As filed with the Securities and Exchange Commission on March 17, 2003
Registration No. 333-________
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[] Pre-Effective Amendment No. ____
[] Post Effective Amendment No. ____
(Check appropriate Box or Boxes)
Ivy Fund*
(Exact Name of Registrant as Specified in Charter)
925 South Federal Highway
Suite 600
Boca Raton, Florida 33432
(Address of Principal Executive Offices)
1-800-456-5111
(Area Code and Telephone Number)
Kristen A. Richards
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
(Name and address of Agent for Services)
Copies to:
Robert R. Leveille
Bell, Boyd & Lloyd LLC
Three First National Plaza
Suite 3300
Chicago, IL 60602
Approximate Date of Proposed Public Offering: As soon as practicable after the Registration Statement becomes effective under the Securities Act of 1933.
Title of Securities Being Registered: Shares of Common Stock, $.01 par value.
An indefinite amount of the Registrant's securities has been registered under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. In reliance upon such Rule, no filing fee is being paid at this time.
*On behalf of the Ivy Developing Markets Fund
IVY DEVELOPING MARKETS FUND
925 SOUTH FEDERAL HIGHWAY, SUITE 600
BOCA RATON, FLORIDA 33432
Dear Shareholder:
As a shareholder of the Ivy Developing Markets Fund, you are invited to vote on a proposal to merge your Fund into the Ivy Pacific Opportunities Fund. Your Fund will hold a special meeting of shareholders on June 3, 2003, at 10:00 a.m., Central Time to consider the proposed acquisition. Your Fund's acquisition is one of a number of fund acquisitions and one liquidation proposed by Waddell & Reed Ivy Investment Company (the "Adviser"), the investment adviser to the Ivy Developing Markets Fund and the Ivy Pacific Opportunities Fund. The specific details and reasons for the Ivy Developing Markets Fund's acquisition are contained in the enclosed combined Prospectus and Proxy Statement. Please read it carefully.
After careful consideration, Ivy Fund's Board of Trustees unanimously approved the proposal and recommends that shareholders vote "FOR" the proposal.
This special meeting will be held at the offices of Waddell & Reed Financial, Inc. located at 6300 Lamar Avenue, Overland Park, Kansas. While we hope you can attend this meeting, it is very important that you vote your shares at your earliest convenience. Your Fund has retained the services of Georgeson Shareholder Communications, Inc. to assist shareholders with the voting process. As we get closer to June 3rd, shareholders who have not yet voted may receive a call from Georgeson Shareholder Communications reminding them to exercise their right to vote.
Your vote is important, regardless of the number of shares you own. It is important that we receive your vote no later than the time of the special meeting of shareholders on June 3, 2003. If you have more than one account registered in your name , you will recieve a seperate proxy card for each account.You can vote easily and quickly by mail, by phone, by internet or in person. If voting by mail, a self-addressed, postage-paid envelope has been enclosed for your convenience. If voting by phone, please call 1-800-___- ____ . If voting by internet, please log on to www.proxyweb.com and use the control number on the front of your proxy card. Please help your Fund avoid the expense of a follow-up mailing by voting today!
If you have any questions regarding the enclosed Combined Prospectus and Proxy Statement, please call Georgeson Shareholder Communications at .
We appreciate your participation and prompt response in these matters and thank you for your continued support.
Sincerely,
Henry J. Herrmann, President
Ivy Fund
April ___, 2003
Henry Herrmann is President, Chief Executive Officer, and Chief Investment Officer of Waddell & Reed Investment Management Company, and President and Chief Investment Officer of Waddell & Reed Ivy Investment Company. Mr. Herrmann also serves as President and Chief Investment Officer of Waddell & Reed Financial, Inc., a national mutual fund management and distribution company headquartered in Overland Park, Kansas.
