associates,
Inc. (Ivy Cundill Value Fund) filed with this
Post-Effective Amendment No. 113.
(e) Underwriting Contracts:
(1) Dealer Agreement, as amended, filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(2) Amended and Restated Distribution Agreement, filed
with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(3) Addendum to Amended and Restated Distribution
Agreement, filed with Post-Effective Amendment No.
102 and incorporated by reference herein.
(4) Addendum to Amended and Restated Distribution
Agreement (Ivy Money Market Fund--Class A and
Class B), filed with Post-Effective Amendment No.
84 and incorporated by reference herein.
(5) Form of Addendum to Amended and Restated
Distribution Agreement (Class C), filed with
Post-Effective Amendment No. 84 and incorporated
by reference herein.
(6) 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 and incorporated by reference herein.
(7) 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 and incorporated
by reference herein.
(8) Form of Addendum to Amended and Restated
Distribution Agreement (Ivy Pan-Europe Fund--Class
A, Class B and Class C), filed with Post-Effective
Amendment No. 94 and incorporated by reference
herein.
(9) Form of Addendum to Amended and Restated
Distribution Agreement (Ivy International Fund
II--Class A, Class B, Class C and Class I), filed
with Post-Effective Amendment No. 94 and
incorporated by reference herein.
(10) Form of Addendum to Amended and Restated
Distribution Agreement (Advisor Class), filed with
Post-Effective Amendment No. 96 and incorporated
by reference herein.
(11) Addendum to Amended and Restated Distribution
Agreement (Ivy Developing Nations Fund, Ivy South
America Fund, Ivy US Emerging Growth Fund), filed
with Post-Effective Amendment No. 98 and
incorporated by reference herein.
(12) Addendum to Amended and Restated Distribution
Agreement (Ivy High Yield Fund), filed with
Post-Effective Amendment No. 98 and incorporated
by reference herein.
(13) Addendum to Amended and Restated Distribution
Agreement (Ivy US Blue Chip Fund), filed with
Post-Effective Amendment No. 101 to Registration
Statement 2-17613 and incorporated by reference
herein.
(14) Addendum to Amended and Restated Distribution
Agreement (Ivy International Strategic Bond Fund)
filed with Post-Effective Amendment No. 110 and
incorporated by reference herein.
(15) Addendum to Amended and Restated Distribution
Agreement (Ivy European Opportunities Fund) filed
with Post-Effective Amendment No. 110 and
incorporated by reference herein.
(16) Amended and Restated Distribution Agreement, filed
with Post-Effective Amendment No. 110 and
incorporated by reference herein.
(17) Form of Addendum to Amended and Restated
Distribution Agreement (Ivy Cundill Value Fund and
Ivy Next Wave Internet Fund) filed with this
Post-Effective Amendment No. 113.
(f) Bonus or Profit Sharing Contracts: Inapplicable.
(g) Custodian Agreements:
(1) Custodian Agreement between Ivy Fund and Brown
Brothers Harriman & Co., filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(2) Foreign Custody Manager Delegation Agreement
between Ivy Fund and Brown Brothers Harriman &
Co., filed with Post-Effective Amendment No. 110
and incorporated by reference herein.
(h) Other Material Contracts:
(1) 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. 102 and incorporated by reference
herein.
(2) Addendum to Administrative Services Agreement
Supplement for Ivy International Fund, filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(3) Administrative Services Agreement Supplement for
Ivy Emerging Growth Fund, filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(4) Administrative Services Agreement Supplement for
Ivy Money Market Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(5) Administrative Services Agreement Supplement for
Ivy China Region Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(6) Administrative Services Agreement Supplement for
Class I Shares of Ivy International Fund, filed
with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(7) 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. 102 and incorporated
by reference herein.
(8) Fund Accounting Services Agreement Supplement for
Ivy Growth with Income Fund, filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(9) Fund Accounting Services Agreement Supplement for
Ivy China Region Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(10) Transfer Agency and Shareholder Services Agreement
between Ivy Fund and Ivy Management, Inc., filed
with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(11) Addendum to Transfer Agency and Shareholder
Services Agreement, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(12) Assignment Agreement relating to Transfer Agency
and Shareholder Services Agreement, filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(13) Administrative Services Agreement Supplement for
Ivy Latin America Strategy Fund, filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(14) Administrative Services Agreement Supplement for
Ivy New Century Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(15) Fund Accounting Services Agreement Supplement for
Ivy Latin America Strategy Fund, filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(16) Fund Accounting Services Agreement Supplement for
Ivy New Century Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(17) Addendum to Transfer Agency and Shareholder
Services Agreement, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(18) Administrative Services Agreement Supplement for
Ivy International Bond Fund, filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(19) Fund Accounting Services Agreement Supplement for
International Bond Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(20) Addendum to Transfer Agency and Shareholder
Services Agreement, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(21) Addendum to Transfer Agency and Shareholder
Services Agreement, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(22) 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. 102 and incorporated
by reference herein.
(23) 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. 102 and incorporated
by reference herein.
(24) Form of Administrative Services Agreement
Supplement (Class C) 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 and incorporated by reference herein.
(25) Form of Addendum to Transfer Agency and
Shareholder Services Agreement (Class C), filed
with Post-Effective Amendment No. 84 and
incorporated by reference herein.
(26) Form of Administrative Services Agreement
Supplement for Ivy Global Science & Technology
Fund, filed with Post-Effective Amendment No. 86
and incorporated by reference herein.
(27) Form of Fund Accounting Services Agreement
Supplement for Ivy Global Science & Technology
Fund, filed with Post-Effective Amendment No. 86
and incorporated by reference herein.
(28) Form of Addendum to Transfer Agency and
Shareholder Services Agreement for Ivy Global
Science & Technology Fund, filed with
Post-Effective Amendment No. 86 and incorporated
by reference herein.
(29) 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 and incorporated by reference
herein.
(30) 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 and incorporated by reference
herein.
(31) 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 and incorporated
by reference herein.
(32) Form of Administrative Services Agreement
Supplement for Ivy Pan-Europe Fund, filed with
Post-Effective Amendment No. 94 and incorporated
by reference herein.
(33) Form of Fund Accounting Services Agreement
Supplement for Ivy Pan-Europe Fund, filed with
Post-Effective Amendment No. 94 and incorporated
by reference herein.
(34) Form of Addendum to Transfer Agency and
Shareholder Services Agreement for Ivy Pan-Europe
Fund, filed with Post-Effective Amendment No. 94
and incorporated by reference herein.
(35) Form of Administrative Services Agreement
Supplement for Ivy International Fund II, filed
with Post-Effective Amendment No. 94 and
incorporated by reference herein.
(36) Form of Fund Accounting Services Agreement
Supplement for Ivy International Fund II, filed
with Post-Effective Amendment No. 94 and
incorporated by reference herein.
(37) Form of Addendum to Transfer Agency and
Shareholder Services Agreement for Ivy
International Fund II, filed with Post-Effective
Amendment No. 94 and incorporated by reference
herein.
(38) Form of Administrative Services Agreement
Supplement (Advisor Class) for 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 II, Ivy
International Small Companies Fund, Ivy Latin
America Strategy Fund, Ivy New Century Fund and
Ivy Pan-Europe Fund, filed with Post-Effective
Amendment No. 96 and incorporated by reference
herein.
(39) Form of Addendum to Transfer Agency and
Shareholder Services Agreement (Advisor Class),
filed with Post-Effective Amendment No. 96 and
incorporated by reference herein.
(40) Addendum to Administrative Services Agreement (Ivy
Developing Nations Fund, Ivy South America Fund,
Ivy US Emerging Growth Fund), filed with
Post-Effective Amendment No. 98 and incorporated
by reference herein.
(41) Addendum to Fund Accounting Services Agreement
(Ivy Developing Nations Fund, Ivy South America
Fund, Ivy US Emerging Growth Fund), filed with
Post-Effective Amendment No. 98 and incorporated
by reference herein.
(42) Addendum to Transfer Agency and Shareholder
Services Agreement (Ivy Developing Nations Fund,
Ivy South America Fund, Ivy US Emerging Growth
Fund, Ivy High Yield Fund), filed with
Post-Effective Amendment No. 98 and incorporated
by reference herein.
(43) Addendum to Fund Accounting Services Agreement
(Ivy High Yield Fund), filed with Post-Effective
Amendment No. 98 and incorporated by reference
herein.
(44) Addendum to Administrative Services Agreement (Ivy
High Yield Fund), filed with Post-Effective
Amendment No. 98 and incorporated by reference
herein.
(45) Amended Addendum to Transfer Agency and
Shareholder Services Agreement (Ivy Developing
Nations Fund, Ivy South America Fund, Ivy US
Emerging Growth Fund, Ivy High Yield Fund), filed
with Post-Effective Amendment No. 98 and
incorporated by reference herein (a corrected
version of which was filed with Post-Effective
Amendment No. 99).
(46) Addendum to Transfer Agency and Shareholder
Services Agreement (Ivy US Blue Chip Fund), filed
with Post-Effective Amendment No. 101 to
Registration Statement 2-17613 and incorporated by
reference herein.
(47) Addendum to Fund Accounting Services Agreement
(Ivy US Blue Chip Fund), to be filed with
Post-Effective Amendment No. 101 to Registration
Statement 2-17613 and incorporated by reference
herein.
(48) Addendum to Administrative Services Agreement (Ivy
US Blue Chip Fund), filed with Post-Effective
Amendment No. 101 to Registration Statement
2-17613 and incorporated by reference herein.
(49) Addendum to Transfer Agency and Shareholder
Services Agreement (Ivy International Strategic
Bond Fund) filed with Post-Effective Amendment No.
110 and incorporated by reference herein.
(50) Addendum to Fund Accounting Services Agreement
(Ivy International Strategic Bond Fund) filed with
Post-Effective Amendment No. 110 and incorporated
by reference herein.
(51) Addendum to Administrative Services Agreement (Ivy
International Strategic Bond Fund) filed with
Post-Effective Amendment No. 110 and incorporated
by reference herein.
(52) Addendum to Transfer Agency and Shareholder
Services Agreement (Ivy European Opportunities
Fund) filed with Post-Effective Amendment No. 110
and incorporated by reference herein.
(53) Addendum to Fund Accounting Services Agreement
(Ivy European Opportunities Fund) filed with
Post-Effective Amendment No. 110 and incorporated
by reference herein.
(54) Addendum to Administrative Services Agreement (Ivy
European Opportunities Fund) filed with
Post-Effective Amendment No. 110 and incorporated
by reference herein.
(55) Form of Addendum to Transfer Agency and
Shareholder Services Agreement (Ivy Cundill Value
Fund and Ivy Next Wave Internet Fund) filed with
this Post-Effective Amendment No. 113.
(56) Form of Addendum to Fund Accounting Services
Agreement (Ivy Cundill Value Fund and Ivy Next
Wave Internet Fund) filed with this Post-Effective
Amendment No. 113.
(57) Form of Addendum to Administrative Services
Agreement (Ivy Cundill Value Fund and Ivy Next
Wave Internet Fund) filed with this Post-Effective
Amendment No. 113.
(i) Legal Opinion: Opinion and consent of counsel with this
Post-Effective Amendment No. 113.
(j) Other Opinions: Opinions of accountants filed with this
Post-Effective Amendment No. 113.
(k) Omitted Financial Statements: Reports of accountants filed
with this Post-Effective Amendment No. 113.
(l) Initial Capital Agreements: Not applicable.
(m) Rule 12b-1 Plan:
(1) 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. 102 and incorporated
by reference herein.
(2) 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. 102 and incorporated by reference
herein.
(3) Distribution Plan for Class C Shares of Ivy Growth
with Income Fund, filed with Post-Effective
Amendment No. 102 and incorporated by reference
herein.
(4) Form of Rule 12b-1 Related Agreement, filed with
Post-Effective Amendment No. 102 and incorporated
by reference herein.
(5) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares,
filed with Post-Effective Amendment No. 102 and
incorporated by reference herein.
(6) Supplement to Distribution Plan for Ivy Fund Class
B Shares, filed with Post-Effective Amendment No.
103 and incorporated by reference herein.
(7) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares,
filed with Post-Effective Amendment No. 103 and
incorporated by reference herein.
(8) Supplement to Distribution Plan for Ivy Fund Class
B Shares, filed with Post-Effective Amendment No.
103 and incorporated by reference herein.
(9) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares,
filed with Post-Effective Amendment No. 103 and
incorporated by reference herein.
(10) Supplement to Distribution Plan for Ivy Fund Class
B Shares, filed with Post-Effective Amendment No.
103 and incorporated by reference herein.
(11) 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 and incorporated
by reference herein.
(12) 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 and incorporated by reference herein.
(13) 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 and incorporated
by reference herein.
(14) Form of Supplement to Distribution Plan for Ivy
Fund Class B Shares (Ivy Global Science &
Technology Fund), filed with Post-Effective
Amendment No. 87 and incorporated by reference
herein.
(15) Form of Supplement to Distribution Plan for Ivy
Fund Class C Shares (Ivy Global Science &
Technology Fund), filed with Post-Effective
Amendment No. 87 and incorporated by reference
herein.
(16) 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 and
incorporated by reference herein.
(17) 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 and incorporated by reference
herein.
(18) 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 and incorporated by reference
herein.
(19) Form of Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares (Ivy
Pan-Europe Fund), filed with Post-Effective
Amendment No. 94 and incorporated by reference
herein.
(20) Form of Supplement to Distribution Plan for Ivy
Fund Class B Shares (Ivy Pan-Europe Fund), filed
with Post-Effective Amendment No. 94 and
incorporated by reference herein.
(21) Form of Supplement to Distribution Plan for Ivy
Fund Class C Shares (Ivy Pan-Europe Fund), filed
with Post-Effective Amendment No. 94 and
incorporated by reference herein.
(22) Form of Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares (Ivy
International Fund II), filed with Post-Effective
Amendment No. 94 and incorporated by reference
herein.
(23) Form of Supplement to Distribution Plan for Ivy
Fund Class B Shares (Ivy International Fund II),
filed with Post-Effective Amendment No. 94 and
incorporated by reference herein.
(24) Form of Supplement to Distribution Plan for Ivy
Fund Class C Shares (Ivy International Fund II),
filed with Post-Effective Amendment No. 94 and
incorporated by reference herein.
(25) Amendment to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares (Ivy
Developing Nations Fund, Ivy South America Fund,
Ivy US Emerging Growth Fund), filed with
Post-Effective Amendment No. 98 and incorporated
by reference herein.
(26) Amendment to Distribution Plan for Ivy Fund Class
B Shares (Ivy Developing Nations Fund, Ivy South
America Fund, Ivy US Emerging Growth Fund), filed
with Post-Effective Amendment No. 98 and
incorporated by reference herein.
(27) Amendment to Distribution Plan for Ivy Fund Class
C Shares (Ivy Developing Nations Fund, Ivy South
America Fund, Ivy US Emerging Growth Fund), filed
with Post-Effective Amendment No. 98 and
incorporated by reference herein.
(28) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares (Ivy
High Yield Fund), filed with Post-Effective
Amendment No. 98 and incorporated by reference
herein.
(29) Supplement to Distribution Plan for Ivy Fund Class
B Shares (Ivy High Yield Fund), filed with
Post-Effective Amendment No. 98 and incorporated
by reference herein.
(30) Supplement to Distribution Plan for Ivy Fund Class
C Shares (Ivy High Yield Fund), filed with
Post-Effective Amendment No. 98 and incorporated
by reference herein.
(31) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares (Ivy
US Blue Chip Fund), filed with Post-Effective
Amendment No. 101 and incorporated by reference
herein.
(32) Supplement to Distribution Plan for Ivy Fund Class
B Shares (Ivy US Blue Chip Fund), filed with
Post-Effective Amendment No. 101 and incorporated
by reference herein.
(33) Supplement to Distribution Plan for Ivy Fund Class
C Shares (Ivy US Blue Chip Fund), filed with
Post-Effective Amendment No. 101 and incorporated
by reference herein.
(34) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares (Ivy
International Strategic Bond Fund) filed with
Post-Effective Amendment No. 110 and incorporated
by reference herein.
(35) Supplement to Distribution Plan for Ivy Fund Class
B Shares (Ivy International Strategic Bond Fund)
filed with Post-Effective Amendment No. 110 and
incorporated by reference herein.
(36) Supplement to Distribution Plan for Ivy Fund Class
C Shares (Ivy International Strategic Bond Fund)
filed with Post-Effective Amendment No. 110 and
incorporated by reference herein.
(37) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares (Ivy
European Opportunities Fund) filed with
Post-Effective Amendment No. 110 and incorporated
by reference herein.
(38) Supplement to Distribution Plan for Ivy Fund Class
B Shares (Ivy European Opportunities Fund) filed
with Post-Effective Amendment No. 110 and
incorporated by reference herein.
(39) Supplement to Distribution Plan for Ivy Fund Class
C Shares (Ivy European Opportunities Fund) filed
with Post-Effective Amendment No. 110 and
incorporated by reference herein.
(40) Form of Amended and Restated Distribution Plan For
Ivy Fund Class B Shares, filed with Post-Effective
Amendment No. 107 and incorporated by reference
herein.
(41) Amended and Restated Distribution Plan for Ivy
Fund Class A Shares, filed with Post-Effective
Amendment No. 111 and incorporated by reference
herein.
(42) Form of Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A Shares (Ivy
Cundill Value Fund and Ivy Next Wave Internet
Fund) filed with this Post-Effective Amendment No.
113.
(43) Form of Supplement to Amended and Restated
Distribution Plan for Ivy Fund Class B Shares (Ivy
Cundill Value Fund and Ivy Next Wave Internet
Fund) filed with this Post-Effective Amendment No.
113.
(44) Form of Supplement to Distribution Plan for Ivy
Fund Class C Shares (Ivy Cundill Value Fund and
Ivy Next Wave Internet Fund) filed with this
Post-Effective Amendment No. 113.
(n) Rule 18f-3 Plans:
(1) Plan adopted pursuant to Rule 18f-3 under the
Investment Company Act of 1940, filed with
Post-Effective Amendment No. 83 and incorporated
by reference herein.
(2) 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
and incorporated by reference herein.
(3) 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
and incorporated by reference herein.
(4) 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
and incorporated by reference herein.
(5) 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. 92
and incorporated by reference herein.
(6) 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. 94
and incorporated by reference herein.
(7) 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. 96
and incorporated by reference herein.
(8) Amended and Restated Plan adopted pursuant to Rule
18f-3 under the Investment Company Act of 1940,
filed with Post-Effective Amendment No. 98 and
incorporated by reference herein (a corrected
version of which was filed with Post-Effective
Amendment No. 99).
(9) Amended and Restated Plan adopted pursuant to Rule
18f-3 under the Investment Company Act of 1940,
filed with Post-Effective Amendment No. 101 to
Registration Statement 2-17613 and incorporated by
reference herein.
(10) Amended and Restated Plan adopted pursuant to Rule
18f-3 under the Investment Company Act of 1940,
filed with Post-Effective Amendment No. 110 and
incorporated by reference herein.