Joining the firm as a senior investment analyst covering the technology industries, Mr. Herrmann began his career with Waddell & Reed in 1971. From 1976 to 1987, he was portfolio manager of the Waddell & Reed Advisors Vanguard Fund. Mr. Herrmann also managed the Waddell & Reed Advisors New Concepts Fund from its inception in June 1983 to February 1989. He was named President and Chief Investment Officer of Waddell & Reed Investment Management Company in 1987.
Mr. Herrmann received his BS in finance from New York University in 1966. Prior to joining Waddell & Reed, he was an investment analyst specializing in high technology stocks for a major New York City bank and two Wall Street brokerage firms.
Mr. Herrmann is a Chartered Financial Analyst. He is a member of the Association for Investment Management and Research (AIMR). He is a member and past president of the Kansas City Society of Financial Analysts.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 3, 2003
IVY DEVELOPING MARKETS FUND
NOTICE IS HEREBY GIVEN that a Special Meeting of the shareholders of the Ivy Developing Markets Fund will be held at 10:00 a.m. Central Time on Tuesday, June 3, 2003, at the offices of Waddell & Reed Financial, Inc., 6300 Lamar Avenue, Overland Park, Kansas for these purposes:
1. To approve an Agreement and Plan of Reorganization providing for the sale of all of the assets of Ivy Developing Markets Fund to, and the assumption of all of the liabilities of the Ivy Developing Markets Fund by, the Ivy Pacific Opportunities Fund in exchange for shares of the Ivy Pacific Opportunities Fund and the distribution of such shares to the shareholders of the Ivy Developing Markets Fund in complete liquidation of the Ivy Developing Markets Fund.
2. To consider and act upon any other matters that properly come before the meeting and any adjourned session of the meeting.
Shareholders of record at the close of business on Arpil 7, 2003, are entitled to notice of and to vote at the meeting and any adjourned session.
By order of the Board of Trustees,
Kristen A. Richards, Secretary
April ____, 2003
Your vote is important, regardless of the number of shares you own. You can vote easily and quickly by phone, by mail, by internet or in person. See the enclosed proxy insert for instructions. Please help your Fund avoid the expense of a follow-up mailing by voting today!
Combined Prospectus And Proxy Statement
April ___, 2003
Acquisition of The Assets and Liabilities of The
Ivy Developing Markets Fund
c/o Ivy Fund
925 South Federal Highway, Suite 600
Boca Raton, Florida 33432
800-777-6472
By and in Exchange for Shares of the
Ivy Pacific Opportunities Fund
c/o Ivy Fund
925 South Federal Highway, Suite 600
Boca Raton, Florida 33432
800-777-6472
1-800-456-5111
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ................................. 8
PROPOSAL -- Acquisition of the Ivy Developing Markets Fund
by the Ivy Pacific Opportunities Fund .............................. 15
The Proposal .............................................. 15
Principal Investment Risks ..................................... 15
Information About the Acquisition ................................ 16
GENERAL ................................................ 27
Voting Information ........................................... 27
Appendix A -- Agreement and Plan of Reorganization .....................A-1
Appendix B -- Fund Information ................................. B-1
Appendix C -- Capitalization ................................... C-1
Appendix D -- Financial Highlights of the Ivy Pacific Opportunities Fund ........D-1
Appendix E -- Financial Highlights of the Ivy Developing Markets Fund .........E-1
Appendix F --Management's Discussion of Fund Performance of
Ivy Pacific Opportunities Fund .................................. F-1
This Combined Prospectus and Proxy Statement ("Prospectus/Proxy") contains information you should know before voting on the Agreement and Plan of Reorganization relating to the proposed acquisition of the Ivy Developing Markets Fund (the "Acquired Fund") by the Ivy Pacific Opportunities Fund (the "Acquiring Fund" and, together with the Acquired Fund, the "Funds") (the "Acquisition") at a Special Meeting of Shareholders of the Acquired Fund (the "Meeting"), which will be held at 10:00 a.m. Central Time on June 3, 2003, at the offices of Waddell & Reed Financial, Inc., 6300 Lamar Avenue, Overland Park, Kansas. The Funds are each a series of a registered, open-end management investment company (mutual funds). The Acquired Fund's investment goal is long-term growth and consideration of current income is secondary to this principal objective. The Acquiring Fund's investment goal is long-term capital growth and consideration of current income is secondary to this principal objective. Please read this Prospectus/Proxy and keep it for future reference.
The Proposal in this Prospectus/Proxy relates to the proposed acquisition of the Acquired Fund by the Acquiring Fund. If the Acquisition of the Acquired Fund occurs, you will become a shareholder of the Acquiring Fund. If the Agreement and Plan of Reorganization is approved by the shareholders of the Acquired Fund and the Acquisition occurs, the Acquired Fund will transfer all of the assets and liabilities attributable to each class of its shares to the Acquiring Fund in exchange for shares of a similar class of the Acquiring Fund with the same aggregate net asset value as the net value of the assets and liabilities transferred. After that exchange, shares of each class received by the Acquired Fund will be distributed pro rata to the Acquired Fund's shareholders of the corresponding class.
Shareholders of the Acquired Fund are being asked to vote on the Proposal in this Prospectus/Proxy. Please review this Proposal carefully.
Please review the enclosed prospectus for each Fund. This document is incorporated into this Prospectus/Proxy by reference. The following documents have been filed with the Securities and Exchange Commission (the "SEC") and are incorporated into this Prospectus/Proxy by reference:
---- | The Statement of Additional Information for each Fund dated April 30, 2002, as supplemented on December 23, 2002 and January 10, 2003. |
---- | Management's Discussion of Fund Performance, the Report of Independent Accountants and the financial statements included in the Annual Report to shareholders of the Acquired Fund dated December 31, 2002. |
---- | The Statement of Additional Information for the Acquiring Fund dated April ___, 2003 relating to this Prospectus/Proxy. |
The Acquired Fund has previously sent its Annual Report to its shareholders. For a free copy of this Report or any of the documents listed above, you may call 1-800-456-5111, or you may write to the Acquired Fund at the address listed on the cover of this Prospectus/Proxy. You may also obtain many of these documents by accessing the Internet site for the Acquired Fund at www.ivyfunds.com. Text-only versions of all the Acquired Fund documents can be viewed online or downloaded from the EDGAR database on the SEC's Internet site at www.sec.gov. You can review and copy information about the Funds by visiting the Public Reference Room, U.S. Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, DC 20549-0102. In addition, these materials can be inspected and copied at the SEC's regional offices at The Woolworth Building, 233 Broadway, New York, New York 10279 and 175 W. Jackson Boulevard, Suite 900, Chicago, Illinois 60604. You can obtain copies, upon payment of a duplicating fee, by se nding an e-mail request to publicinfo@sec.gov or by writing the Public Reference Room at the address above. Information on the operation of the Public Reference Room may be obtained by calling 202-942-8090.
The Securities and Exchange Commission has not approved or disapproved these securities or determined if this Prospectus/Proxy is truthful or complete. Any representation to the contrary is a criminal offense.
QUESTIONS AND ANSWERS
The following questions and answers provide an overview of key features of the Acquisition and of the information contained in this Prospectus/Proxy. Please review the full Prospectus/Proxy prior to casting your vote.
1. WHAT IS BEING PROPOSED?
The Board of Trustees of the Ivy Fund is recommending approval of a transaction in which the Acquiring Fund would acquire the Acquired Fund. This means that the Acquiring Fund would acquire all of the assets and liabilities of the Acquired Fund in exchange for shares of the Acquiring Fund. The Acquiring Fund is a portfolio of Ivy Fund and has the same principal investment goal, and similar investment policies, strategies and restrictions as the Acquired Fund. Although the investment goals and strategies of the Acquiring Fund are generally similar to those of the Acquired Fund, there are some differences in the investment strategies of the Funds. Specifically, the Acquired Fund is designated a "Developing Markets Fund," while the Acquiring Fund is designated a "Pacific Opportunities Fund." This means that the Acquired Fund has an investment strategy that it normally intends to invest in at least three different emerging market countries. In contrast, the Acquiring Fund has an investment strategy to inves t in companies such as those whose securities are traded mainly on markets in the Pacific region, organized under the laws of a Pacific region country or issued by any country with more than half of its business in the Pacific region. Please see the answer to Question 4 below for more information comparing the investment goals, strategies and policies of the Funds.