(11) Amended and Restated Plan adopted pursuant to Rule
18f-3 under the Investment Company Act of 1940,
filed with this Post-Effective Amendment No. 113.
(p) Codes of Ethics:
(1) Code of Ethics of Mackenzie Investment Management
Inc., filed with this Post-Effective Amendment No.
113.
(2) Code of Ethics of Peter Cundill & Associates,
Inc., filed with this Post-Effective Amendment No.
113.
Item 24. Persons Controlled by or Under Common Control with the Fund: Not
applicable
Item 25. Indemnification
A policy of insurance covering Ivy Management, Inc. and the
Registrant will insure the Registrant's trustees and officers
and others against liability arising by reason of an actual or
alleged breach of duty, neglect, error, misstatement,
misleading statement, omission or other negligent act.
Reference is 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 and incorporated by
reference herein.
Item 26. 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 and Business Manager to nineteen
series of the Trust, Mackenzie Financial Corporation, the
adviser to Ivy Global Natural Resources Fund, Northern Cross
Investments Limited (the successor to Boston Overseas
Investors, Inc.), the adviser to Ivy International Fund,
Henderson Investment Management Limited, the subadviser to Ivy
European Opportunities Fund and a portion of Ivy International
Small Companies Fund, and Peter Cundill & Associates (Bermuda)
Ltd., the subadviser to Ivy Cundill Value Fund.
The list required by this Item 26 of officers and directors of
Ivy Management, Inc., Mackenzie Financial Corporation,
Northern Cross Investments Limited, Henderson Investment
Management Limited, and Peter Cundill & Associates (Bermuda)
Ltd., 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.
Item 27. Principal Underwriters
(a) Ivy Mackenzie Distributors, Inc. ("IMDI"), formerly
Mackenzie Ivy Funds Distributors, 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 is the successor to MIMI's
distribution activities. IMDI also serves as the distributor
for Mackenzie Solutions.
(b) The information required by this Item 27 regarding each
director, officer or partner of IMDI is incorporated by
reference to Schedule A of Form BD filed by IMDI pursuant to
the Securities Exchange Act of 1934.
(c) Not applicable
Item 28. 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.
Item 29. Management Services: Not applicable.
Item 30. Undertakings: Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 113 to its Registration Statement to be signed on
its behalf by the undersigned, duly authorized, in the City of Boston, and the
Commonwealth of Massachusetts, on the 15th day of March, 2000.
IVY FUND
By: JAMES W. BROADFOOT***
---------------------
President
By: /S/ JOSEPH R. FLEMING
Joseph R. Fleming, Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 113 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
JOHN S. ANDEREGG, JR.* Trustee 3/15/00
PAUL H. BROYHILL* Trustee 3/15/00
JAMES W. BROADFOOT*** Trustee and President 3/15/00
KEITH J. CARLSON** Trustee and Chairman 3/15/00
(Chief Executive Officer)
STANLEY CHANNICK* Trustee 3/15/00
C. WILLIAM FERRIS* Treasurer (Chief 3/15/00
Financial Officer)
ROY J. GLAUBER* Trustee 3/15/00
JOSEPH G. ROSENTHAL* Trustee 3/15/00
RICHARD N. SILVERMAN* Trustee 3/15/00
DIANNE LISTER*** Trustee 3/15/00
EDWARD M. TIGHE*** Trustee 3/15/00
By: /S/ JOSEPH R. FLEMING
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 power of attorney filed with Post-Effective
Amendment No. 89 to Registration Statement No. 2-17613.
*** Executed pursuant to power of attorney filed with Post-Effective
Amendment No. 111 to Registration Statement No. 2-17613.
EXHIBIT INDEX
Exhibit (a)(27): Establishment and designation of Series and Classes (Ivy
Cundill Value Fund -- Class A, Class B, Class C, Class I and
Advisor Class).
Exhibit (a)(28): Establishment and designation of Series and Classes (Ivy Next
Wave Internet Fund -- Class A, Class B, Class C, Class I and
Advisor Class).
Exhibit (d)(26): Form of Supplement to Master Business Management and
Investment Advisory Agreement between Ivy Fund and Ivy
Management, Inc. (Ivy Cundill Value Fund and Ivy Next Wave
Internet Fund).
Exhibit (d)(27): Form of Subadvisory Agreement between Ivy Management, Inc. and
Peter Cundill & Associates, Inc. (Ivy Cundill Value Fund).
Exhibit (e)(17): Form of Addendum to Amended and Restated Distribution
Agreement (Ivy Cundill Value Fund and Ivy Next Wave Internet
Fund).
Exhibit (h)(55): Form of Addendum to Transfer Agency and Shareholder Services
Agreement (Ivy Cundill Value Fund and Ivy Next Wave Internet
Fund)
Exhibit (h)(56): Form of Addendum to Fund Accounting Services Agreement (Ivy
Cundill Value Fund and Ivy Next Wave Internet Fund).
Exhibit (h)(57): Form of Addendum to Administrative Services Agreement (Ivy
Cundill Value Fund and Ivy Next Wave Internet Fund).
Exhibit (i): Opinion and Consent of Dechert Price & Rhoads
Exhibit (j): Opinion of PricewaterhouseCoopers.
Exhibit (k): Reports of PricewaterhouseCoopers.
Exhibit (m)(42) Form of Supplement to Master Amended and Restated Distribution
Plan for Ivy Fund Class A Shares (Ivy Cundill Value Fund and
Ivy Next Wave Internet Fund).
Exhibit (m)(43): Form of Supplement to Amended and Restated Distribution Plan
for Ivy Fund Class B Shares (Ivy Cundill Value Fund and Ivy
Next Wave Internet Fund).
Exhibit (m)(44): Form of Supplement to Distribution Plan for Ivy Fund Class C
(Ivy Cundill Value Fund and Ivy Next Wave Internet Fund).
Exhibit (n)(11): Form of Amended and Restated Plan adopted pursuant to Rule
18f-3 under the Investment Company Act of 1940.
Exhibit (p)(1): Code of Ethics and Business Conduct Policy of Mackenzie
Investment Management Inc.
Exhibit (p)(2): Code of Ethics of Peter Cundill & Associates, Inc.
Exhibit (a)(27)
IVY FUND
Ivy Cundill Value Fund
Establishment and Designation of Additional
Series of Shares of Beneficial Interest,
No Par Value Per Share
I, Keith J. Carlson, 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 in
lieu of a meeting of Trustees, the Trustees of the Trust (the "Trustees"),
pursuant to Articles III and IV 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 nineteen separate series,
designated as Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region
Fund, Ivy Developing Nations Fund, Ivy European Opportunities 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 Fund II, Ivy International Small
Companies Fund, Ivy International Strategic Bond Fund, Ivy Money Market
Fund, Ivy Pan-Europe Fund, Ivy South America Fund, Ivy US Blue Chip
Fund and Ivy US Emerging Growth Fund, shall hereby be divided into one
additional series designated as "Ivy Cundill Value Fund" (the "Fund,"
and collectively with the other nineteen 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 Cundill Value Fund--Class A," (b)
"Ivy Cundill Value Fund--Class B," (c) "Ivy Cundill Value Fund--Class
C," (d) "Ivy Cundill Value Fund--Class I" and (e) "Ivy Cundill Value
Fund--Advisor Class," 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:
A. 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.
B. 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.
C. 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:
(1) 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.
(2) The Trust may from time to time in particular
cases make specific allocations of assets or
liabilities among the Series.
D. The Trust (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).
E. 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.
F. (1) 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;
(2) 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;
(3) 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
(4) 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 described in the following
resolution is filed with the Securities and Exchange Commission
("SEC"), and 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 15th day of
March 2000.
/s/ KEITH J. CARLSON
Keith J. Carlson, as Trustee
The above signature is the true and correct signature of Keith J.
Carlson, Trustee of the Trust.
/s/ C. WILLIAM FERRIS
C. William Ferris, Secretary/Treasurer
Mackenzie Investment Management Inc.
Exhibit (a)(28)
IVY FUND
Ivy Next Wave Internet Fund
Establishment and Designation of Additional
Series of Shares of Beneficial Interest,
No Par Value Per Share
I, Keith J. Carlson, 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 in
lieu of a meeting of Trustees, the Trustees of the Trust (the "Trustees"),
pursuant to Articles III and IV 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 twenty separate series, designated
as Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy China Region Fund, Ivy
Cundill Value Fund, Ivy Developing Nations Fund, Ivy European
Opportunities 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 Fund II, Ivy
International Small Companies Fund, Ivy International Strategic Bond
Fund, Ivy Money Market Fund, Ivy Pan-Europe Fund, Ivy South America
Fund, Ivy US Blue Chip Fund and Ivy US Emerging Growth Fund, shall
hereby be divided into one additional series designated as "Ivy Next
Wave Internet Fund" (the "Fund," and collectively with the other twenty
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 Next Wave
Internet Fund--Class A," (b) "Ivy Next Wave Internet Fund--Class B,"
(c) "Ivy Next Wave Internet Fund--Class C," (d) "Ivy Next Wave Internet
Fund--Class I" and (e) "Ivy Next Wave Internet Fund--Advisor Class,"
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:
A. 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.
B. 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.
C. 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:
(1) 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.
(2) The Trust may from time to time in particular
cases make specific allocations of assets or
liabilities among the Series.
D. The Trust (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).
E. 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.
F. (1) 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;
(2) 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;
(3) 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
(4) 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 described in the following
resolution is filed with the Securities and Exchange Commission
("SEC"), and 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 15th day of
March 2000.
/s/ KEITH J. CARLSON
Keith J. Carlson, as Trustee
The above signature is the true and correct signature of
Keith J. Carlson, Trustee of the Trust.
/s/ C. WILLIAM FERRIS
C. William Ferris, Secretary/Treasurer
Mackenzie Investment Management Inc.
Exhibit (d)(26)
IVY FUND
FORM OF
MASTER BUSINESS MANAGEMENT AND INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
Ivy Cundill Value Fund
Ivy Next Wave Internet Fund
AGREEMENT made as of the ___ day of _______, 2000, by and between Ivy
Fund (the "Trust") and Ivy Management, Inc. (the "Manager").
WHEREAS, the Trust is an open-end investment company, organized as a
Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established and designated by the Trustees of
the Trust from time to time;
WHEREAS, a separate class of shares of the Trust is offered to
investors with respect to each investment portfolio;
WHEREAS, the Trust has adopted a Master Business Management and
Investment Advisory Agreement dated December 31, 1991 (the "Master Agreement"),
pursuant to which the Trust has appointed the Manager to provide the business
management and investment advisory services specified in that Master Agreement;
and
WHEREAS, Ivy Cundill Value Fund and Ivy Next Wave Interenet Fund (each,
a "Fund" and collectively the "Funds") are separate investment portfolio of the
Trust.
NOW, THEREFORE, the Trustees of the Trust hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Trust hereby adopts
the Master Agreement with respect to the Funds, and the Manager hereby
acknowledges that the Master Agreement shall pertain to the Funds, the terms and
conditions of such Master Agreement being hereby incorporated herein by
reference.
2. The term "Portfolio" as used in the Master Agreement shall, for
purposes of this Supplement, pertain to each Fund.
3. As provided in the Master Agreement and subject to further
conditions as set forth therein, each Fund shall pay the Manager a monthly fee
on the first business day of each month based upon the average daily value (as
determined on each business day at the time set forth in the Prospectus of each
Fund for determining net asset value per share) of the net assets of that Fund
during the preceding month at the annual rate of 1.00%.
4. This Supplement and the Master Agreement (together, the
"Agreement") shall become effective with respect to each of the Funds as of the
date specified above, and unless sooner terminated as hereinafter provided, the
Agreement shall remain in effect with respect to a Fund for a period of more
than two (2) years from such date only so long as the continuance is
specifically approved at least annually (a) by the vote of a majority of the
outstanding voting securities of that Fund (as defined in the Investment Company
Act of 1940, as amended (the "1940 Act")) or by the Trust's entire Board of
Trustees and (b) by the vote, cast in person at a meeting called for that
purpose, of a majority of the Trust's Independent Trustees. This Agreement may
be terminated with respect to a Fund at any time, without payment of any
penalty, by vote of a majority of the outstanding voting securities of the Fund
(as defined in the 1940 Act) or by vote of a majority of the Trust's entire
Board of Trustees on sixty (60) days' written notice to the Manager or by the
Manager on sixty (60) days' written notice to the Trust. This Agreement shall
terminate automatically in the event of its assignment (as defined in the 1940
Act).
IVY FUND, on behalf of
Ivy Cundill Value Fund and
Ivy Next Wave Internet Fund
By: ______________________
James W. Broadfoot, President
IVY MANAGEMENT, INC.
By: ______________________
Keith J. Carlson, President
Exhibit (d)(27)
FORM OF
SUBADVISORY AGREEMENT
AGREEMENT made as of the day of , 2000, between IVY MANAGEMENT, INC.,
700 South Federal Highway, Boca Raton, Florida 33432 U.S.A., a Massachusetts
corporation (hereinafter called the "Manager"), and PETER CUNDILL & ASSOCIATES,
Inc., a corporation incorporated under the laws of Delaware at PO Box 50133,
Santa Barbara, CA 93150 USA (hereinafter called the "Subadviser").
WHEREAS, Ivy Fund (the "Trust") is a Massachusetts business trust
organized with one or more series of shares, and is registered as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Manager has entered into a Master Business Management and
Investment Advisory Agreement dated December 31, 1991, as amended (the "Advisory
Agreement"), with the Trust, pursuant to which the Manager acts as investment
adviser to the portfolio assets of certain series of the Trust listed on
Schedule A hereto, as amended from time to time (each a "Fund" and,
collectively, the "Funds"); and
WHEREAS, the Manager desires to utilize the services of the Subadviser
as investment subadviser with respect to certain portfolio assets of each Fund;
and
WHEREAS, the Subadviser is willing to perform such services on the
terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
1. Duties of the Subadviser. The Subadviser will serve the Manager as
investment subadviser with respect to certain portfolio assets of each
Fund, as set forth on the attached Schedule A.
<PAGE>
(a) As investment subadviser to the Funds, the Subadviser is hereby
authorized and directed and hereby agrees, in accordance with the
Subadviser's best judgment and subject to the stated investment
objectives, policies and restrictions of the Funds as set forth
in the current prospectuses and statements of additional
information of the Trust (including amendments) and in accordance
with the Trust's Declaration of Trust, as amended, and By-laws
governing the offering of its shares (collectively, the "Trust
Documents"), the 1940 Act and the provisions of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"),
relating to regulated investment companies, and subject to such
resolutions as from time to time may be adopted by the Trust's
Board of Trustees, and provided that the Trust Documents are all
furnished to the Subadviser, to develop, recommend and implement
such investment program and strategy for the Funds as may from
time to time be most appropriate to the achievement of the
investment objectives of the Funds as stated in the aforesaid
prospectuses, to provide research and analysis relative to the
investment program and investments of the Funds, to determine
what securities should be purchased and sold and to monitor on a
continuing basis the performance of the portfolio securities of
the Funds.
(b) The Subadviser agrees to comply with the investment objective and
policies as set out in the Funds registration statement in
providing its investment advisory services and to notify the
Manager on a timely basis of any lapse in compliance with the
objective and policies.
(c) The Subadviser shall (i) comply with all reasonable requests of
the Trust (through the Manager) for information, including
information required in connection with the Trust's filings with
the Securities and Exchange Commission (the "SEC") and state
securities commissions, and (ii) provide such other services as
the Subadviser shall from time to time determine to be necessary
or useful to the administration of the Funds.
(d) The Subadviser shall furnish to the Manager for distribution to
the Trust's Board of Trustees periodic reports on the investment
performance of each Fund and on the performance of its
obligations under this Agreement and shall supply such additional
reports and information as the Trust's officers or Board of
Trustees shall reasonably request.
<PAGE>
(e) On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of a Fund as well as other
customers, the Subadviser, to the extent permitted by applicable
law, may aggregate the securities to be so sold or purchased in
order to obtain the best execution or lower brokerage
commissions, if any. The Subadviser also may purchase or sell a
particular security for one or more customers in different
amounts. On either occasion, and to the extent permitted by
applicable law and regulations, allocation of the securities so
purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner it
considers to be the most equitable and consistent with its
fiduciary obligations to the Fund involved and to such other
customers. In no instance, however, will a Fund's assets be
purchased from or sold to the Manager, the Subadviser, the
Trust's principal underwriter, or any affiliated person of either
the Trust, the Manager, the Subadviser or the principal
underwriter, acting as principal in the transaction, except to
the extent permitted by the SEC and the 1940 Act.
(f) Consistent with U.S. securities laws, the Subadviser agrees to
adopt written trade allocation procedures that are "fair and
equitable" to its clients which are consistent with the
investment policies set out in the prospectuses and statements of
additional information (including amendments) of the Funds or as
the Trust's Board of Trustees may direct from time to time. The
Subadviser also agrees to effect securities transactions in
client accounts consistent with the allocation system described
in such written procedures, to keep accurate records of such
transactions and to fully disclose such trade allocation
procedures and practices to clients.
(g) The Subadviser shall provide the Funds' custodian on each
business day with information relating to all transactions
concerning each Fund's assets and shall provide the Manager with
such information upon request of the Manager.
(h) The investment advisory services provided by the Subadviser under
this Agreement are not to be deemed exclusive and the Subadviser
shall be free to render similar services to others, as long as
such services do not impair the services rendered to the Manager
or the Trust.
(i) The Subadviser shall promptly notify the Manager of any financial
condition that is likely to impair the Subadviser's ability to
fulfill its commitment under this Agreement.
<PAGE>
2. Delivery of Documents to the Manager. The Subadviser has furnished the
Manager with copies of each of the following documents:
(a) The Subadviser's current Form ADV and any amendments thereto, if
applicable;
(b) The Subadviser's most recent audited balance sheet;
(c) Separate lists of persons whom the Subadviser wishes to have
authorized to give written and/or oral instructions to the
custodian and the fund accounting agent of Trust assets for the
Funds; and
(d) The Code of Ethics of the Subadviser as currently in effect.
The Subadviser will furnish the Manager from time to time with
copies, properly certified or otherwise authenticated, of all
material amendments of or supplements to the foregoing, if
any. Additionally, the Subadviser will provide to the Manager
such other documents relating to its services under this
Agreement as the Manager may reasonably request on a periodic
basis. Such amendments or supplements as to items (a) through
(d) above will be provided within 30 days of the time such
materials became available to the Subadviser.
3. Expenses. The Subadviser shall pay all of its expenses arising from the
performance of its obligations under this Agreement.
4. Compensation. The Manager shall pay to the Subadviser for its services
hereunder, and the Subadviser agrees to accept as full compensation
therefor, a fee with respect to each Fund as set forth on Schedule B. Such
fee shall be accrued daily on the basis of the value of the portion of the
average daily net assets of the applicable Fund as are then being managed
by the Subadviser and shall be payable monthly. If the Subadviser shall
serve hereunder for less than the whole of any month, the fee hereunder
shall be prorated accordingly.