If the Acquisition relating to the Acquired Fund is approved and the Acquisition is consummated, your shares of the Acquired Fund will be cancelled and you will receive shares of the Acquiring Fund with an aggregate net asset value equal to the aggregate net asset value of your Acquired Fund shares as of the business day before the closing of the Acquisition. The Acquisition is currently scheduled to take place on or around [June __], 2003.
2. WHY IS THE ACQUISITION BEING PROPOSED?
Waddell & Reed Ivy Investment Company ("Adviser"), the investment adviser to each of the Funds, manages the fifteen mutual fund portfolios that are offered by the Ivy Fund. The Adviser and certain affiliates were acquired by Waddell & Reed Financial, Inc. on December 16, 2002, and management of the combined company began the process of comparing product offerings within the Ivy Fund and the W&R Funds, Inc. and Waddell & Reed Advisors Funds, Inc. (the "W&R Family of Funds"). The Adviser has proposed a number of acquisitions and one liquidation involving the Ivy Funds and the W&R Family of Funds in addition to the Acquisition described in this Prospectus/Proxy.
The Board of Trustees of the Ivy Fund recommends approval of the Acquisition because it offers shareholders of the Acquired Fund the opportunity to invest in a larger fund (allowing the potential for more efficient operations by spreading relatively fixed costs, such as audit and legal fees, over a larger asset base). In reviewing the Acquisition, the Trustees also considered the following factors, among others:
---- | the Acquired Fund and the Acquiring Fund have the same portfolio manager and share similar investment goals and investment strategies and policies. |
---- | based on estimated expense ratios calculated using each Fund's net assets and numbers of shareholders as of December 31, 2002, shareholders of the Acquired Fund are expected to experience the same or lower net expenses, except for Class A shareholders who may experience a slight increase in net expenses; and |
---- | the Acquisition is expected to be tax-free for shareholders of the Acquired Fund who choose to remain shareholders of the Acquiring Fund, while liquidation or shareholder redemption would be a realization event for tax purposes. |
Please review "Reasons for the Acquisition" in the "Information About the Acquisition" section under "Proposal" in this Prospectus/Proxy for more information regarding the factors considered by the Ivy Fund Trustees.
3. HOW DO THE MANAGEMENT FEES AND EXPENSES OF THE FUNDS
COMPARE, AND WHAT ARE THEY ESTIMATED TO BE FOLLOWING THE
ACQUISITION?
The following tables allow you to compare the sales charges and management fees and expenses of the Acquired Fund and the Acquiring Fund and to analyze the estimated expenses that the Adviser expects to be applicable to the combined fund in the first year following the Acquisition. As part of the Acquisition, Class A shareholders of the Acquired Fund will receive Class A shares of the Acquiring Fund, Class B shareholders of the Acquired Fund will receive Class B shares of the Acquiring Fund, Class C shareholders of the Acquired Fund will receive Class C shares of the Acquiring Fund, and Advisor Class shareholders of the Acquired Fund will receive Advisor Class shares of the Acquiring Fund. No Class I shares of the Acquired Fund are outstanding as of the date of this Prospectus/Proxy, and Class I shares of the Acquired Fund are not currently available for sale. Therefore, the Acquisition will not involve the transfer of any Class I shares of the Acquired Fund. The shareholder fees presented below for the Acquiring Fund apply both before and after giving effect to the Acquisition. Sales charges, if applicable, are paid directly by shareholders to the relevant Fund's distributor. Annual Fund Operating Expenses are paid by each Fund. They include management fees, 12b-1 fees (if applicable) and administrative costs, including [pricing] and custody services.