<PAGE>
5. Purchase and Sale of Securities. The Subadviser will determine the
securities to be purchased or sold with respect to the portion of each
Fund's portfolio assets being managed by it, and shall purchase securities
from or through and sell securities to or through such persons, brokers or
dealers as the Subadviser shall deem appropriate in order to carry out the
policy with respect to allocation of portfolio transactions as described in
section 1.(f) of this Agreement and statements of additional information
(including amendments) of the Funds. In providing the Funds with investment
management and supervision, it is recognized that the Subadviser will seek
the most favorable price and execution, and, consistent with such policy,
may give consideration to the research services furnished by brokers or
dealers to the Subadviser for its use and to such other considerations as
the Trust's Board of Trustees may direct or authorize from time to time.
Nothing in this Agreement shall be implied to prevent: (i) the Manager from
engaging other subadvisers to provide investment advice and other services
in relation to series of the Trust, or a portion of the portfolio assets of
any such series, for which the Subadviser does not provide such services,
or to prevent the Manager from providing such services itself in relation
to such series; or (ii) the Subadviser from providing investment advice and
other services to other funds or clients.
In the performance of its duties hereunder, the Subadviser is and shall be
an independent contractor and except as expressly provided herein or
otherwise authorized in writing, shall have no authority to act for or
represent the Trust, the Funds, any other series of the Trust or the
Manager in any way or otherwise be deemed to be an agent of the Trust, the
Funds, any other series of the Trust or the Manager.
<PAGE>
6. Term of Agreement. This Agreement shall continue in full force and effect
until February 1, 2002 and from year to year thereafter if such continuance
is approved in the manner required by the 1940 Act if the Subadviser shall
not have notified the Manager in writing at least 60 days prior to such
February 1 or prior to February 1 of any year thereafter that it does not
desire such continuance. This Agreement may be terminated at any time,
without payment of penalty by a Fund, by vote of the Trust's Board of
Trustees or a majority of the outstanding voting securities of the
applicable Fund (as defined by the 1940 Act), or by the Manager upon 30
days written notice or by the Subadviser upon 120 days' written notice.
This Agreement will automatically terminate in the event of its assignment
(as defined by the 1940 Act) or upon the termination of the Advisory
Agreement, or if (a) either party is unable to pay its debts or an
administrative or insolvency order is made in respect of a party pursuant
to its relevant governing and applicable laws and regulations.
7. Amendments. This Agreement may be amended by consent of the parties hereto
provided that the consent of the applicable Fund is obtained in accordance
with the requirements of the 1940 Act.
8. Confidential Treatment. It is understood that any information or
recommendation supplied by the Subadviser in connection with the
performance of its obligations hereunder is to be regarded as confidential
and for use only by the Manager, the Trust or such persons as the Manager
may designate in connection with the Funds. It is also understood that any
information supplied to the Subadviser in connection with the performance
of its obligations hereunder, particularly, but not limited to, any list of
securities which, on a temporary basis, may not be bought or sold for the
Funds, is to be regarded as confidential and for use only by the Subadviser
in connection with its obligation to provide investment advice and other
services to the Funds.
9. Representations and Warranties. The Subadviser hereby represents and
warrants as follows:
(a) The Subadviser is registered with the SEC as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), and such registration is current, complete and in full
compliance with all material applicable provisions of the Advisers Act
and the rules and regulations thereunder;
(b) The Subadviser has all requisite authority to enter into, execute,
deliver and perform the Subadviser's obligations under this Agreement;
(c) The Subadviser's performance of its obligations under this Agreement
does not conflict with any law, regulation or order to which the
Subadviser is subject; and
<PAGE>
(d) The Subadviser has reviewed the portion of (i) the registration
statement filed with the SEC, as amended from time to time, for the
Funds ("Registration Statement"), and (ii) each Fund's prospectuses
and statements of additional information (including amendments)
thereto, in each case in the form received from the Manager with
respect to the disclosure about the Subadviser and the Funds of which
the Subadviser has knowledge ("Subadviser and Fund Information") and
except as advised in writing to the Manager such Registration
Statement, prospectuses and statements of additional information
(including amendments) contain, as of their respective dates, no
untrue statement of any material fact of which the Subadviser has
knowledge and do not omit any statement of a material fact of which
the Subadviser has knowledge which was required to be stated therein
or necessary to make the statements contained therein not misleading.
10. Covenants. The Subadviser hereby covenants and agrees that, so long as this
Agreement shall remain in effect:
(a) The Subadviser shall maintain the Subadviser's registration as an
investment adviser under the Advisers Act, and such registration shall
at all times remain current, complete and in full compliance with all
material applicable provisions of the Advisers Act and the rules and
regulations thereunder;
(b) The Subadviser's performance of its obligations under this Agreement
shall not conflict with any law, regulation or order to which the
Subadviser is then subject;
(c) The Subadviser shall at all times comply with the Advisers Act and the
1940 Act, and all rules and regulations thereunder, and all other
applicable laws and regulations, and the Registration Statement,
prospectuses and statements of additional information (including
amendments) and with any applicable procedures adopted by the Trust's
Board of Trustees, provided that such procedures are substantially
similar to those applicable to similar funds for which the Trust's
Board of Trustees is responsible and that such procedures are
identified in writing to the Subadviser;
<PAGE>
(d) The Subadviser shall promptly notify the Manager and the Fund upon the
occurrence of any event that might disqualify or prevent the
Subadviser from performing its duties under this Agreement. The
Subadviser shall promptly notify the Manager and the Fund if there are
any changes to its organizational structure or the Subadviser has
become the subject of any adverse regulatory action imposed by any
regulatory body or self-regulatory organization. The Subadviser
further agrees to notify the Manager of any changes relating to it or
the provision of services by it that would cause the Registration
Statement, prospectuses or statements of additional information
(including amendments) for the Funds to contain any untrue statement
of a material fact or to omit to state a material fact which is
required to be stated therein or is necessary to make the statements
contained therein not misleading, in each case relating to Subadviser
and Fund Information;
(e) The Subadviser will manage the portion of each Fund's portfolio assets
for which it serves as subadviser under this Agreement in a manner
consistent with the Fund's status as a regulated investment company
under Subchapter M of the Internal Revenue Code; and
(f) The Subadviser shall exercise its powers and discharge its duties as
adviser honestly, in good faith and in the best interests of the Funds
and shall exercise the degree of care, diligence and skill that a
reasonably prudent person would exercise in the circumstances provide
that it has fulfilled its standard of care obligation, the Subadviser
will not be liable for any loss sustained by reason of the adoption or
implementation of any investment objective or policy or the purchase,
sale or retention of any portfolio investment by and on behalf of the
Funds.
<PAGE>
11. Use of Names.
(a) The Subadviser acknowledges and agrees that the names Ivy Fund and Ivy
Management, Inc, and abbreviations or logos associated with those
names, are the valuable property of Manager and its affiliates; that
the Funds, the Manager and their affiliates have the right to use such
names, abbreviations and logos; and that the Subadviser shall use the
names Ivy Fund and Ivy Management, Inc., and associated abbreviations
and logos, only in connection with the Subadviser's performance of its
duties hereunder. Further, in any communication with the public and in
any marketing communications of any sort, Subadviser agrees to obtain
prior written approval from Manager before using or referring to Ivy
Fund, and Ivy Management, Inc, or the Funds or any abbreviations or
logos associated with those names; provided that nothing herein shall
be deemed to prohibit the Subadviser from referring to the performance
of the Funds in the Subadviser's marketing material as long as such
marketing material does not constitute "sales literature" or
"advertising" for the Funds, as those terms are used in the rules,
regulations and guidelines of the SEC and the National Association of
Securities Dealers, Inc.
(b) The Subadviser acknowledges that each Fund and its agents may use the
"Cundill" and "Peter Cundill" names in connection with accurately
describing the activities of the Fund, including use with marketing
and other promotional and informational material relating to the Fund.
The Subadviser hereby agrees and consents to the use of the
Subadviser's name upon the foregoing terms and conditions.
(c) The Subadviser acknowledges that each Fund and its agents may use the
"Cundill" name in conjunction with accurately describing the
activities of the Fund, including use with marketing and other
promotional materials relating to the Fund with prior written approval
always of the Subadviser. In the event that the Subadviser shall cease
to be the Manager's subadviser of a Fund, then the Fund at its own or
the Manager's expense, upon the Subadviser's written request: (i)
shall cease to use the Subadviser's name for any commercial purpose;
and (ii) shall use its best efforts to cause the Fund's officers and
trustees to take any and all actions which may be necessary or
desirable to effect the foregoing and to reconvey to the Subadviser
all rights which a Fund may have to such name. Manager agrees to take
any and all reasonable actions as may be necessary or desirable to
effect the foregoing and Subadviser agrees to allow the Funds and
their agents a reasonable time to effectuate the foregoing.
(d) The Subadviser hereby agrees and consents to the use of the
Subadviser's name upon the foregoing terms and conditions.
12. Reports by the Subadviser and Records of the Funds. The Subadviser shall
furnish the Manager monthly, quarterly and annual reports concerning
transactions and performance of the Funds, including information required
to be disclosed in the Trust's Registration Statement, in such form as may
be mutually agreed. The Subadviser shall permit the financial statements,
books and records with respect to the Funds to be inspected and audited by
the Trust, the Manager or their agents at all reasonable times during
normal business hours. The Subadviser shall immediately notify and forward
to both the Manager and legal counsel for the Trust any legal process
served upon it on behalf of the Manager or the Trust. The Subadviser shall
promptly notify the Manager of any changes in any information concerning
the Subadviser of which the Subadviser becomes aware that would be required
to be disclosed in the Trust's Registration Statement.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Subadviser agrees that all records it maintains for the Trust are the
property of the Trust and further agrees to surrender promptly to the Trust
or the Manager any such records upon the Trust's or the Manager's request.
The Subadviser further agrees to maintain for the Trust the records the
Trust is required to maintain under Rule 31a-1(b) insofar as such records
relate to the investment affairs of each Fund. The Subadviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940
Act the records it maintains for the Trust.
<PAGE>
13. Indemnification. The Subadviser agrees to indemnify and hold harmless the
Manager, any affiliated person within the meaning of Section 2(a)(3) of the
1940 Act ("affiliated person") of the Manager and each person, if any, who,
within the meaning of Section 15 of the Securities Act of 1933, as amended
(the "1933 Act"), controls ("controlling person") the Manager, against any
and all losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses), to which the Manager, the Trust or
such affiliated person or controlling person may become subject under the
1933 Act, the 1940 Act, the Advisers Act, under any other statute, at
common law or otherwise, arising out of Subadviser's responsibilities as
subadviser of the Funds (1) to the extent of and as a result of the willful
misconduct, bad faith, or gross negligence of the Subadviser, any of the
Subadviser's employees or representatives or any affiliate of or any person
acting on behalf of the Subadviser, or (2) as a result of any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, prospectuses or statements of additional
information covering the Funds or the Trust or any amendment thereof or any
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement therein not misleading, if such a statement or omission was made
in reliance upon written information furnished by the Subadviser to the
Manager, the Trust or any affiliated person of the Manager or the Trust
expressly for use in the Trust's Registration Statement, or upon verbal
information confirmed by the Subadviser in writing expressly for use in the
Trust's Registration Statement or (3) to the extent of, and as a result of,
the failure of the Subadviser to execute, or cause to be executed,
portfolio transactions according to the standards and requirements of the
1940 Act; provided, however, that in no case is the Subadviser's indemnity
in favor of the Manager or any affiliated person or controlling person of
the Manager deemed to protect such person against any liability to which
any such person would otherwise be subject by reason of willful misconduct,
bad faith or gross negligence in the performance of its duties or by reason
of its reckless disregard of its obligations and duties under this
Agreement.
The Manager agrees to indemnify and hold harmless the Subadviser against
any and all losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses), to which the Subadviser or such
affiliated person or controlling person may become subject under the 1933
Act, the 1940 Act, the Advisers Act, under any other statute, at common law
or otherwise, arising out of the Manager's responsibilities as investment
manager of the Funds (1) to the extent of and as a result of the willful
misconduct, bad faith, or gross negligence of the Manager, any of the
Manager's employees or representatives or any affiliate of or any person
acting on behalf of the Manager, or (2) as a result of any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement, prospectuses or statements of additional
information covering the Funds or the Trust or any amendment thereof or any
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement therein not misleading, if such a statement or omission was made
by the Trust other than in reliance upon written information furnished by
the Subadviser, or any affiliated person of the Subadviser, expressly for
use in the Trust's Registration Statement or other than upon verbal
information confirmed by the Subadviser in writing expressly for use in the
Trust's Registration Statement; provided, however, that in no case is the
Manager's indemnity in favor of the Subadviser deemed to protect such
person against any liability to which any such person would otherwise be
subject by reason of willful misconduct, bad faith or gross negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
<PAGE>
14. Assignment by Subadviser. This Agreement shall not be assigned by the
Subadviser to any other person or company without the Manager's prior
written consent.
15. Jurisdiction. The Subadviser irrevocably submits to the jurisdiction of any
state or U.S. federal court sitting in the Commonwealth of Massachusetts
over any suit, action or proceeding arising out of or relating to this
proposal and the agreement contemplated herein. The Subadviser irrevocably
waives, to the fullest extent permitted by law, any objection which it may
have to the laying of the venue of any such suit, action or proceeding
brought in such a court and any claim that any such suit, action or
proceeding brought in such a court has been brought in an inconvenient
forum. The Subadviser agrees that final judgment in any such suit, action
or proceeding brought in such a court shall be conclusive and binding upon
the Subadviser, and may be enforced to the extent permitted by applicable
law in any court of the jurisdiction of which the Subadviser is subject by
a suit upon such judgment, provided that service of process is effected
upon the Subadviser in the manner specified in the following paragraph or
as otherwise permitted by law.
<PAGE>
As long as the agreement contemplated herein remains in effect, the
Subadviser will at all times have an authorized agent in the Commonwealth
of Massachusetts upon whom process may be served in any legal action or
proceeding in a state or U.S. federal court sitting in the Commonwealth of
Massachusetts over any suit, action or proceeding arising out of or
relating to this proposal or the agreement contemplated herein. The
Subadviser hereby appoints CT Corporation System as its agent for such
purpose, and covenants and agrees that service of process in any such legal
action or proceeding may be made upon it at the office of such agent at 2
Oliver Street, Boston, MA 02019 (or at such other address in the
Commonwealth of Massachusetts, as said agent may designate by written
notice to the Subadviser and the Manager). The Subadviser hereby consents
to the process being served in any suit, action or proceeding of the nature
referred to in the preceding paragraph by service upon such agent together
with the mailing of a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to the address of the Subadviser set
forth in Section 16 below or to any other address of which the Subadviser
shall have given written notice to the Manager. The Subadviser irrevocably
waives, to the fullest extent permitted by law, all claim of error by
reason of any such service (but does not waive any right to assert lack of
subject matter jurisdiction) and agrees that such service (i) shall be
deemed in every respect effective service of process upon the Subadviser in
any suit, action or proceeding and (ii) shall, to the fullest extent
permitted by law, be taken and held to be valid personal service upon and
personal delivery to the Subadviser.
Nothing in this Section 15 shall affect the right of the Manager to serve
process in any manner permitted by law or limit the right of the Manager to
bring proceedings against the Subadviser in the courts of any jurisdiction
or jurisdictions.
16. Notices. All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered or sent by
pre-paid first class letter post to the following addresses or to such
other address as the relevant addressee shall hereafter notify for such
purpose to the others by notice in writing and shall be deemed to have been
given at the time of delivery.
If to the Manager: IVY MANAGEMENT, INC.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432, U.S.A.
Attention: C. William Ferris
If to the Trust: IVY FUND
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432, U.S.A.
Attention: C. William Ferris
If to the Subadviser: PETER CUNDILL & ASSOCIATES INC.
PO Box 50133
Santa Barbara, CA 93108 USA
Attn: Brian L. McDermott
With a copy to:
Cundill Investment Research Ltd.
1200 1100 Melville Street
Vancouver, British Columbia V6E 4A6
Attn: Mr. Andrew C. Parkinson
<PAGE>
17. Limitation of Liability of the Trust, its Trustees, and Shareholders. It is
understood and expressly stipulated that none of the trustees, officers,
agents, or shareholders of any series of the Trust shall be personally
liable hereunder. It is understood and acknowledged that all persons
dealing with any series of the Trust must look solely to the property of
such series for the enforcement of any claims against that series as
neither the trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of any series of the
Trust. No series of the Trust shall be liable for the obligations or
liabilities of any other series of the Trust.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts. Anything
herein to the contrary notwithstanding, this Agreement shall not be
construed to require, or to impose any duty upon either of the parties, to
do anything in violation of any applicable laws or regulations.
19. Severability. Should any part of this Agreement be held invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors.
20. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and all such counterparts shall
constitute a single instrument.
IN WITNESS WHEREOF, Ivy Management, Inc. and Peter Cundill & Associates,
Inc. have each caused this instrument to be signed in duplicate on its behalf by
the officer designated below thereunto duly authorized.
IVY MANAGEMENT, INC.
By:___________________________
Title:________________________
PETER CUNDILL & ASSOCIATES, INC.
By:____________________________
Title:_________________________
<PAGE>
SCHEDULE A
TO SUBADVISORY AGREEMENT BETWEEN
IVY MANAGEMENT, INC. AND PETER CUNDILL & ASSOCIATES, INC.
DATED , 2000
-----------------------------------
Funds:
Ivy Cundill Value Fund - 100% of Fund's net assets
<PAGE>
SCHEDULE B
TO SUBADVISORY AGREEMENT BETWEEN
IVY MANAGEMENT, INC. AND PETER CUNDILL & ASSOCIATES, INC.
DATED , 2000
-----------------------------------
Fee schedule:
Fund Net Assets (U.S. $millions) Advisory Fee Annual Rate
All Net Assets 0.50%
Fees are subject to renegotiation based on assets under management.
Exhibit (e)(7)
IVY FUND
FORM OF ADDENDUM TO
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
Ivy Cundill Value Fund
Ivy Next Wave Internet Fund
Class A, Class B, Class C, Class I and Advisor Class Shares
AGREEMENT made as of the ___th day of ________, 2000, by and between
Ivy Fund (the "Trust") and Ivy Mackenzie Distributors, Inc. ("IMDI")(formerly
"Mackenzie Ivy Funds Distribution, Inc.").
WHEREAS, the Trust is registered as an open-end investment company
under the Investment Company Act of 1940, as amended, and consists of one or
more separate investment portfolios, as may be designated from time to time; and
WHEREAS, IMDI serves as the Trust's distributor pursuant to an Amended
and Restated Distribution Agreement dated March 16, 1999 (the "Agreement"); and
WHEREAS, the Trustees of the Trust have duly approved an amendment to
the Agreement to include the Class A, Class B, Class C, Class I and Advisor
Class shares (the "Shares") of Ivy Cundill Value Fund and Ivy Next Wave Internet
Fund (the "Funds"), respectively.
WHEREAS, the Shares were established and designated by the Board of
Trustees of the Trust by written consent made effective as of the date that the
Registration Statement for the Funds was filed with the Securities and Exchange
Commission ("SEC") in accordance with Rule 485(a)(2) under the Securities Act of
1933 (the "Securities Act").
NOW THEREFORE, the Trust and IMDI hereby agree as follows:
Effective as of the date the Registration Statement pertaining to Ivy
Cundill Value Fund and Ivy Next Wave Internet Fund filed with the SEC
pursuant to Rule 485(a)(2) under the Securities Act first becomes
effective, the Agreement shall relate in all respects to the Shares, in
addition to the classes of shares of the Funds and any other series of
the Trust specifically identified in Paragraph 1 of the Agreement and
any other Addenda thereto.
IN WITNESS WHEREOF, the Trust and IMDI have adopted this Addendum as of
the date first set forth above.
IVY FUND
By: __________________________
James W. Broadfoot, President
IVY MACKENZIE DISTRIBUTORS, INC.
By: __________________________
Keith J. Carlson, President
Exhibit (h)(55)
FORM OF
ADDENDUM TO TRANSFER AGENCY AND SHAREHOLDER SERVICES AGREEMENT
IVY FUND
The Transfer Agency and Shareholder Services Agreement, made as of the
1st day of January, 1992 between Ivy Fund and Ivy Management, Inc. ("IMI"), the
duties of IMI thereunder of which were assigned on October 1, 1993 to Ivy
Mackenzie Services Corp. ("IMSC")(formerly "Mackenzie Ivy Investor Services
Corp."), is hereby revised as set forth below in this Addendum.
Schedule A of the Agreement is revised in its entirety to read as follows:
SCHEDULE A
Ivy Fees:
The transfer agency and shareholder service fees are based on an annual
per account fee. These fees are payable on a monthly basis at the rate of 1/12
of the annual fee and are charged with respect to all open accounts.
A. Per Account Fees
Classes Class Advisor
Fund Name A, B, C I Class
Ivy Asia Pacific Fund $20.00 N/A $20.00
Ivy Bond Fund 20.75 10.25 20.75
Ivy China Region Fund 20.00 N/A 20.00
Ivy Cundill Value Fund 20.00 10.25 20.00
Ivy Developing Nations Fund 20.00 N/A 20.00
Ivy European Opportunities Fund 20.00 10.25 20.00
Ivy Global Fund 20.00 N/A 20.00
Ivy Global Natural Resources Fund 20.00 N/A 20.00
Ivy Global Science & Technology Fund 20.00 10.25 20.00
Ivy Growth Fund 20.00 N/A 20.00
Ivy Growth with Income Fund 20.00 N/A 20.00
Ivy International Fund 20.00 10.25 N/A
Ivy International Fund II 20.00 10.25 20.00
Ivy International Small Companies Fund 20.00 10.25 20.00
Ivy International Strategic Bond Fund 20.00 10.25 20.00
Ivy Money Market Fund 22.00 N/A N/A
Ivy Next Wave Internet Fund 20.00 10.25 20.00
Ivy Pan-Europe Fund 20.00 N/A 20.00
Ivy South America Fund 20.00 N/A 20.00
Ivy US Blue Chip Fund 20.00 10.25 20.00
Ivy US Emerging Growth Fund 20.00 N/A 20.00
In addition, in accordance with an agreement between IMSC and First
Data Investor Services Group, Inc. (formerly The Shareholder Services Group,
Inc.), each Fund will pay a fee of $4.58 for each account that is closed, which
fee may be increased from time to time in accordance with the terms of that
agreement.
B. Special Services
Fees for activities of a non-recurring nature, such as preparation of
special reports, portfolio consolidations, or reorganization, and extraordinary
shipments will be subject to negotiation.
This Addendum shall take effect as of the date that the Registration
Statement pertaining to Ivy Cundill Value Fund and Ivy Next Wave Internet Fund,
filed with the Securities and Exchange Commission pursuant to Rule 485(a)(2)
under the Securities Act of 1933, first becomes effective.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed as of the ___th day of __________, 2000.
IVY FUND
By: ________________________
Keith J. Carlson, President
IVY MACKENZIE SERVICES CORP.
By: ________________________
C. William Ferris, President
Exhibit (h)(56)
IVY FUND
FORM OF
FUND ACCOUNTING SERVICES AGREEMENT SUPPLEMENT
Ivy Cundill Value Fund
Ivy Next Wave Internet Fund
AGREEMENT made as of the ___th day of _________, 2000, by and between
Ivy Fund (the "Trust") and Mackenzie Investment Management Inc. (the "Agent").
WHEREAS, the Trust is an open-end investment company, organized as a
Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established and designated by the Trustees of
the Trust from time to time;
WHEREAS, a separate class of shares of the Trust is offered to
investors with respect to each investment portfolio;
WHEREAS, the Trust has adopted a Master Fund Accounting Services
Agreement dated January 25, 1993 (the "Master Agreement"), pursuant to which the
Trust has appointed the Agent to provide the fund accounting services specified
in the Master Agreement; and
WHEREAS, Ivy Cundill Value Fund and Ivy Next Wave Internet Fund (each,
a "Fund" and collectively the "Funds") are separate investment portfolios of the
Trust.
NOW, THEREFORE, the Trustees of the Trust hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Trust hereby adopts the
Master Agreement with respect to the Funds, and the Manager hereby acknowledges
that the Master Agreement shall pertain to the Funds, the terms and conditions
of such Master Agreement being hereby incorporated herein by reference.
2. The term "Portfolio" as used in the Master Agreement shall, for
purposes of this Supplement, pertain to each Fund.
3. As provided in the Master Agreement and subject to further
conditions as set forth therein, each Fund shall pay the Agent a monthly fee
based upon the rate(s) set forth in the Fee Schedule attached hereto as Annex 1.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund as of the date specified above,
and unless sooner terminated as hereinafter provided, the Agreement shall remain
in effect with respect to a Fund for a period of more than one (1) year from
such date only so long as the continuance is specifically approved at least
annually by the Trust's Board of Trustees, including the vote or written consent
of a majority of the Trust's Independent Trustees (as defined in the Investment
Company Act of 1940, as amended). This Agreement may be terminated with respect
to a Fund, without payment of any penalty, by that Fund upon at least ninety
(90) days' prior written notice to the Agent or by the Agent upon at least
ninety (90) days' prior written notice to that Fund; provided, that in the case
of termination by a Fund, such action shall have been authorized by the Trust's
Board of Trustees, including the vote or written consent of a majority of the
Trust's Independent Trustees.
IVY FUND, on behalf of
Ivy Cundill Value Fund and
Ivy Next Wave Internet Fund
By: ________________________
James W. Broadfoot, President
MACKENZIE INVESTMENT MANAGEMENT INC.
By: ________________________
Keith J. Carlson, President
<PAGE>
ANNEX 1
FUND ACCOUNTING SERVICES AGREEMENT
FEE SCHEDULE
Based upon assets under management (in millions):
$0-$10 >$10-$40 >$40-$75 Over $75
Ivy Cundill Value Fund $1,250 $2,500 $5,000 $6,500
Ivy Next Wave Internet Fund $1,250 $2,500 $5,000 $6,500
Exhibit (h)(57)
IVY FUND
FORM OF
ADMINISTRATIVE SERVICES AGREEMENT SUPPLEMENT
Ivy Cundill Value Fund
Ivy Next Wave Internet Fund
AGREEMENT made as of the ___th day of __________, 2000 by and between
Ivy Fund (the "Trust") and Mackenzie Investment Management Inc. ("MIMI").
WHEREAS, the Trust is an open-end investment company, organized as a
Massachusetts business trust, and consists of such separate investment
portfolios as have been or may be established and designated by the Trustees of
the Trust from time to time;
WHEREAS, a separate series of shares of the Trust is offered to
investors with respect to each investment portfolio;
WHEREAS, the Trust has adopted a Master Administrative Services
Agreement dated September 1, 1992 (the "Master Services Agreement"), pursuant to
which the Trust has appointed MIMI to provide the administrative services
specified in the Master Services Agreement; and
WHEREAS, Ivy Cundill Value Fund and Ivy Next Wave Internet Fund ( each,
a "Fund" and collectively the "Funds") are separate investment portfolios of the
Trust.
NOW, THEREFORE, the Trustees of the Trust hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Services Agreement, the Trust hereby
adopts the Master Services Agreement with respect to the Funds, and MIMI hereby
acknowledges that the Master Services Agreement shall pertain to the Funds, the
terms and conditions of such Master Services Agreement being incorporated herein
by reference.
2. The term "Fund" as used in the Master Services Agreement shall, for
purposes of this Supplement, pertain to each Fund.
3. As provided in the Master Services Agreement and subject to further
conditions as set forth therein, each Fund shall pay MIMI a monthly fee on the
first business day of each month based upon the average daily value (as
determined on each business day at the time set forth in each Fund's Prospectus
for determining net asset value per share) of the net assets of that Fund during
the preceding month at the annual rate of (i) 0.10% with respect to that Fund's
Class A, Class B, Class C and Advisor Class shares, and (ii) 0.01% with respect
to that Fund's Class I shares.
4. This Supplement and the Master Services Agreement (together, the
"Agreement") shall become effective with respect to each of the Funds as of the
date specified above, and unless sooner terminated as hereinafter provided, the
Agreement shall remain in effect for a period of two years from that date.
Thereafter, the Agreement shall continue in effect with respect to each Fund
from year to year, provided such continuance with respect to each Fund is
approved at least annually by the Trust's Board of Trustees, including the vote
or written consent of a majority of the Trust's Independent Trustees (as defined
in the Investment Company Act of 1940, as amended). This Agreement may be
terminated with respect to a Fund at any time, without payment of any penalty,
by MIMI upon at least sixty (60) days' prior written notice to that Fund, or by
a Fund upon at least sixty (60) days' written notice to MIMI; provided, that in
case of termination by a Fund, such action shall have been authorized by the
Trust's Board of Trustees, including the vote or written consent of a majority
of the Trust's Independent Trustees.
IVY FUND, on behalf of
Ivy Cundill Value Fund and
Ivy Next Wave Internet Fund
By: ________________________
James W. Broadfoot, President
MACKENZIE INVESTMENT MANAGEMENT INC.
By: ________________________
Keith J. Carlson, President
Exhibit (i)
DECHERT PRICE & RHOADS
TEN POST OFFICE SQUARE -- SOUTH
SUITE 1230
BOSTON, MASSACHUSETTS 02109-4603
March 15, 2000
Ivy Fund
Via Mizner Financial Plaza
700 South Federal Highway
Suite 300
Boca Raton, Florida 33432
Dear Sirs:
As counsel for Ivy Fund (the "Trust"), we are familiar with the
registration of the Trust under the Investment Company Act of 1940, as amended
(the "1940 Act") (File No. 811-1028), and the Prospectuses contained in
Post-Effective Amendment No. 113 to the Trust's registration statement relating
to the shares of beneficial interest of Ivy Cundill Value Fund and Ivy Next Wave
Internet Fund (the "Shares") being filed under the Securities Act of 1933, as
amended (File No. 2-17613) ("Post-Effective Amendment No. 113"). We have also
examined such other records of the Trust, agreements, documents and instruments
as we deemed appropriate.
Based upon the foregoing, it is our opinion that the Shares have been
duly authorized and, when issued and sold at the public offering price
contemplated by the Prospectuses for the Funds and delivered by the Trust
against receipt of the net asset value of the Shares, will be issued as fully
paid and nonassessable shares of the Trust.
We consent to the filing of this opinion on behalf of the Trust with
the Securities and Exchange Commission in connection with the filing of
Post-Effective Amendment No. 113.
Very truly yours,
/s/ DECHERT PRICE & RHOADS
Exhibit (j)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Trustees of Ivy Fund
We hereby consent to the use in this Post-Effective Amendment No. 113 to the
registration statement on Form N-1A of Ivy Fund (File No. 2-17613) (the
"Registration Statement") of our report dated March 15, 2000, relating to the
Statement of Assets and Liabilities at March 14, 2000 of the Ivy Cundill Value
Fund and the Ivy Next Wave Internet Fund, which appear in such Registration
Statement. We also consent to the reference to us under the heading "Auditors"
in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
March 15, 2000
[PricewaterhouseCoopers letterhead] Exhibit (k)
Report of Independent Certified Public Accountants
To the Board of Trustees and
Shareholders of Ivy Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Ivy Cundill
Value Fund (the "Fund") at March 14, 2000, in conformity with accounting
principles generally accepted in the United States. This financial statement is
the responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
March 15, 2000
<PAGE>
[PricewaterhouseCoopers letterhead]
Report of Independent Certified Public Accountants
To the Board of Trustees and
Shareholders of Ivy Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Ivy Next Wave
Internet Fund (the "Fund") at March 14, 2000, in conformity with accounting
principles generally accepted in the United States. This financial statement is
the responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
March 15, 2000
Exhibit (m)(42)
FORM OF SUPPLEMENT TO
MASTER AMENDED AND RESTATED DISTRIBUTION PLAN
FOR IVY FUND CLASS A SHARES
WHEREAS, Ivy Fund is registered as an open-end investment company under
the Investment Company Act of 1940 (the "1940 Act") and consists of one or more
separate investment portfolios as may be established and designated from time to
time (each, a "Portfolio");
WHEREAS, the Board of Trustees of Ivy Fund has adopted a Master Amended
and Restated Distribution Plan dated December 3, 1999 (the "Plan"), in
accordance with the requirements of the 1940 Act, and determined that there is a
reasonable likelihood that the Plan will benefit Ivy Fund and its shareholders;
and
WHEREAS, the Board of Trustees of Ivy Fund, pursuant to Section 1 of
the Plan, desires to supplement the Plan so that it pertains to the Class A
Shares of two new Portfolios of Ivy Fund referred to as Ivy Cundill Value Fund
and Ivy Next Wave Internet Fund.
NOW THEREFORE, the Board of Trustees of Ivy Fund having determined that
the Plan shall pertain to the Class A shares of Ivy Cundill Value Fund and Ivy
Next Wave Internet Fund hereby adopts this Supplement, to be effective as of the
date the Registration Statement pertaining to Ivy Cundill Value Fund and Ivy
Next Wave Internet Fund filed with the Securities and Exchange Commission
pursuant to Rule 485(a)(2) under the Securities Act of 1933 first becomes
effective.
IVY FUND
By:_________________________
James W. Broadfoot, President
Exhibit (m)(43)
FORM OF SUPPLEMENT TO
AMENDED AND RESTATED DISTRIBUTION PLAN
FOR IVY FUND CLASS B SHARES
WHEREAS, Ivy Fund is registered as an open-end investment company under
the Investment Company Act of 1940 (the "1940 Act") and consists of one or more
separate investment portfolios as may be established and designated from time to
time (each, a "Portfolio");
WHEREAS, the Board of Trustees of Ivy Fund has adopted an Amended and
Restated Distribution Plan dated March 16, 1999 (the "Plan"), in accordance with
the requirements of the 1940 Act, and determined that there is a reasonable
likelihood that the Plan will benefit Ivy Fund and its shareholders; and
WHEREAS, the Board of Trustees of Ivy Fund, pursuant to Section 1 of
the Plan, desires to supplement the Plan so that it pertains to the Class B
Shares of two new Portfolios of Ivy Fund referred to as Ivy Cundill Value Fund
and Ivy Next Wave Internet Fund.
NOW THEREFORE, the Board of Trustees of Ivy Fund having determined that
the Plan shall pertain to the Class B shares of Ivy Cundill Value Fund and Ivy
Next Wave Internet Fund hereby adopts this Supplement, to be effective as of the
date the Registration Statement pertaining to Ivy Cundill Value Fund and Ivy
Next Wave Internet Fund filed with the Securities and Exchange Commission
pursuant to Rule 485(a)(2) under the Securities Act of 1933 first becomes
effective.
IVY FUND
By:_________________________
James W. Broadfoot, President
Exhibit (m)(44)
FORM OF SUPPLEMENT TO
DISTRIBUTION PLAN FOR IVY FUND CLASS C SHARES
WHEREAS, Ivy Fund is registered as an open-end investment company under
the Investment Company Act of 1940 (the "1940 Act") and consists of one or more
separate investment portfolios as may be established and designated from time to
time (each, a "Portfolio");
WHEREAS, the Board of Trustees of Ivy Fund has adopted a Plan dated
February 10, 1996 (the "Plan"), in accordance with the requirements of the 1940
Act, and determined that there is a reasonable likelihood that the Plan will
benefit Ivy Fund and its shareholders; and
WHEREAS, the Board of Trustees of Ivy Fund, pursuant to Section 1 of
the Plan, desires to supplement the Plan so that it pertains to the Class C
Shares of a new Portfolio of Ivy Fund referred to as Ivy Cundill Value Fund and
Ivy Next Wave Internet Fund.
NOW THEREFORE, the Board of Trustees of Ivy Fund having determined that
the Plan shall pertain to the Class C shares of Ivy Cundill Value Fund and Ivy
Next Wave Internet Fund hereby adopts this Supplement, to be effective as of the
date the Registration Statement pertaining to Ivy Cundill Value Fund and Ivy
Next Wave Internet Fund filed with the Securities and Exchange Commission
pursuant to Rule 485(a)(2) under the Securities Act of 1933 first becomes
effective.
IVY FUND
By:_________________________
James W. Broadfoot, President
Exhibit (n)(11)
IVY FUND
FORM OF
PLAN PURSUANT TO RULE 18F-3
UNDER THE
INVESTMENT COMPANY ACT OF 1940
(As Amended and Restated on ________, 2000)
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 four classes of
shares identified as Class A, Class B, Class C and an Advisor Class: Ivy Asia
Pacific Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Cundill
Value Fund, Ivy Developing Nations Fund, Ivy European Opportunities Fund, Ivy
Global Fund, Ivy Global Natural Resources Fund, Ivy Global Science & Technology
Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy High Yield Fund, Ivy
International Fund[FN][Ivy International Fund does not have an Advisor Class],
Ivy International Small Companies Fund, Ivy International Fund II, Ivy
International Strategic Bond Fund, Ivy Next Wave Internet Fund, Ivy South
America 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 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 that have been acquired pursuant to
an exchange from another Fund. (See Section III.D.)], Ivy Pan-Europe Fund, Ivy
US Blue Chip Fund and Ivy US Emerging Growth Fund. Ivy Bond Fund, Ivy Cundill
Value Fund, Ivy European Opportunities Fund, Ivy Global Science & Technology
Fund, Ivy High Yield Fund, Ivy International Fund, Ivy International Fund II,
Ivy International Small Companies Fund, Ivy International Strategic Bond Fund,
Ivy Next Wave Internet Fund and Ivy US Blue Chip Fund are also authorized to
issue an additional 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.
Advisor Class and 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][Advisor Class and 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.
<PAGE>
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 Cundill Value Fund 0.25% 0.00% 1.00%
Ivy Developing Nations 0.25% 0.00% 1.00%
Fund
Ivy European Opportunities 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 High Yield Fund 0.25% 0.00% 1.00%
Ivy International Fund 0.25% 0.00% 1.00%
Ivy International Fund II 0.25% 0.00% 1.00%
Ivy International
Small Companies Fund 0.25% 0.00% 1.00%
Ivy International
Strategic Bond Fund 0.25% 0.00% 1.00%
Ivy South America Fund 0.25% 0.00% 1.00%
Ivy Next Wave Internet Fund 0.25% 0.00% 1.00%
Ivy Money Market Fund* 0.00% 0.00% 0.00%
Ivy Pan-Europe Fund 0.25% 0.00% 1.00%
Ivy US Blue Chip Fund 0.25% 0.00% 1.00%
Ivy US Emerging Growth Fund 0.25% 0.00% 1.00%
* See footnote 1.