The Annual Fund Operating Expenses shown in the tables below represent expenses for each Fund for its last fiscal year (ended December 31, 2002) and those expected to be incurred by the combined fund on a pro forma basis (after giving effect to the Acquisition) and based on pro forma combined net assets as of December 31, 2002.
Shareholders of the Acquired Fund will not pay additional sales charges as a result of the Acquisition, although any contingent deferred sales charge ("CDSC") will continue to apply.
SHAREHOLDER FEES
(paid directly from your investment)
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Acquiring Fund | ||||
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Redemption fee/exchange fee |
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(1) A CDSC of 1.00% may apply to Class A shares of either the Acquired Fund or the Acquiring Fund if the amount invested was $500,000 or more and the Class A shares are redeemed within two years of the end of the month in which they were purchased.
(2) If you choose to receive your Acquired Fund redemption proceeds via Federal Funds wire, a $10 wire fee will be charged to your account. Class A shares of either the Acquired Fund or the Acquiring Fund redeemed or exchanged within 30 days of purchase are subject to a 2.00% redemption/exchange fee. This fee also applies to Class A shares of either the Acquired Fund or the Acquiring Fund purchased without a sales charge.
ANNUAL FUND OPERATING EXPENSES (deducted directly from Fund assets)
Acquired Fund (as of 12/31/02)(1) | ||||
Class A | Class B | Class C | Advisor | |
Management fees (%) | 1.00 | 1.00 | 1.00 | 1.00 |
Distribution and/or service (12b-1) fees (%) | 0.25 | 1.00 | 1.00 | None |
Other Expenses (%) | 3.39 | 3.39 | 3.39 | 3.39 |
Total annual fund operating expenses (%) | 4.64 | 5.39 | 5.39 | 4.39 |
Expenses reimbursed(%)(2) | 1.89 | 1.89 | 1.89 | 1.89 |
Net Fund operating expenses(%) | 2.75 | 3.50 | 3.50 | 2.50 |
Acquiring Fund (as of 12/31/02) | ||||
Class A | Class B | Class C | Advisor | |
Management fees (%) | 1.00 | 1.00 | 1.00 | 1.00 |
Distribution and/or service (12b-1) fees (%) | 0.25 | 1.00 | 1.00 | None |
Other Expenses (%) | 2.27 | 2.27 | 2.27 | 2.27 |
Total annual fund operating expenses (%) | 3.52 | 4.27 | 4.27 | 3.27 |
Expenses reimbursed(%)(2) | 0.77 | 0.77 | 0.77 | 0.77 |
Net Fund operating expenses(%) | 2.75 | 3.50 | 3.50 | 2.50 |
Acquiring Fund (Pro Forma Combined at 12/31/02) | ||||
Class A | Class B | Class C | Advisor | |
Management fees (%) | 1.00 | 1.00 | 1.00 | 1.00 |
Distribution and/or service (12b-1) fees (%) | 0.25 | 1.00 | 1.00 | None |
Other Expenses (%) | 1.86 | 1.89 | 1.87 | 1.72 |
Total annual fund operating expenses (%) | 3.11 | 3.89 | 3.87 | 2.72 |
Expenses reimbursed(%)(2) | 0.91 | 0.94 | 0.92 | 0.92 |
Net Fund operating expenses(%) | 2.20 | 2.95 | 2.95 | 1.80 |
- The expense information shown above has been restated to reflect current fees. Expenses reimbursed are estimates based on Class A.
- The Adviser to each Fund has contractually agreed to reimburse the Fund's expenses for the fiscal year ending December 31, 2003 and for each of the eight following years, to the extent necessary to ensure that the Fund's Annual Fund Operating Expenses, when calculated at the Fund level, do not exceed 2.50% of the Fund's average net assets (excluding 12b-1 fees and certain other expenses).