<PAGE>
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][Advisor Class and Class I shares 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 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, Class C and
Advisor Class shares pay 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.
<PAGE>
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. [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 Fund
(or for shares of another 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 Fund (or for shares of another 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 the same
class of shares of another 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,
as the case may be, 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. ADVISOR CLASS AND CLASS I:
Advisor Class and Class I shareholders may exchange their outstanding
Advisor Class or Class I shares for shares of the same class of another Fund on
the basis of the net asset value per Advisor Class or Class I share, as the case
may be.
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 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 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
was further amended and restated on February 8, 1997 to reflect the
establishment and designation of Ivy Pan-Europe Fund. The Plan was further
amended and restated on April 30, 1997 to reflect the establishment and
designation of Ivy International Fund II. The Plan was further amended and
restated on December 6, 1997 to reflect the establishment and designation of the
Fund's Advisor Class of shares. The Plan was further amended and restated on
February 7, 1998 to reflect the redesignation of Ivy International Bond Fund as
Ivy High Yield Fund. The Plan was further amended and restated on September 19,
1998 to reflect the redesignation of Ivy US Blue Chip Fund. The Plan was further
amended and restated on February 6, 1999 to reflect the establishment and
designation of Ivy European Opportunities Fund and Ivy International Strategic
Bond Fund. The Plan was further amended and restated on February 4, 2000 to
reflect the establishment and designation of Ivy Cundill Value Fund. The Plan
was further amended and restated as of the date set forth on the first page
hereof to reflect the establishment and designation of Ivy Next Wave Internet
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.
Exhibit (p)(1)
CODE OF ETHICS
AND
BUSINESS CONDUCT POLICY
Mackenzie Investment Management Inc.
February 3, 2000
<PAGE>
Table of Contents:
1. Overview...........................................................1
2. Confidentiality....................................................1
3. Standards..........................................................2
4. Conflicts of Interest..............................................2
5. Gifts..............................................................4
6. Insider Trading....................................................4
7. Personal Investing.................................................7
8. Review, Enforcement and Other Administrative Matters..............13
Schedule A: Certificate/Acknowledgment
Schedule B: Request for Authorization of Securities Transaction(s)
Schedule C: Initial Securities Holdings Report by Access Persons
Schedule D: Annual Securities Holdings Report by Access Persons
Schedule E: Quarterly Report of Securities Transactions by Access Persons
Schedule F: Record Retention Requirements
Schedule G: Summary of Responsibilities under the Code
<PAGE>
1. Overview
This Code of Ethics and Business Conduct Policy ("Code") has been adopted by
Mackenzie Investment Management Inc. ("MIMI"), Ivy Management, Inc. ("IMI"), Ivy
Mackenzie Distributors, Inc. ("IMDI"), Ivy Mackenzie Services Corp. ("IMSC") and
Ivy Fund.(1) MIMI, IMI, IMDI and IMSC are referred to collectively herein as
"Mackenzie".(2)
1.1. Purpose. It is fundamental to the continuing success of Mackenzie that
it maintain its reputation for the highest standards of integrity and
ethical business conduct. This can only be achieved if the officers,
directors and employees of Mackenzie acknowledge and adhere to the
highest principles of conduct in the discharge of their duties. This
Code is designed to facilitate such adherence.
1.2. Application. This Code applies to all officers, directors/trustees and
employees of Mackenzie and Ivy Fund.(3)
1.3. Administration. This Code will be administered by MIMI's Compliance
Department. The Chief Compliance Officer (as referred to herein) is C.
William Ferris.
1.4. Non-compliance. Failure to comply with the Code may be grounds for a
warning, revision of responsibilities, suspension, or immediate
dismissal. Failure to report or to cooperate in the investigation of
possible breaches of this Code may also constitute a failure to comply
with this Code. All officers, directors/trustees and employees of
Mackenzie and the Funds have a duty to report any violation of this
policy that comes to their attention.
2. Confidentiality
2.1. Policy. Mackenzie's professional reputation and its success as a
leading portfolio manager and manager and promoter of mutual funds
depends, in part, upon the relationship of trust and professionalism
that Mackenzie engenders in its clients and other professionals. A
significant part of maintaining these relationships of trust and
professionalism is Mackenzie's ability to protect the confidentiality
and prevent the misuse of the information entrusted to it.
2.2. Communication of Confidential Information. In the course of their
duties, officers, directors and employees of Mackenzie may obtain
information concerning Mackenzie and/or the Funds, or their respective
shareholders, operations, sales people (including brokers and mutual
fund dealers), employees, officers and/or directors/trustees. As a
general rule, communication of confidential information within and
outside of Mackenzie is permitted only when the recipient of the
information has a legitimate need to know such information in
connection with his or her duties as an officer, director or employee
of Mackenzie.
This duty of confidentiality applies not only with respect to private
information, but also to any asset of Mackenzie (including trade secrets,
computer software, company records and other proprietary information).
2.3. Departure from Mackenzie. The duty of confidentiality described in
Section 2.2 continues to apply to each officer, director and employee
who has left Mackenzie.
3. Standards
3.1. Obligations to Customers. It is Mackenzie's policy to continue to
maintain the highest standards for quality service to its clients.
Mackenzie has a duty to its clients to act honestly, in good faith and
in the best interests of its clients. This duty extends to all
Mackenzie officers, directors and employees in every facet of
Mackenzie's business operations.
3.2. Obligations to Fellow Employees. Mackenzie adheres to principles of
fair and equitable treatment in such areas as the evaluation of
employees, hiring, discipline, training and general interaction.
Mackenzie and its officers and directors are bound by the Civil Rights
Act, including the prohibition of discrimination or harassment of
others on the basis of race, color, language, national origin,
religion, creed, marital status or sex.
3.3. Knowledge. Officers, directors and employees of Mackenzie may be
required to attain a certain level of knowledge for their employment
duties.(4)
3.4. Obligation to Comply with the Law. Mackenzie and each of its officers,
directors and employees are required to comply with all of the laws
applicable to Mackenzie's business operations, including securities
laws governing the provision of investment advisory services, insider
trading and personal investment activities.
4. Conflicts of Interest
4.1. Policy. Officers, directors and employees of Mackenzie must avoid any
situation in which their personal interests conflict or appear to
conflict with their duties at Mackenzie (see "Personal Investing"
below for special restrictions affecting Access Persons and Investment
Persons, as defined in Section 7.2). Conflicts of interest may arise
in a number of ways and include, but are not limited to, the
following. Each example is accompanied by a rule governing disclosure.
(a) Example: A personal interest in a proposed business
transaction involving Mackenzie or in a business activity
also conducted by Mackenzie. (This would include the
interests of a family member or close personal friends.)
Rule: The interest or activity must be disclosed to
Mackenzie's Executive Committee.(5)
(b) Example: A proposed directorship in a business enterprise
(other than family firms, personal tax planning corporations
or businesses connected with hobbies or special interests
that do not occupy a significant portion of an officer's
time).
Rule: Officers and directors of Mackenzie must disclose
other directorships to the Chief Compliance Officer and must
obtain permission before accepting such positions from
Mackenzie's Executive Committee.
(c) Example: Involvement with outside political, charitable or
other business activities. -------
Rule: The involvement must be disclosed to Mackenzie's
Executive Committee.
(d) Example: An interest in the business of a supplier,
contractor, customer, competitor or other ------- company in
which Mackenzie has an investment.
Rule: The interest must be disclosed to Mackenzie's
Executive Committee.
(e) Example: A portfolio manager has beneficial ownership of a
security, and wishes to buy or sell the same security for
his or her managed portfolio.
Rule: The decision must be reviewed and confirmed by another
portfolio manager and disclosed to the Chief Compliance
Officer.
4.2. Disclosure Procedures. For any of the above conflicts of interest, it
is important that disclosure take place immediately after discovery.
Disclosure should be made to the Chief Compliance Officer or to any
other member of Mackenzie's Executive Committee. If there is any
uncertainty as to whether a conflict of interest exists:
(a) If you are an officer or director of Mackenzie, you should
discuss the matter (i) with the Chief Compliance Officer or
(ii) at a meeting of the Board of Directors of a Mackenzie
company.
(b) If you are an employee, you should discuss the matter with
the Chief Compliance Officer, who will determine whether the
matter should be disclosed to Mackenzie's Executive
Committee.
5. Gifts
5.1. Policy. No officer, director or employee of Mackenzie may accept gifts
or personal benefits from any individual, entity or business that does
(or is considering doing) business with or on behalf of Mackenzie or
Ivy Fund. Bona fide gifts of a nominal value (i.e., gifts whose
reasonable value is no more that $100 annually from a single giver),
and customary business lunches, dinners, entertainment (e.g., sporting
events) and promotional items (e.g., pens and mugs) may, however, be
accepted. Extraordinary or extravagant gifts are not permissible and
must be declined or returned. If you receive any gift that might be
prohibited under this Code, you must inform MIMI's Compliance
Department. All solicitation of gifts or gratuities is unprofessional
and is strictly prohibited.
6. Insider Trading
6.1. Policy. Every officer, director/trustee and employee of Mackenzie and
the Funds is prohibited from trading, either personally or on behalf
of others (such as mutual funds, and private accounts managed by MIMI
or IMI), on the basis of material non-public information or
communicating material non-public information to others in violation
of the law (referred to herein as "Insider Trading"). Each of
Mackenzie's and Ivy Fund's policy against insider trading (the
"Insider Trading Policy") applies to every officer, director/trustee
and employee of Mackenzie and the Funds and extends to activities
within and outside his or her duties with Mackenzie (or the Funds, as
applicable). Every officer, director/trustee and employee of Mackenzie
and the Funds must read and retain this policy statement. Any
questions regarding the Insider Trading Policy and procedures should
be referred to the President of MIMI (or his or her duly appointed
designee) or the Chief Compliance Officer.
6.2. Explanation of Terms. Following are explanations of terms used in the
Policy.
(a) Insider. The law has left this definition intentionally
broad. An insider may include officers, directors/trustee
and employees of a company. In addition, a person may be a
"temporary insider" if he or she enters into a special
confidential relationship in the conduct of a company's
affairs and as a result is given access to information
solely for the company's purposes. Mackenzie may become a
temporary insider of a company it advises or for which it
performs services.
(b) Insider Trading. The term "insider trading" is not defined
in the Federal Securities Laws, but generally is used to
refer to the use of material non-public information to trade
in securities (whether or not one is an "insider") or to the
communications of material non-public information to others.
While the law concerning insider trading is not static, it
is generally understood that the law prohibits:
o trading by an insider, while in possession of
material non-public information.
o trading by a non-insider while in possession of
material non-public information, where the
information was disclosed to the non-insider in
violation of an insider's duty to keep it
confidential.
o communicating material non-public information to
others.
(c) Material Information. Trading on inside information is not a
basis for liability unless the information is material.
Generally speaking, information is material if there is a
substantial likelihood that a reasonable investor would
consider it important in making his or her investment
decisions, or if the information is reasonably certain to
have a substantial effect on the price of a company's
securities. Information that officers, directors/trustees
and employees of Mackenzie and the Funds should consider
material includes, but is not limited to: dividend changes,
earnings estimates, changes in the previously released
earnings estimates, significant merger or acquisition
proposals or agreements, major litigation, liquidation
problems and other unusual management developments.
(d) Non-Public Information. Information is non-public until it
has been effectively communicated to the marketplace. One
must be able to point to some fact to show that the
information is generally public. For example, information
found in a report filed with the Securities and Exchange
Commission (the "SEC"), or appearing in a newspaper, or
other publication of general circulation, would be
considered public.
6.3. Penalties for Insider Trading. Penalties for trading or communicating
material non-public information are severe, both for individuals and
their employers. A person may be subject to some or all of the
penalties below even if he or she does not personally benefit from the
violation of the law. Penalties include, but are not necessarily
limited to:
- civil injunctions
- treble damages
- disgorgement of profits
- jail sentences
- fines of up to three times the profit gained, or
loss avoided, whether or not the individual
benefited
- fines for the employer of up to the greater of
$1,000,000 or three times the profit gained, or
the loss avoided
Any violation of the Insider Trading Policy could also result in
serious sanctions by Mackenzie, including immediate dismissal.
6.4. Procedures for Identifying Insider Trading. The following procedures
have been established to aid the officers, directors/trustees and
employees of Mackenzie and the Funds in avoiding insider trading, and
to aid Mackenzie and the Funds in preventing, detecting and
determining appropriate sanctions against insider trading. Every
officer, director/trustee and employee of Mackenzie and/or the Funds
must follow these procedures or risk serious sanctions, including
immediate dismissal, substantial personal liability and criminal
penalties.
Before trading for yourself or others, including any of the Funds and
private accounts managed by Mackenzie or in securities of a company
about which you may have potential inside information, ask yourself
the following questions:
(a) Is the information material? Would an investor consider the
information important in making his or her investment
decisions? Is it likely that the information would
substantially affect the market price of the securities if
generally disclosed?
(b) Is the information non-public? To whom has this information
been provided? Has this information been effectively
communicated to the marketplace by being published?
6.5. Possession of Material and Non-Public Information. If, after
considering the above, you believe that the information you possess is
both material and non-public, or if you have questions as to whether
the information is both material and non-public, you should take the
following steps:
(a) Report the matter to the Chief Compliance Officer.
(b) Do not purchase or sell the securities on behalf of yourself
or others.
(c) Do not communicate the information to persons outside of
Mackenzie, other than to its legal counsel.
(d) After the Chief Compliance Officer has reviewed the matter,
you will be instructed to continue to abide by the
prohibitions against trading and communication, or you will
be allowed to trade and communicate the information.
6.6. Restricting Access to Material Non-Public Information. Information in
your possession that you identify as material and non-public may not
be communicated to anyone, including persons within Mackenzie, except
as provided above. In addition, care should be taken so that such
information is secure. For example, files containing material
non-public information should be sealed, and access to computer files
containing material non-public information should be restricted.
6.7. Resolving Issues Concerning Insider Trading. If you are uncertain as
to the meaning or application of the foregoing procedures with respect
to certain information in your possession, you should discuss the
matter with the President of MIMI (or his or her duly appointed
designee) before trading or communicating the information to anyone.
7. Personal Investing
Certain officers, directors/trustees and employees of Mackenzie and/or the Funds
may have access to (i) information of a confidential nature about the companies
in which they invest that has not been made public, and (ii) information
concerning proposed purchases or sales of securities by the Funds or private
accounts managed by Mackenzie. Mackenzie and the Funds have adopted the
following guidelines relating to personal investing that are designed to prevent
such persons from engaging in inappropriate trading activity.
7.1. General Principles. All personal securities transactions by Access
Persons (as defined below) are governed by the following general
principles:
- It is the duty of each Access Person to place the
interests of Mackenzie's advisory clients (both
the Funds and private accounts) first.
- It is absolutely necessary and is the
responsibility of each Access Person to comply
with the Code and to avoid actual and/or potential
conflicts of interest in personal securities
transactions.
- It is essential that each Access Person realizes
that the Code prohibits him or her from taking
inappropriate advantage of his or her position
with and/or relationship to any Fund or private
account managed by MIMI or IMI.
7.2. Definitions
(a) Access Person. Either a Class 1 Access Person or a Class 2
Access Person.
(b) Account. Any personal account of an Access Person; any joint
or tenant-in-common account in which an Access Person has an
interest or is a participant; any account for which the
Access Person acts as trustee, executor, or custodian; any
account over which the Access Person has investment
discretion or otherwise can exercise control (other than
non-related clients' accounts over which the Access Person
has investment discretion), including accounts of entities
controlled directly or indirectly by the Access Person; any
securities account of a member of an Access Person's
Immediate Family; and any other account in which the Access
Person has a direct or indirect beneficial interest (other
than such accounts over which the Access Person has no
investment discretion and cannot otherwise exercise
control).
(c) Advisory Person. (i) Any employee of a Fund or Mackenzie who
in connection with his or her regular functions or duties
makes or participates in making recommendations, or obtains
information, regarding the purchase or sale of Securities by
a Fund; and (ii) any natural person in a control
relationship (25% ownership) with respect to a Fund, IMI or
MIMI who obtains information concerning recommendations made
to the Fund with regard to its purchase or sale of
Securities.(6)
(d) Beneficial Interest. Any opportunity to share, directly or
indirectly, in any profit or loss on a transaction in
securities, including but not limited to all joint accounts,
partnerships, and trusts.
(e) Class 1 Access Person. Any director, trustee, officer or
Advisory Person of the Funds, MIMI or IMI, except for any
director of MIMI who is a Class 2 Access Person, as defined
below. The term "Class 1 Access Person" also includes any
director or officer of IMDI who in the ordinary course of
his or her business makes, participates in, or obtains
information regarding the purchase or sale of securities for
the Funds or whose functions relate to the making of any
recommendations with respect to such purchases or sales.
(f) Class 2 Access Person. Any director of MIMI that is not an
"interested person" of MIMI, as defined in the 1940 Act. No
person shall be deemed to be an interested person of MIMI
solely by reason of (i) his or her being a member of its
board of directors or advisory board or an owner of less
than 5% of its securities or the securities of Mackenzie
Financial Corporation, or (ii) his or her membership in the
immediate family of any person in clause (i).
(g) Security. Any security, as defined in Section 2(a)(36) of
the 1940 Act, and any financial instrument related to a
security or commodity, including futures, options on futures
and other derivative instruments, and any security that is
exchangeable for or convertible into any security that is
held or to be acquired by a Fund.
(h) Immediate Family. Any person living in the same household as
the Access Person; any person to whose support the Access
Person materially contributes; the Access Person's children
(including adopted children); and the Access Person's
spouse.
(i) Independent Fund Trustee. A trustee (or a director) of Ivy
Fund who is not an "interested person" of Ivy Fund within
the meaning of Section 2(a)(19) of the 1940 Act.
(j) Investment Person. (i) Any employee of a Fund or Mackenzie
who in connection with his or her regular functions or
duties makes or participates in making recommendations
regarding the purchase or sale of Securities by a Fund; and
(ii) any natural person in a control relationship (25%
ownership) with respect to a Fund, IMI or MIMI who obtains
information concerning recommendations made to the Fund with
regard to its purchase or sale of Securities.
7.3. Exempted Transactions. The trading restrictions, preauthorization and
reporting provisions set forth in this Section 7 do not apply to
purchases or sales of securities that:
(a) are effected in an account or in a manner over which the
Access Person has no direct or indirect influence or
control;
(b) the Funds are not permitted to purchase or sell, based on
their investment policies and restrictions;
(c) are effected pursuant to a systematic dividend reinvestment,
cash purchase or withdrawal plan;
(d) are effected in connection with the exercise or sale of
rights to purchase additional Securities from an issuer and
granted by such issuer pro rata to all holders of a class of
its Securities; or
(e) are (i) direct obligations of the U.S. Government, (ii)
bankers' acceptances, bank certificates of deposit,
commercial paper and high quality short-term debt
instruments (including repurchase agreements); or (iii)
shares of an open-end investment company registered under
the 1940 Act.