EXAMPLE EXPENSES
Example Expenses help you compare the cost of investing in the Acquired Fund or the Acquiring Fund currently with the cost of investing in the Acquiring Fund on a pro forma combined basis and also allow you to compare these costs with the cost of investing in other mutual funds. Your actual costs may be higher or lower. The following hypothetical conditions were used in performing the calculations:
- $10,000 initial investment
- 5% total return for each year
- Each Fund's operating expenses remain the same
- Reinvestment of all dividends and distributions
ACQUIRED FUND | 1 YEAR | 3 YEARS | 5 YEARS | 10 YEARS |
Class A | $837 | $1,379 | $1,946 | $3,693 |
Class B |
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Advisor Shares | $253 | $779 | $1,331 | $3,064 |
ACQUIRING FUND | 1 YEAR | 3 YEARS | 5 YEARS | 10 YEARS |
Class A | $837 | $1,379 | $1,946 | $3,566 |
Class B |
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Advisor Shares | $253 | $779 | $1,331 | $2,904 |
ACQUIRING FUND | 1 YEAR | 3 YEARS | 5 YEARS | 10 YEARS |
Class A | $785 | $1,224 | $1,687 | $2,963 |
Class B |
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Advisor Shares | $183 | $566 | $975 | $2,116 |
The projected post-Acquisition pro forma Annual Fund Operating Expenses and Example Expenses presented above are based upon numerous material assumptions, including that (1) the current contractual agreements will remain in place [and (2) certain fixed costs involved in operating the Acquired Fund are eliminated]. Although these projections represent good faith estimates, there can be no assurance that any particular level of expenses or expense savings will be achieved, because expenses depend on a variety of factors, including the future level of fund assets, many of which are beyond the control of the Acquiring Fund or the Adviser.
4. HOW DO THE INVESTMENT GOALS, STRATEGIES AND POLICIES OF THE ACQUIRED FUND AND ACQUIRING FUND COMPARE?
The Acquired Fund and the Acquiring Fund have similar investment goals, strategies and policies.
This table compares the investment goal and principal investment strategies of the Acquired Fund to those of the Acquiring Fund.
ACQUIRED FUND | ACQUIRING FUND |
INVESTMENT GOAL. The Acquired Fund's investment goal is long-term growth. Consideration of current income is secondary to this principal objective. The Fund seeks to achieve its goal principally as follows: | INVESTMENT GOAL. The Acquiring Fund's investment goal is long-term capital growth. Consideration of current income is secondary to this principal objective. The Fund seeks to achieve its goal principally as follows: |
- The Fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities (including common stock, preferred stock and securities convertible into common stock) of companies that are located in, or are expected to profit from, countries whose markets are generally viewed as "developing" or "emerging" by the World Bank and the International Finance Corporation, or classified as "emerging" by the United Nations. - For these purposes, a company "located in" or "expected to profit" from emerging market countries is one: (1) whose securities are principally trading in one or more emerging market countries, (2) that derives at least 50% of its total revenue from goods, sales or services in one or more emerging market countries, or (3) that is organized under the laws of (and has a principal office in) an emerging market country. - The Fund may invest more than 25% of its assets in a single country, but usually will hold securities from at least three emerging market countries in its portfolio. The countries in which the Fund invests are selected on the basis of a mix of factors that include long-term economic growth prospects, anticipated inflation levels, and the effect of applicable government policies on local business conditions. - The Fund's management team uses an investment approach that focues on analyzing a company's financial statements and taking advantage of overvalued or undervalued markets. The Fund is managed using an approach which focues on financial ratios such as price/earnings, price/book value, price/cash flow, dividend yield and price/replacement costs. Securities purchased are believed to be attractively valued on one or more of these measures relative to a broad universe of comparable securities. Some of the Fund's investments may produce income (such as dividends), although it is expected that any income realized would be incidental. | - The Fund invests at least 80% of its total net assets, plus the amount of any borrowings for