7.4. Policy on Personal Investments
(a) General restrictions affecting Access Persons.
(1) A Class 1 Access Person may not enter an order for
the purchase or sale of a Security that a Fund or
private account is, or is considering, purchasing
or selling until two days after the Fund's or
private account's transaction in the Security has
been completed. (See also Section 7.4(b)(1)
below.)
(2) A Class 1 Access Person must obtain prior written
authorization (see Section 7.5(b) below) for all
Securities transactions in an Account.
(b) Additional restrictions affecting Investment Persons.
(1) An Investment Person may not buy or sell a
Security within seven days before a Fund or
private account managed by the Investment Person
trades in the Security. Any transactions in
violation of this restriction must be unwound, if
possible, and the profits must be disgorged (to a
Fund or to a charity).
(2) Investment Persons are prohibited from profiting
in the sale and purchase, or purchase and sale,
within 60 days of the same or equivalent
Securities. Any profits from short-term trading
must be disgorged (to a Fund or to a charity).
Nothing in this restriction will be deemed to
prohibit avoidance of loss through trading within
a period shorter than 60 calendar days.
(3) An Investment Person may not serve on the board of
directors of a publicly traded company.
(c) Private Placements.
(1) Any authorization with respect to a private
placement transaction will take into account
whether the investment opportunity in question
should be reserved for a Fund or private account
managed by MIMI or IMI, and whether the
opportunity is being offered to the person by
virtue of his or her position with the Fund. A
record of any such authorization, including the
reasons supporting it, will be maintained for at
least five years after the end of the fiscal years
in which it was granted.
(2) An Investment Person who has been authorized to
acquire securities in a private placement must
disclose the investment if he or she is involved
in any subsequent consideration of the securities
of that issuer by a Fund or a private account
managed by MIMI or IMI. Thereafter, any decision
to acquire the issuer's securities on behalf of
the Fund or private account must be reviewed and
authorized by an Investment Person, after
consultation with the Chief Compliance Officer,
who has no personal interest in the issuer.
7.5. Compliance Procedures
(a) Securities Holdings and Activity Reports by Access Persons.
Following is a description of the reports that Access
Persons must file periodically with MIMI's Compliance
Department. Mackenzie will identify all Access Persons and
inform them of their reporting obligations. Unless otherwise
indicated, no report shall be construed as an admission by
the person making the report that he or she has any direct
or indirect Beneficial Interest in the security to which the
report relates. Each report submitted pursuant to this
Section will be reviewed by the Chief Compliance Officer (or
his or her duly appointed designee) and Mackenzie's Review
Committee (see Section 8.1 below).
(1) Initial and annual holdings reports: Within ten
(10) days of becoming an Access Person and
annually thereafter (by January 31), each Access
Person must submit to MIMI's Compliance Department
a report (substantially in the form of Schedules C
and D hereto, respectively) that contains the
following information:
- The title, number of shares and principal amount
of each Security in which the Access Person has
(or had during the relevant time period) a direct
or indirect Beneficial Interest; and
- the name of any broker, dealer or bank with whom
the Access Person maintains (or maintained during
the relevant period) any Account.
(2) Quarterly reports: Subject to Subparagraph (c)
below, within 10 days after the end of each
calendar quarter each Access Person must submit to
MIMI's Compliance Department a report
(substantially in the form of Schedule E hereto)
that contains the following information:(7)
(i) With respect to any transaction during
the quarter in a Security in which the
Access Person had any direct or indirect
Beneficial Interest:
- The date of the transaction, the title of the
Security, the interest rate and maturity date (if
applicable), the number of shares, and the
principal amount;
- the nature of the transaction (i.e., purchase,
sale, etc.);
- the price of the Security at which the transaction
was effected;
- the name of the broker, dealer or bank with or
through which the transaction was effected; and
- the date the report is submitted by the Access
Person.
(ii) With respect to any Account established
by the Access Person in which any
Securities were held during the quarter
for the Access Person's direct or
indirect Beneficial Interest:
- The name of the broker, dealer or bank with whom
the Access Person established the Account;
- the date the Account was established; and
- the date the report is submitted by the Access
Person.
(3) Trade confirmations (Class 1 Access Persons only):
In addition to the foregoing reports, each Class 1
Access Person must direct his or her broker to
provide to MIMI's Compliance Department, on a
timely basis, duplicate copies of confirmations of
all personal securities transactions in the Class
1 Access Person's Account(s) and copies of
periodic (e.g., quarterly) Account statements. If
a Class 1 Access Person is unable to arrange for
duplicate confirmations and periodic Account
statements to be sent, he or she must notify the
Compliance Department immediately.
(b) Pre-clearance of trades: Attached as Schedule B is a sample
memorandum to be used by Class 1 Access Persons (including
Investment Persons) for the purpose of obtaining prior
authorization of transactions in Securities in an
Account.(8) Such authorizations (i) may only be given by
MIMI's President (or his or her duly appointed designee),
(ii) must be in writing, and (iii) are valid for only 24
hours from the time authorization is granted.(9) MIMI's
President (or his or her duly appointed designee) will send
a copy of each completed authorization form to MIMI's
Compliance Department and to the person seeking
authorization. The 24 hour period during which the
authorization is valid commences when the authorization is
received by the person requesting it. No order for a
securities transaction for which preauthorization is
required may be placed prior to such receipt.
MIMI's President (or his or her duly appointed designee, if
applicable) is not required to give any explanation for
refusing to authorize a given securities transaction.
(c) Special rules governing Independent Fund Trustees. The
trading, preauthorization and reporting requirements set
forth in this Section 7 will not apply to any Independent
Fund Trustee, except with respect to the quarterly report
described in Section 7.5.(a)(2) above in the case of an
Independent Fund Trustee who knew, or in the ordinary course
of fulfilling his or her official duties as an Independent
Fund Trustee, should have known, that during the 15-day
period immediately before or after the date of a given
transaction in a Security by the Independent Fund Trustee a
Fund purchased or sold the Security or the Fund (or IMI, on
the Fund's behalf) considered purchasing or selling the
Security. An Independent Fund Trustee may not purchase or
sell any such Security until the day after a Fund's
transaction in the Security has been completed, unless the
Chief Compliance Officer determines that it is clear that,
in view of the nature of the Security and the market for the
Security, the Independent Fund Trustee's transaction is not
likely to affect the price paid for or received by the Fund.
Absent such a finding, the transaction is considered
prohibited and any profits related thereto must be disgorged
(to a Fund or to a charity).
8. Review, Enforcement and Other Administrative Matters
8.1. Investigating and reporting of Code violations; Sanctions. Mackenzie
has established a Code of Ethics Review Committee (the "Review
Committee") that is responsible for investigating (directly or through
delegation) any reported or suspected violation of the Code,
determining sanctions, and reporting such matters to the President of
MIMI and to the Board of Trustees of the Funds.(10)
If the Review Committee determines that an Access Person has violated
the Code, the Committee may impose sanctions and take other actions as
it deems appropriate, including (but not limited to) (i) issuing a
letter of caution or warning, (ii) suspending personal trading rights,
(iii) suspending or terminating employment (with or without
compensation), (iv) assessing fines, and (v) referring the matter to
the SEC (for possible civil action) or another appropriate
prosecutorial authority (for possible criminal action). As part of any
sanction, the Review Committee may require the Access Person to
reverse the trade(s) in question and forfeit any profit (or absorb any
loss) from the trade. The Review Committee has sole authority to
determine the appropriate disposition of any monies so forfeited.
Failure to abide by a directive to reverse a trade may result in the
imposition of additional sanctions.
The Review Committee will report to the Board of Trustees of Ivy Fund
information relating to the investigation of the violation, including
any sanctions imposed and disposition of any forfeited monies. The
Board of Trustees of Ivy Fund will have the power to modify or
increase the sanction as it deems appropriate, and may direct the
reversal of any given trade with respect to affected Fund(s).
8.2. Board review and approval. The Review Committee will review the Code
at least once a year in light of legal and business developments and
experience in implementing the Code. The Review Committee will prepare
an annual written report to the President of MIMI and the Board of
Trustees of Ivy Fund that:
(a) describes any issues arising under the Code since the last
annual report, including information about material
violations of the Code and sanctions imposed in response to
the material violations;
(b) identifies any recommended changes in existing restrictions
or procedures based on experience under the Code, evolving
industry practices, or developments in applicable laws or
regulations; and
(c) contains a certification to the effect that procedures have
been adopted that are reasonably necessary to prevent Access
Persons from violating the Code.
The Board of Trustees of Ivy Fund, including a majority of the
Independent Fund Trustees, shall approve the Code at least annually
based on its consideration of the foregoing report and (i) a
determination that the Code contains provisions reasonably necessary
to prevent Access Persons from violating the anti-fraud provisions of
Rule 17j-1(b) under the 1940 Act, and (ii) the certification described
in subparagraph (c) of this Subsection 8.2. The Board shall similarly
approve any material change to the Code within six months after such
change's adoption. The Board's determination as to whether to approve
the Code (or any material change to Section 7 hereof) should take into
consideration the extent to which the Code permits personal trading by
Access Persons (including Investment Persons).
8.3. Exceptions to the Code. Although exceptions to the Code will rarely,
if ever, be granted, MIMI's President (or his or her duly appointed
designee), after consultation with MIMI's Chief Compliance Officer,
may make exceptions, on a case-by-case basis, to any of the provisions
of this Code upon a determination that the conduct at issue involves a
negligible opportunity for abuse or otherwise merits an exemption from
the Code. All such exceptions must be in writing. MIMI's President (or
his or her duly appointed designee) will immediately report the
exception to the Review Committee and, in addition, will report the
exception to the Board of Trustees of Ivy Fund at the next regularly
scheduled Board meeting.
8.4. Alternative compliance requirements. The code of ethics, trading
restrictions, and preauthorization and reporting procedures of the
investment advisory firms listed below shall govern in the case of the
individuals identified in the right-hand column:
---------------------------- --------------------------------------------
Mackenzie Financial (i) MIMI's directors who are also officers
Corporation ("MFC") or directors of MFC and are located in
Canada and (ii) any employee of MFC who
in connection with his or her regular
functions or duties makes, participates
in, or obtains information regarding the
purchase or sale of Securities by Ivy
Global Natural Resources Fund.
---------------------------- --------------------------------------------
Northern Cross Investments Any employee of Northern Cross who in
Investments Ltd. ("Northern connection with his or her regular
Cross") functions or duties makes, participates
in, or obtains information regarding the
purchase or sale of Securities by Ivy
International Fund.
---------------------------- --------------------------------------------
Henderson Investment Any employee of Henderson who in connection
with his or her regular functions or duties
makes, participates in, or obtains informa-
tion regarding the purchase or sale of
Securities by Ivy European Opportunities
Fund or Ivy International Small Companies
Fund.
------------------------------ --------------------------------------------
Peter Cundill & Associates Any employee of Cundill who in connection
(Bermuda) Ltd. ("Cundill") with his or her regular functions or duties
functions or duties makes, participates
in, or obtains information regarding the
purchase or sale of Securities by Ivy
Cundill Value Fund.
------------------------------ --------------------------------------------
8.5. Disclosure; Filing of Code with SEC. Each Fund's Statement of
Additional Information shall state (i) that the Fund, MIMI, IMI and
IMDI have adopted this Code and whether Access Persons may invest in
Securities, including those in which the Fund may invest; (ii) that
the Code (a) can be reviewed and copied at the SEC's public reference
room, and (b) is available from the EDGAR database; and (iii) copies
of the Code may be obtained from the SEC for a fee. This Code as well
as the code of each investment advisory firm identified in the
preceding table, and in each case any material amendments thereto,
shall be filed as exhibits to the Funds' respective Registration
Statements on Form N-1A.
8.6. Annual Confirmation. Each officer, director and employee of Mackenzie
will be asked to sign an annual certificate (substantially in the form
of Schedule A hereto) regarding his or her awareness of, and
compliance with, the Code.
8.7. Recordkeeping. Mackenzie will maintain and preserve the records
identified in Schedule F hereto.
8.8. Inquiries Regarding the Code. Please speak with the Chief Compliance
Officer if you have any questions about this Code or any other
compliance-related matters.
<PAGE>
Schedule A
CERTIFICATE / ACKNOWLEDGMENT
1. I hereby acknowledge receipt of the Mackenzie Code of Ethics and
Business Conduct Policy dated ______________, 2000 (the "Code").
2. I hereby certify that I have read, understand and am in full
compliance with the Code and agree to abide by its requirements and
procedures.
3. I hereby acknowledge that failure to comply fully with the Code may
subject me to disciplinary action, including, but not limited to,
immediate dismissal.
Signature Date
Officer/Director/Employee (circle one)
Please print your name
<PAGE>
Schedule B
MACKENZIE INVESTMENT MANAGEMENT INC.
CODE OF ETHICS AND BUSINESS CONDUCT POLICY
Request for Authorization of Securities Transaction(s)
TO: Keith J. Carlson (or his duly appointed designee)
CC: C. William Ferris
FROM: _____________________
DATE: _____________________
Pursuant to Subsection 7.5(b) of Mackenzie's Code of Ethics and Business Conduct
Policy (the "Code"), I hereby request that you authorize my purchase and/or sale
of the following Securities (as defined in the Code):
- ------------------ ------------------ ------------ --------------- ------------
Title Nature # of Price Per Broker/Bank
of Security of Transaction Shares Share
- ------------------ ------------------ ------------ --------------- ------------
- ------------------ ------------------ ------------ --------------- ------------
- ------------------ ------------------ ------------ --------------- ------------
- ------------------ ------------------ ------------ --------------- ------------
- ------------------ ------------------ ------------ --------------- ------------
Affirmation: I affirm that I (a) do not possess material non-public
information relating to any of the above-listed securities;
(b) am not aware of any proposed trade or investment program
relating to the securities by any of the Funds (as defined
in the Code); and (c) believe the proposed trade is
available to any market participant on the same terms.
Further, insofar as I am considered under the Code to be an
"Investment Person" I affirm that I have considered the
security for the Fund(s) that I manage and the reason I
decided not to purchase the security for the Fund(s) is:
______________________________________
Signature:__________________________ Authorized:
Note: This request may be communicated via E-mail, provided that this format
is duplicated. ----
- ---------------------------------------------------------------------------
Compliance Department Use
Your trade request has been approved and is valid for 24 hours from the date and
time shown below.
By: ____________________________ Date:______________________, ______[am/pm].
Chief Compliance Officer
<PAGE>
Schedule C
MACKENZIE INVESTMENT MANAGEMENT INC.
CODE OF ETHICS AND BUSINESS CONDUCT POLICY
Initial Securities Holdings Report by Access Persons
(Date on which the undersigned became an Access Person)
1. Statement of holdings: Please identify in the following table all
Securities* in which you had, or by reason of which you had acquired,
any direct or indirect Beneficial Interest* as of the date noted
above. (If you held no such securities, answer "None".)
Note: In lieu of entering the information requested below, you may
attach a copy of an account statement received from the broker, dealer
or bank; indicate the number of statements attached.
---------------------- ------------------------ -----------------------
Title of Security Number of Shares Principal Amount
---------------------- ------------------------ -----------------------
---------------------- ------------------------ -----------------------
---------------------- ------------------------ -----------------------
---------------------- ------------------------ -----------------------
2. Account information: Please identify in the space provided below the
name of any broker, dealer or bank with whom you maintain an Account.*
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
* As defined in Section 7.2 of Mackenzie's Code of Ethics and Business
Conduct Policy.
Signature: Name:
-------------------------------- -------------------------
(Please Print)
Date: ____________________
<PAGE>
Schedule D
MACKENZIE INVESTMENT MANAGEMENT INC.
CODE OF ETHICS AND BUSINESS CONDUCT POLICY
Annual Securities Holdings Report by Access Persons
January 31, 200__
1. Statement of holdings: Please identify in the following table all
Securities* in which you had, or by reason of which you had acquired,
any direct or indirect Beneficial Interest* as of the date noted
above. (If you held no such securities, answer "None".)
Note: In lieu of entering the information requested below, you may
attach a copy of an account statement received from the broker, dealer
or bank; indicate the number of statements attached.
----------------------- -------------------- -----------------------
Title of Security Number of Shares Principal Amount
----------------------- -------------------- -----------------------
----------------------- -------------------- -----------------------
----------------------- -------------------- -----------------------
----------------------- -------------------- -----------------------
2. Account information: Please identify in the space provided below the
name of any broker, dealer or bank with whom you maintain an Account.*
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
* As defined in Section 7.2 of Mackenzie's Code of Ethics and Business
Conduct Policy.
Signature: Name:
------------------------------- -------------------------
(Please Print)
Date: ____________________
<PAGE>
Schedule E
MACKENZIE INVESTMENT MANAGEMENT INC.
CODE OF ETHICS AND BUSINESS CONDUCT POLICY
Quarterly Report of Securities Transactions by Access Persons
For the Quarter Ending (check one):
March ___/June ___/September ___/December ___, 2000
1. Transaction Report: Please identify in the following tables all
transactions in Securities# during the calendar quarter noted above.
If no reportable transactions have occurred, answer "None". (Note: In
lieu of entering the information requested below, you may attach a
copy of an account statement received from the broker, dealer or bank
that includes all of the required information. Please indicate the
number of statements so attached.)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------------- ------------- ------------ ---------- ------------ ----------------- ------------------------
Price at which Broker/dealer/bank
Transac- Title of Number of Principal Transac- transaction was through which trans-
tion date: Security: shares: amount: tion type: effected: action was effected:
- -------------- ------------- ------------ ---------- ------------ ----------------- ------------------------
- -------------- ------------- ------------ ---------- ------------ ----------------- ------------------------
- -------------- ------------- ------------ ---------- ------------ ----------------- ------------------------
- -------------- ------------- ------------ ---------- ------------ ----------------- ------------------------
</TABLE>
2. Account information: Please identify in the following table the name
of any broker, dealer or bank with whom you established an Account in
which any Securities# were held during the quarter noted above for
your direct or indirect Beneficial Interest.#
--------------------------------- -----------------------------------
Broker, dealer or bank: Date Account established:
--------------------------------- -----------------------------------
--------------------------------- -----------------------------------
--------------------------------- -----------------------------------
--------------------------------- -----------------------------------
Affirmation: The information in Item 1 above is an accurate record of
every transaction in a Security in which I had or by reason
of which I acquired any direct or indirect Beneficial
Interest during the quarter noted above.
Signed: ________________________________ Date: ______________________
# As defined in Mackenzie's Code of Ethics and Business Conduct Policy.
<PAGE>
Schedule F
MACKENZIE INVESTMENT MANAGEMENT INC.
CODE OF ETHICS AND BUSINESS CONDUCT POLICY
Record Retention Requirements
The records listed in the following table must be maintained by Mackenzie at its
principal place of business, and must be made available to any representative of
the SEC at any time and from time to time for reasonable periodic, special or
other examination:
- -------------------------------- --------------------------------------------
Document description: Record retention requirement:
- -------------------------------- --------------------------------------------
A copy of the Code that is in Maintain in an easy accessible place.
effect or that was in effect at
any time during the last five
years.
- -------------------------------- --------------------------------------------
A record of any violation of the Maintain in an easily accessible place for at
Code and of any action taken as least five years after the end of the fiscal
a result of the violation. year in which the violation occurred.
- -------------------------------- --------------------------------------------
A copy of each report made by an Maintain for at least five years after the
Access Person, including any end of the fiscal year in which the report is
information provided in lieu of made of the information is provided, the
the reports required under the first two years in an easily accessible
Code. place.
- -------------------------------- --------------------------------------------
A records of all persons, Maintain in an easily accessible place.
currently or within the last
five years, who are or were
required to make reports under
the Code, or who are or were
responsible for reviewing such
reports.
- -------------------------------- --------------------------------------------
A copy of each report prepared Maintain for at least five years after the
by the Review Committee in end of the fiscal year in which the report
connection with the annual is made, the first two years in an easily
review by the Funds' Board accessible place.
described in Section 8.2 of
the Code
- -------------------------------- --------------------------------------------
In addition, Mackenzie will maintain a record of any decision (and the
supporting reasons therefor) to approve the acquisition by any Access Person of
(i) securities issued in an IPO; (ii) founders stock, promoter stock, or any
other similar stock of an issuer in the early stage of development; or (iii)
Securities issued in a private placement. Such records shall be maintained for
at least five years after the end of the fiscal year in which the approval is
granted.
<PAGE>
Schedule G
MACKENZIE INVESTMENT MANAGEMENT INC.
CODE OF ETHICS AND BUSINESS CONDUCT POLICY
Summary of Responsibilities
I. Board of Trustees of Ivy Fund:
- Approves the Code (and the code of any Fund subadvisor) at
least annually based upon a determination that the Code (and
each subadvisor's code) contains provisions reasonably
necessary to prevent Access Persons from violating the
anti-fraud provisions of the 1940 Act and upon a
consideration of the annual Review Committee report and
certification
- Approves, based upon a similar determination, any material
change to the Code (and each subadvisor's code) within 6
months after such change's adoption
- Receives reports of any exceptions to provisions of the Code
granted by the President of MIMI
- Reviews all investigation and sanction reports submitted by
the Review Committee
II. Access Persons
- File initial and annual holdings reports with the Compliance
Department
- File quarterly reports detailing any security transactions
and Accounts established
- (Class 1 Access Persons only:) Direct their brokers to
provide copies of all trade confirmations to the Compliance
Department
- (Class 1 Access Persons only:) Obtain prior written
authorization for all Securities transactions in an Account
III. Compliance Department:
- Administer the Code
- Receive and review all initial and annual holdings reports,
quarterly reports and trade confirmations
- Review all disclosures of conflicts of interest
- Respond to questions concerning conflicts of interest, the
Insider Trading Policy, requirements or application of the
Code, and other compliance related matters
- File the Code (and the code each Fund subadvisor) with the
SEC and prepare required Prospectus and/or Statement of
Additional Information disclosure*
- Coordinate with Fund subadvisors presentation of required
information to Fund Trustees
IV. Code of Ethics Review Committee:
- Investigate any reported or suspected violation of the Code
- Determine and impose appropriate sanctions for Code
violations
- Report all investigations and sanctions to the President of
MIMI and the Board of Trustees of each affected Fund
- Review the Code at least annually in light of legal and
business developments and experience in implementing the
Code
- Submit an annual written report to the President of MIMI and
the Board of Trustees of Ivy Fund describing any issues
arising under the Code, identifying any recommended changes
and containing a certification that procedures have been
adopted that are reasonably necessary to prevent Access
Persons from violating the Code
- Receive and review reports of any exceptions to provisions
of the Code granted by the President of MIMI
- -------------------------------------------
* Verify that Prospectus/SAI disclosure is consistent with any related
disclosure in MIMI's and IMI's respective Forms ADV.
FOOTNOTES:
(1) Ivy Fund is a registered open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). MIMI and
IMI provide investment advisory and business management services to
the separate series of shares of Ivy Fund (each, a "Fund", and
collectively, the "Funds"). IMDI is the Funds' principal underwriter.
IMSC is the Funds' transfer agent.
(2) A summary of the various actions that are required under the Code and
the persons responsible for carrying them out is set forth in Schedule
G.
(3) Each "Advisory Person" (as defined in Section 7.2) of MIMI and/or IMI
is also expected to adhere to the Standards of Professional Conduct of
the Financial Analysts Federation.
(4) For example, some persons may be asked to pass certain NASD series
tests or the chartered financial analyst's course required for
investment advisers.
(5) Mackenzie's Executive Committee is comprised of members of MIMI's
Board of Directors. Any member of the Executive Committee may be
contacted through the offices of MIMI (700 S. Federal Highway, Boca
Raton, Florida, (800) 456-5111).
(6) The difference between an "Advisory Person" and an "Investment Person"
(see Section 7.2(j)) is that the definition of "Advisory Person"
includes that class of persons who "obtain information" regarding the
purchase or sale of Securities by a Fund, but who are not necessarily
involved in the investment decisionmaking process. Unlike Advisory
Persons who are also Investment Persons, these persons (who merely
obtain information regarding fund investments) do not have significant
opportunities to influence investment decisions that may benefit them
personally, and therefore they are not subject to the special
preclearance requirements affecting Investment Persons (see Section
7.4(b)).
(7) An Access Person need not make the quarterly transaction reports
required by this Section if the information in the reports (i) would
duplicate information that is already being recorded pursuant to
Sections 204-2(a)(12) and/or 204-2(a)(13) of the Investment Advisers
Act of 1940 and/or (ii) is contained in broker trade confirmations or
account statements of the Access Person that have already been
delivered to Mackenzie and/or the Funds.
(8) Preclearance requests by Class 1 Access Persons must be accompanied by
an affirmation that the Access Person (a) does not possess material
non-public information relating to the listed security; (b) is not
aware of any proposed trade or investment program relating to the
security by any of the Funds; and (c) believes the proposed trade is
available to any market participant on the same terms. In the case of
Investment Persons, the request must also be accompanied by an
affirmation that the Investment Person has considered the security for
the Fund(s) that he or she manages. Such affirmation must also state
the reason the Investment Person decided not to purchase the security
for the Fund(s).
(9) Electronic transmissions (such as e-mail) are considered valid for
these purposes.
(10) The Review Committee is comprised of the President, Chief Compliance
Officer and Chief Investment Officer of MIMI, and may take action at
any meeting in which at least two members are present. Meetings may be
held in person or by telephone conference. A Review Committee member
whose actions are the subject of a given meeting may participate in
the meeting but may not participate in any determination by the other
members as to whether a Code violation has occurred and any associated
sanctions.
Exhibit (p)(2)
The Cundill Group of Companies'
Code of Ethics
TABLE OF CONTENTS
1. PURPOSE OF THE CODE....................................................2
1.1 Application of the Code............................................2
1.2 Our Responsibilities to Our Managed Accounts.......................2
1.3 Breach of Code.....................................................3
1.4 Annual Confirmation................................................3
1.5 Administration of the Code.........................................3
1.6 Supplement to Other Codes..........................................3
2. STANDARDS..............................................................3
2.1 Obligations to Clients.............................................3
2.2 Obligation to Comply with the Law..................................4
2.3 Duty to Know Applicable Securities Law.............................4
2.4 Registered Salespeople.............................................4
3. CONFIDENTIAL INFORMATION...............................................4
3.1 Ensuring Client Privacy............................................4
3.2 Confidentiality....................................................4
3.3 Accuracy of Information............................................4
3.4 Release of Confidential Information................................5
3.5 Duty to the Cundill Group..........................................5
3.6 Departure from the Cundill Group...................................5
4. CONFLICTS OF INTEREST..................................................5
4.1 General............................................................5
4.2 Personal Conflicts of Interest.....................................5
4.3 Disclosure.........................................................6
4.4 Who Determines if there is a Conflict of Interest where
there is Uncertainty?...........................................6
4.5 Policy With Respect to Gifts.......................................6
5. INSIDER TRADING........................................................7
5.1 Restrictions on Trades by Insiders.................................7
5.2 Penalties for Improper Insider Trading.............................8
5.3 Self-Dealing Restrictions..........................................8
5.4 Cross-Trading......................................................9
6. SPECIAL RULES FOR ACCESS PERSONS.......................................9
6.1 Who is an "ACCESS PERSON"..........................................9
6.2 Prohibited Activities.............................................10
6.3 Requirement for Independent Trading Decision......................11
6.4 Requirement to Obtain Prior Approval for Personal Trades..........12
6.5 Exempt Securities.................................................12
6.6 Procedures to Obtain Prior Approval...............................13
6.7 Blackout Periods..................................................15
6.8 Personal Trading Reporting Procedures.............................15
6.9 Compliance Review Procedures......................................16
7. REVIEW................................................................17
7.1 Annual Review of Code by Compliance Officer.......................17
7.2 Appointment of Independent Review Committee.......................17
7.3 Annual Report to the Committee....................................17
7.4 Annual Review of Code by the Independent Review Committee.........18
7.5 Principles Applicable to External Investment Advisors.............18
CERTIFICATE / ACKNOWLEDGEMENT..............................................19
APPENDIX "A"...............................................................20
APPENDIX "B"...............................................................20
APPENDIX "C"...............................................................20
<PAGE>
1. PURPOSE OF THE CODE
1.1 Application of the Code
Maintaining the highest standards of integrity and ethical business
conduct in the management of our mutual funds and other accounts
(collectively, the "Managed Accounts") is fundamental to the fair
treatment of investors. This can only be achieved by the employees,
officers and directors of the Cundill Group of Companies (as defined
below and hereafter the "Cundill Group") continuing to adhere to the
highest principles of conduct in the discharge of their duties.
The following companies comprise the Cundill Group:
- Cundill Investment Research Ltd.
- Peter Cundill Capital Ltd.
- PCLP Management Ltd.
- Peter Cundill Holdings Ltd.
- Peter Cundill Holdings (Bermuda) Ltd.
- Peter Cundill & Associates (Bermuda) Ltd.
- Peter Cundill & Associates, Inc.
- Peter Cundill & Associates (UK) Limited.
- Cundill International Company Ltd.
- Cundill Yen Fund (Bermuda) Ltd.
For greater certainty, Cundill Funds Inc., which is a wholly owned
subsidiary of Mackenzie Financial Corporation, is not a part of the
Cundill Group.
1.2 Our Responsibilities to Our Managed Accounts
(a) As an employee, officer or director of the Cundill Group, you
have to put the interests of our Managed Accounts first, ahead
of your personal self-interests. Above all, you must not take
unfair advantage of your position, knowledge or relationship
with the Managed Accounts, or engage in any conduct which is
not in the best interests of the Managed Accounts.
(b) In addition, if you are an "Access Person", described in
Section 6.1 of this Code, there are special rules in Section 6
which apply to your personal trading activities. Trading
transactions for the Managed Accounts must always have
priority over your personal trading transactions.
<PAGE>
1.3 Breach of Code
Failure to comply with the Code may be grounds for a warning, revision
of responsibilities, suspension or dismissal without further notice,
depending on the particular circumstances. Failure to comply with
certain sections of this Code may also be a violation of securities
law and may be punishable accordingly. All employees, officers and
directors have a duty to report any contravention of this Code which
comes to their notice, and to co-operate in the investigation of
possible breaches of this Code.
1.4 Annual Confirmation
Each employee, officer and director will be asked to sign a copy of
this Code on commencement of duties and on an annual basis confirming
his or her awareness of and agreeing to abide by the Code and its
provisions. If you are uncertain about any requirements or procedures
in this Code, you should contact the Compliance Officer.
1.5 Administration of the Code
The Code will be administered for all employees, officers and
directors by the senior officer designated for monitoring compliance
or by other persons designated by that senior officer (collectively
the "Compliance Officer" - Appendix C).
1.6 Supplement to Other Codes
The Code may be supplemented by any other Codes adopted by the Cundill
Group.
2. STANDARDS
2.1 Obligations to Clients
It is our policy to continue to maintain the highest standards of
service for our clients. The Cundill Group has a statutory and
fiduciary duty to its clients to act honestly, in good faith and in
the best interests of our Managed Accounts and their investors and to
exercise the degree of care, diligence and skill that a reasonably
prudent manager would exercise in the circumstances. This standard of
care extends to the service provided by all employees, officers and
directors in each facet of our business operations.
<PAGE>
2.2 Obligation to Comply with the Law
The Cundill Group and its employees, officers and directors are
required to comply with all legislation applicable to the Cundill
Group's business operations including Canadian provincial and United
States federal and state securities legislation ("Securities
Legislation") governing the provision of investment advisory services,
insider trading and reporting of insider transactions and similar
legislation of other jurisdictions in which the Cundill Group
operates.
2.3 Duty to Know Applicable Securities Law
As an employee, officer and director, you have a duty to know,
understand and comply with securities and other legislation applicable
to your duties and responsibilities. You should be aware that your
legal obligations may be more extensive than your obligations to the
Cundill Group and our Managed Accounts under this Code. If you are
uncertain about these requirements, contact the Compliance Officer for
guidance.
2.4 Registered Salespeople
If you are registered with securities regulators for the sale of
securities you are required to comply with the "Know Your Client"
rules as set out in the Securities Legislation with respect to any
client accounts for which you are the designated trading officer, in
addition to all other rules and regulations governing the sale of
securities.
3. CONFIDENTIAL INFORMATION
3.1 Ensuring Client Privacy
In the course of conducting its business, the Cundill Group must
obtain and use certain personal information relating to clients. To
ensure the privacy of its clients, the Cundill Group will conduct its
business in accordance with the following principles.
3.2 Confidentiality
Personal information that is collected and retained will be considered
to be confidential, and proper safeguards must be employed to protect
that confidentiality.
3.3 Accuracy of Information
Every reasonable effort must be made to ensure that personal
information collected, used, retained or disclosed is accurate,
relevant, timely and complete. A client will be encouraged to correct,
clarify or update personal information in a timely fashion.
3.4 Release of Confidential Information
Without the client's express written consent, the Cundill Group, its
employees, licensed representatives, officers or directors will not
permit inappropriate access to or disclosure of a client's personal
information to any person, except as may be required by legal process
or statutory authority.
3.5 Duty to the Cundill Group
Employees, officers and directors must not use any confidential
information for their own purposes or for purposes other than those of
the Cundill Group. This requirement of confidentiality extends beyond
the duty not to discuss private information and also applies to any
asset of the Cundill Group, including trade secrets, customer lists,
business plans, computer software, company records and other
proprietary information.
3.6 Departure from the Cundill Group
The duty of confidentiality applies to each employee, officer and
director even after leaving the Cundill Group regardless of the reason
for departing.
4. CONFLICTS OF INTEREST
4.1 General
When faced with a conflict with respect to services provided to our
Managed Accounts or to an investor in a Managed Account, we are
required to exercise the business judgement of responsible persons,
uninfluenced by considerations other than the best interests of the
Managed Account and the investors in our Managed Accounts.
4.2 Personal Conflicts of Interest
You must avoid any situation in which your personal interests conflict
or appear to conflict with your duties as an employee, officer or
director within the Cundill Group. Conflicts of interest may arise in
a number of ways and include the following categories:
(a) a personal interest in a proposed business transaction of
the Cundill Group or in a business activity also conducted
by the Cundill Group;
(b) a proposed directorship in a public company;
(c) shareholdings in excess of 5% in any public company in which
the Cundill Group or its Managed Accounts owns securities;
(d) use of the Cundill Group's name in connection with outside
political, charitable or other business activities;
(e) an interest in the business of a supplier, contractor,
customer, competitor or other company in which the Cundill
Group has an investment; or
(f) acceptance of gifts or other personal benefits from persons
who deal with the Cundill Group.
4.3 Disclosure
It is important that disclosure of potential conflicts of interest
takes place immediately after you become aware that there is a
potential conflict. If you know a conflict of interest exists or could
arise, provide all details of the conflict of interest to the
Compliance Officer immediately. Disclosure shall be made to the
Compliance Officer as the Compliance Officer is responsible for
resolving conflicts of interest, except that a director may make
disclosure directly to the Board of Directors of the Cundill Group
company of which he or she is a director.
4.4 Who Determines if there is a Conflict of Interest where there is
Uncertainty?
If you are uncertain as to whether a conflict of interest exists:
(a) as an employee or officer, you should discuss the potential
conflict of interest with the Compliance Officer who will
determine whether the matter should be disclosed to the
Boards of Directors of the companies in the Cundill Group;
and
(b) as a director, you may discuss the matter with the
Compliance Officer, or disclose the potential conflict at a
meeting of the Board of Directors of such company within the
Cundill Group of which you are a director.
4.5 Policy With Respect to Gifts.
As an employee, officer or director of the Cundill Group, you are
expected to take actions and make decisions based on an impartial and
objective assessment of the facts of each situation, free from the
influence of gifts, entertainment and other favours that might
adversely affect judgment. Similarly, the Cundill Group must avoid
both the fact and appearance of improperly influencing relationships
with the organizations and individuals with whom it deals. For these
reasons, the employees, officers, directors and governors of the
Cundill Group may only accept gifts or personal benefits from outside
or unrelated parties where they involve items of moderate value and
conform to the following basic principles:
(a) they are infrequent;
(b) they legitimately serve a definite business purpose;
(c) they are appropriate to the business responsibilities of the
individuals;
(d) they are within limits of reciprocation as a normal business
expense;
(e) they do not impose a sense of responsibility on the
recipient;
(f) they do not result in any kind of special treatment for the
donor;
(g) there is no effort made to conceal the full facts by either
the recipient or the donor.
In no case are you permitted to receive gifts of cash, commissions,
loans, shares in profit, securities or equivalent. Neither should you
accept gifts of more than a nominal value. For clarity, the Compliance
Officer should be informed of a gift or personal benefit received;
and, where the value of a gift or personal benefit exceeds $100, prior
approval is required before it can be accepted.
5. INSIDER TRADING
5.1 Restrictions on Trades by Insiders
(a) It is illegal for an insider or a person in a special
relationship with a publicly traded company to give any
information to another person before it has been generally
disclosed to the public, other than during the necessary
course of business, whether or not the other person uses the
information for trading purposes.
(b) It is also illegal for an insider or a person in a special
relationship with a publicly traded company to purchase or
sell securities of that company with knowledge of a material
change or a material fact relating to the company that has
not been generally disclosed to the public.
(c) A person in a special relationship to a publicly traded
company includes each insider, affiliate or associate of
that company and a person who was an insider, affiliate or
associate at the time of learning about the material change
or material fact, but who has ceased to hold that position.
(d) A "material change" is defined in the Securities Legislation
to be a change in the business, operations or capital of the
issuer that would reasonably be expected to have a
significant effect on the market price or value of any of
the securities of the issuer. In addition, a "material fact"
means a fact that significantly affects or could reasonably
be expected to have a significant effect on the market price
or value of such securities.
(e) Examples of material information would include:
i. an actual or proposed change in control of a
publicly traded company;
ii. a change in such company's dividend policy;
iii. a significant change in earnings or anticipated
earnings of such company;
iv. a merger or acquisition by such company; and
v. any other information which has not been generally
disclosed to the investing public which would be
likely to materially affect the price of such
company stock.
As an employee, officer and director of the Cundill Group, you may not
use for your own financial gain or disclose for the use of others,
inside information obtained as a result of their relationships with
any publicly traded company. Nor may the securities of a publicly
traded company in respect of which an employee, officer or director
has inside information be purchased or sold for a Managed Account
until such time as that information has been publicly disclosed.
5.2 Penalties for Improper Insider Trading
An insider or person in a special relationship who contravenes the
restrictions imposed by the Securities Legislation on insider trading
is liable on conviction to a fine of up to $1,000,000 and/or
imprisonment for a term of up to 2 years. Higher damages may apply in
certain circumstances.
5.3 Self-Dealing Restrictions
The self-dealing rules in the Securities Legislation prohibits the
following transactions:
(a) an investment by a Managed Account in any company in which
any employee, officer or director of the Cundill Group or
their associates owns more than 10% of the securities of the
company;
(b) an investment by any of our Managed Accounts in a company in
which any portfolio manager of the Cundill Group is an
employee, officer or director, unless that specific fact is
disclosed to the Managed Account and the written consent of
the client is obtained before the purchase; and
(c) the purchase or sale of the securities of any company from
or to a Managed - Account, manager of the Cundill Group or
their associates.
5.4 Cross-Trading
Portfolio managers may trade securities from one Managed Account to
another Managed Account only through mechanisms approved under the
Securities Legislation or applicable securities legislation in other
jurisdictions in which the Cundill Group operates for inter-fund
trading and only at a market price that is fair to each of the Managed
Accounts. In addition to meeting such other requirements, it may be
appropriate, for portfolio managers to obtain market value information
from more than one market source before completing the cross-trade
transaction.
6. SPECIAL RULES FOR ACCESS PERSONS
All "Access Persons" (as defined below) are subject to special rules
and restrictions with respect to trading in securities within accounts
covered by this Code (referred to as "personal trading") as set out in
this Section. Access Persons must not use any non-public information
about our Managed Accounts for their direct or indirect personal
benefit or in a manner which would not be in the best interests of our
Managed Accounts. That prohibition includes what is commonly called
"front-running" and it is not only a breach of our Code, but is
generally punishable under Securities Legislation and under the
securities laws of other jurisdiction in which the Cundill Group
operates.
Access Persons also must not use their position in the Cundill Group
to obtain special treatment or investment opportunities not generally
available to our Managed Accounts or the public. Although
non-management directors will not generally be considered to be Access
Persons under this Code, they must adhere to the same standards of
ethical conduct as Access Persons when they are in possession of
non-public information or if they are offered special treatment or
investment opportunities not generally available to the public by
reason of their role as a director of a company within the Cundill
Group.
6.1 Who is an "ACCESS PERSON"
(a) Access to Non-Public Trading Information. You are an Access
Person if you are an employee, officer or director who has,
or is able to obtain access to, non-public information
concerning the portfolio holdings, the trading activities or
the ongoing investment programs of our Managed Accounts.
A list of all employees, officers and directors of the
Cundill Group is attached as Appendix A to this Code. You
can check whether or not you are considered to be an Access
Person by referencing this list. If your name is not on the
list, please notify the Compliance Officer immediately.
(b) These Restrictions Apply to Various Accounts. If you are an
Access Person, the restrictions apply to:
i. accounts registered in your name;
ii. accounts for which you are able to, directly or
indirectly, exercise investment or voting control;
and
iii. accounts in which you have a "beneficial
interest".
(c) What is a "Beneficial Interest". You have a beneficial
interest in an account if you are in a position to receive
benefits comparable to ownership benefits (through family
relationship, understanding, agreement or by other
arrangements) or you have the ability to gain ownership,
either immediately or at some future time.
(d) Examples of Beneficial Interest. You are considered to have
a beneficial interest in accounts:
i. registered in your name;
ii. held by your spouse or other family members living
in the same household;
iii. held by a corporation, partnership or other entity
in which you participate in the investment or
voting decisions;
iv. held in trust for you or those listed above,
unless
A. the trustee is someone other than your spouse or other
family members living in the same household; and
B. you are not able to, directly or indirectly, exercise
investment or voting control over the account; and
v. held by an investment club, of which you or those
listed above participate in the investment or
voting decisions.
The above examples are not exhaustive of all situations in which a
beneficial interest can exist. If you are uncertain about whether a
beneficial interest exists, or wish to obtain an exemption for a
specific account, contact the Compliance Officer.
6.2 Prohibited Activities
The following activities are prohibited:
i. violating Securities Legislation or securities
laws of those other jurisdictions in which the
Cundill Group operates;
ii. communicating any non-public information
concerning our funds or their investment trading
to anyone outside the Cundill Group;
iii. inducing a Managed Account to take, or fail to
take, any action because of personal interests;
iv. using knowledge of a Managed Account's portfolio
transactions to profit by the market effect of
such transactions (e.g. "front-running" or similar
activities);
v. using your position in the Cundill Group to obtain
special treatment or investment opportunities not
generally available to our Managed Accounts or the
public;
vi. a purchase by an Access Person of an offering
which is subject to allocation, such as a new or
secondary public offering or a private placement
(other than the limited private placement
exceptions set out in Section 6.6 (c));
vii. a trade by an Access Person to or from one of our
Managed Accounts;
viii. a trade by an Access Person in a security for
which there is an unfilled order outstanding by
any of our Managed Accounts; and
ix. the use of derivatives to evade the restrictions
imposed by this Code.
Other activities which are not specifically listed may still be
inappropriate if they would place you in a position of conflict with
the best interests of our Managed Accounts. If you are uncertain about
whether a particular activity may be prohibited, contact the
Compliance Officer.
6.3 Requirement for Independent Trading Decision
If a portfolio manager personally has registered ownership, can
exercise investment or voting control or has a beneficial interest in
a security, and wishes to buy or sell a security of the same issuer
for a Managed Account, that decision must be reviewed and confirmed by
another portfolio manager or independent person uninfluenced by any
factor other than whether the proposed trade is in the best interests
of the Managed Account. The decision to buy or sell the security for
the Managed Account must be reported to the Compliance Officer along
with supporting reasons for the decision.
6.4 Requirement to Obtain Prior Approval for Personal Trades
All Access Persons must obtain prior approval from the Compliance
Officer for a personal trade. Only the securities listed in Section
6.5 are exempt from this pre-clearance process. All other trades must
be pre-cleared and will only be approved if the Compliance Officer is
satisfied that the personal trade will not conflict with the best
interests of our Managed Accounts and has not been offered to you
because of your position in our the Cundill Group.
6.5 Exempt Securities
The following securities are exempt from the pre-clearance and
reporting procedures in this Code:
i. securities of open-end mutual funds, segregated
funds and pooled trust funds;
ii. securities issued or guaranteed by the Government
of Canada, or the government of any province in
Canada;
iii. securities issued or guaranteed by the Governments
of the United States, United Kingdom, Germany,
Japan, France, and Italy;
iv. guaranteed investment certificates, certificates
of deposit, and other deposits with financial
institutions (although they may not technically be
"securities");
v. short-term debt securities maturing in less than
91 days from their date of issue;
vi. options, futures or other derivatives on any
broadly based market indices approved by the
Compliance Officer;
vii. physical commodities or securities relating to
those commodities; and
viii. securities of the Cundill Group and its
affiliates, in which our Managed Accounts are
prohibited from investing.
The above securities have been designated as exempt securities because
trading in those securities by Access Persons will generally not
affect the price of the securities or limit their availability to our
Managed Accounts, or because trading in those securities by our
Managed Accounts will not provide a personal benefit to the Access
Person.
<PAGE>
6.6 Procedures to Obtain Prior Approval
The following procedures have been adopted to ensure that only
personal trades which do not conflict with the best interests of our
Managed Accounts and which do not provide a benefit to the Access
Person from any anticipated Managed Account trading will be approved
by the Compliance Officer:
(a) No Conflict by Access Person. The Access Person must in
written form advise the Compliance Officer that he or she:
i. does not possess material non-public information
relating to the security;
ii. is not aware of any proposed trade or investment
program relating to that security by any of our
Managed Accounts;
iii. believes the proposed trade has not been offered
because of the Access Person's position in the
Cundill Group and is available to any market
participant on the same terms;
iv. believes the proposed trade does not contravene
any of the prohibited activities listed in Section
6.2; and
v. will provide any other information requested by
the Compliance Officer concerning the proposed
personal trade.
(b) Special Rules for Portfolio Managers and Research Analysts. If
you are a portfolio manager or research analyst you must also
provide the following information to the "Senior Portfolio
Manager" (as designated from time to time for the purposes of
this Code):
i. a complete description of the security (name of
issuer and details of the security);
ii. a summary of the key financial characteristics of
the issuer and, where applicable, an estimate of
net asset value per unit of the security; and
iii. an explanation why the security is suitable for
the proposed personal trade, but not for purchase
by our Managed Accounts.
(c) Special Rules for Private Placements. Private placements
will not be approved unless, in addition to the requirements
for the approval of other trades, the Compliance Officer is
satisfied that the issuer is a "private company" under the
Securities Legislation or similar applicable legislation in
other jurisdictions in which the Cundill Group operates and
the Access Person has no reason to believe that the issuer
will make a public offering of its securities in the
foreseeable future.
Examples include:
i. Shares, units or similar evidence of ownership of
private companies, private partnerships and other
issuers where the Access Person has a close
personal or business relationship (other than a
relationship arising from the Access Person's
position with the Cundill Group) with the founder
or promoter of the issuer; and
ii. tax shelters which are generally available on a
private placement basis.
(d) Compliance Officer Review. The Compliance Officer will
review all relevant information and will only grant approval
for the proposed personal trade if the Compliance Officer is
satisfied that the trade will not be contrary to the best
interests of our Managed Accounts, and does not contravene
any of the other restrictions imposed by this Code. In the
case of a personal trade proposed by a portfolio manager or
research analyst, the Compliance Officer will not approve
the proposed personal trade until the Senior Portfolio
Manager (Appendix B) has given his or her written approval.
(e) Restricted List. The Compliance Officer will maintain a list
of companies (the "Restricted List") in respect of which:
i. a trade or investment program on behalf of our
Managed Accounts, whether to purchase or sell
securities, is under consideration, proposed,
outstanding or incomplete;
ii. any Access Person has inside information;
iii. the Cundill Group and our Managed Accounts have a
significant ownership interest on an aggregate
basis (20% or more of the voting securities);
iv. any employee, officer or director of the Cundill
Group owns more than 10% of the outstanding
securities; or
v. it is determined that regulatory restrictions
preclude investment by our Managed Accounts.
(f) Approval Withheld. The Compliance Officer will not approve a
proposed personal trade ------------------ in a security on
the Restricted List until:
i. all trading for our Managed Accounts has been
completed; and
ii. any material non-public information has been made
public.
(g) Trading Approval Period. The Compliance Officer will determine
the period of time during which the Access Person may conduct
the approved trade. The Access Person must re-apply for prior
approval if any part of the approved trade has not been
completed by the end of the trading approval period and the
Access Person still wishes to complete the remainder of the
trade.
(h) De Minimus and Other Exception Rules. The Compliance Officer
may develop de minimus and other exception rules to permit a
personal trade to proceed where there is no likelihood of the
trade being contrary to the best interests of our Managed
Accounts. For example, the Compliance Officer may elect to
waive the 5 trading days blackout period described below where
the Managed Accounts have disposed of all of their shares of
the relevant security and the Access Person also wishes to
sell the same security.
6.7 Blackout Periods
If the Access Person is a portfolio manager, the Compliance Officer
will generally not approve the proposed trade if there has been
trading in a security of the same issuer by the Managed Accounts for
which the portfolio manager is responsible within the previous 5
trading days. In all other cases, the Compliance Officer will
generally not approve the proposed trade by the Access Person if there
has been trading in a security of the same issuer by any of our
Managed Accounts within the previous trading day.
6.8 Personal Trading Reporting Procedures
If you are an Access Person, you must:
(a) Initial List of Holdings. Upon commencing employment with
the Cundill Group, provide the Compliance Officer with a
complete list (the number of securities and the names of the
securities) of the securities for all of your accounts
covered by this Code.
(b) Copies of Account Statements. Instruct your dealer to
provide duplicate copies of all statements for your accounts
covered by this Code on a timely basis to the Compliance
Officer.
(c) Confirmations of Trades. Instruct your dealer to provide
duplicate copies of all confirmation slips for your accounts
covered by this Code on a timely basis to the Compliance
Officer.
(d) Quarterly Report. Provide a report within 10 days of each
quarter-end disclosing all personal trading transactions
which occurred during that quarter.
(e) Annual Reports of Holdings. Provide a report within 35 days
of each calendar year-end listing the number and name of all
personal securities holdings for your accounts covered by
this Code, or confirm to the Compliance Officer that the
reports submitted during the year under (b) and (c) above
include all personal securities holdings for your accounts
covered by this Code.
6.9 Compliance Review Procedures
(a) Review of Reported Trades. The Compliance Officer will
review on a regular basis reporting by Access Persons to
ensure compliance with the personal trading procedures in
this Code.
(b) Confidentiality of Information. All information received by
the Compliance Officer will be kept confidential and will
only be disclosed to others if the disclosure is required to
administer this Code or is required by securities regulators
or other competent legal authorities. Both the Compliance
Officer and the Access Person are required to keep details
of personal trading approval requests confidential (whether
the trades are permitted or denied), subject to any legal
obligation to report the trade under Securities Legislation
or those of any other jurisdiction in which the Cundill
Group operates.
(c) Enforcement of Personal Trading Procedures. The Compliance
Officer will report any violations of the personal trading
procedures, and the action taken by the Cundill Group, to
the Independent Review Committee designated under Section 7
of this Code.
(d) Breach of Code. You must report to the Compliance Officer
any violations of this Code which come to your attention. If
you breach any of the provisions of this Code, knowingly or
unknowingly, you may be issued a written warning, have your
employment responsibilities revised, be required to forfeit
any trading profits, be suspended or be terminated. You also
may face additional punishment under Securities Legislation.
You must cooperate fully in any investigations initiated by
the Company under this Code or by securities regulators or
other competent legal authorities.
<PAGE>
7. REVIEW
7.1 Annual Review of Code by Compliance Officer
The Compliance Officer will review this Code at least annually to
update it for any changes in the law. Subsequently, the Code will be
reviewed annually by the Board of Directors of every company within
the Cundill Group which is registered with the securities regulators.
7.2 Appointment of Independent Review Committee
(a) The Cundill Group will appoint from time to time one or more
individuals each of whom is independent of management of the
Managed Accounts and is not an Access Person, as the
Independent Review Committee (Schedule "D"). Each is free
from any interest and any business or other relationship
which could, or could reasonably be perceived to, materially
interfere with his ability to act in the best interests of
Managed Account investors under this Code.
(b) The Committee will be responsible for approval of all personal trading
rules and other provisions of this Code and for monitoring the
administration of the Code from time to time. The Independent Review
Committee has approved the provisions of this Code.
7.3 Annual Report to the Committee
The Compliance Officer will provide a written report, at least
annually, to the Independent Review Committee summarizing:
i. compliance with the Code for the period under
review;
ii. violations of the Code for the period under
review;
iii. sanctions imposed under the Code by the Cundill
Group during the period under review;
iv. whether the Cundill Group's external investment
advisors, if any, have confirmed that they have
complied with the basic principles set out in
section 7.5 of this Code in providing investment
advisory services to the Cundill Group's Managed
Accounts during the period under review;
v. changes in procedures recommended for the Code;
and
vi. any other information requested by the Committee.
7.4 Annual Review of Code by the Independent Review Committee
After receiving the Compliance Officer's report, the Independent
Review Committee will review the Code to ensure that the Cundill
Group's administration of the Code is adequate, and to identify any
amendments which may be necessary in light of legal and business
developments and the Cundill Group's experience in administering the
Code. The Committee will recommend such amendments to the Cundill
Group companies' Boards of Directors for consideration.
7.5 Principles Applicable to External Investment Advisors
In order to exercise our statutory standard of care as manager of our
Managed Accounts, the Cundill Group will require each external
investment advisor to confirm in writing that, in providing investment
advisory services to the Managed Accounts, it will:
i. act honestly, in good faith and in the best
interests of the Managed Accounts and exercise the
degree of care, diligence and skill that a
reasonably prudent manager would exercise in the
circumstances, or otherwise adhere to the standard
of care required of a reasonably prudent manager
in its home jurisdiction;
ii. comply with all securities laws applicable in its
home jurisdiction with respect to any activities
carried out on behalf of the Managed Accounts;
iii. require the portfolio managers and any insiders of
the Managed Accounts' portfolio activities to
place the interests of the Managed Accounts first,
ahead of their own interests, in all personal
trading conflicts of interests involving
securities which would not be exempt securities
under this Code; and
iv. submit a report annually to the Cundill Group
confirming compliance with these personal trading
standards in respect of the advisory services
provided to the Managed Accounts.
<PAGE>
CERTIFICATE / ACKNOWLEDGEMENT
I hereby certify and acknowledge that I have understood The Cundill
Group of Companies Code of Ethics and I agree to abide by it.
Signature Date
Employee / Officer / Director
Please print your name
Please return this signed Certificate / Acknowledgement to the
Compliance Officer, Cundill Investment Research Ltd.
Copy: Signatory
<PAGE>
The Cundill Group of Companies'
Code of Ethics for Personal Investing
APPENDIX "A"
ACCESS PERSON PORTFOLIO MANAGER/
NAME COMPANY (Y/N) RESEARCH ANALYST (Y/N)
Bates, Douglas A. PCI N N
Bingham, Jennifer PCUK N N
Briggs, David CIR Y Y
Chin, Lawrence CIR Y Y
Collis, Graham B. R. PCB N N
Crocker, Maureen CIR Y N
Cundill, F. Peter CIR Y Y
Driver, Kim CIR Y N
Ferris, Leslie PCI Y Y
Glenryan, Lisa PCI Y N
Johnson, Alan G. PCI N N
Kalfon, Edna CIR N N
Kempe, Stephen W. PCB N N
Massie, Andrew CIR Y Y
McDermott, Brian L. PCI Y N
McElvaine, Tim A. CIR Y Y
Morton, James EAS Y Y
Ng, Hhu CIR Y Y
Parkinson, Andrew C. CIR Y N
Pasnik, Alan CIR Y Y
Scott, Geoffrey L. PCH N N
Steers, Ian S. PCB N N
Talbot, John R. PCB N N
Trollope, Nicolas G. PCB N N
<PAGE>
APPENDIX "B"
Senior Portfolio Manager
------------------------
Primary: Tim A. McElvaine
Alternate: Leslie Ferris
APPENDIX "C"
Compliance Officer
------------------
Andrew C. Parkinson
APPENDIX "D"