investment purposes, in the equity securities (including common stock, preferred stock and securities convertible into common stock) of companies such as those whose securities are traded mainly on markets in the Pacific region, organized under the laws of a Pacific region country or issued by any company with more than half of its business in the Pacific region. Examples of Pacific region countries include China, Hong Kong, Malaysia, Sri Lanka, Australia and India. The Fund usually invests in at least three different countries, and does not intend to concentrate its investments in any particular industry. The countries in which the Fund invests are selected on the basis of a mix of factors that include long-term economic growth prospects, anticipated inflation levels, and the effect of applicable government policies on local business conditions. Although it is permitted to invest in Japan, the Fund do es not currently anticipate doing so. - The Fund's management team uses an investment approach that focuses on analyzing a company's financial statements and taking advantage of overvalued or undervalued markets. The Fund is managed using an approach which focuses on financial ratios such as price/earnings, price/book value, price/cash flow, dividend yield and price/replacement cost. Securities purchased are believed to be attractively valued on one or more of these measures relative to a broad universe of comparable securities. Some of the Fund's investments may produce income (such as dividends), although it is expected that any income realized would be incidental. |
For more information concerning investment policies and restrictions, see each Fund's Statement of Additional Information.
5. WHAT CLASS OF ACQUIRING FUND SHARES WILL I RECEIVE IF THE ACQUISITION RELATING TO THE ACQUIRED FUND OCCURS?
If you own Class A shares of the Acquired Fund, you will receive Class A shares of the Acquiring Fund. The initial sales charge will not apply to Class A shares you receive in connection with the Acquisition. An initial sales charge will apply to any purchases of Class A shares of the Acquiring Fund you make after consummation of the Acquisition. If you purchased $500,000 or more of Class A shares of the Acquired Fund within one year prior to the consummation of the Acquisition and did not pay a front-end sales charge, the Class A shares you acquire in the Acquisition will be subject to a 1% CDSC if you sell the shares within two years after the end of the month in which you purchased the Acquired Fund Class A shares.
If you own Class B shares of the Acquired Fund, you will receive Class B shares of the Acquiring Fund. The CDSC applicable to the Acquired Fund Class B shares will apply to your redemption of Class B shares you receive in the Acquisition.
If you own Class C shares of the Acquired Fund, you will receive Class C shares of the Acquiring Fund. The CDSC applicable to the Acquired Fund Class C shares will apply to your redemption of Class C shares you receive in the Acquisition.
If you own Advisor Class shares of the Acquired Fund, you will receive Advisor Class shares of the Acquiring Fund.
For more information on the characteristics of the Acquiring Fund shares you will receive in comparison to the Acquired Fund shares you currently own, please see the section "Information About the Acquisition - Shares You Will Receive" in the Proposal section of this Prospectus/Proxy.
6. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION?
The Acquisition is expected to be tax-free to you for federal income tax purposes. This means that neither you nor the Acquired Fund is expected to recognize a gain or loss as a result of the Acquisition.
Immediately prior to the Acquisition, the Acquired Fund will declare and pay a distribution of all net investment company taxable income, if any, and net realized capital gains (after reduction by any available capital loss carryforwards), if any, to its shareholders.
The cost basis and holding period of the Acquired Fund shares are expected to carry over to your new shares in the Acquiring Fund.
PROPOSAL
ACQUISITION OF THE IVY DEVELOPING MARKETS FUND
BY THE
IVY PACIFIC OPPORTUNITIES FUND
THE PROPOSAL
Shareholders of the Acquired Fund are being asked to approve the Agreement and Plan of Reorganization dated [__________], 2003, among Ivy Fund on behalf of each of the Acquired Fund and the Acquiring Fund. A form of the Agreement and Plan of Reorganization is attached as Appendix A to this Prospectus/Proxy. By approving the Agreement and Plan of Reorganization, you are also approving the Acquisition of the Acquired Fund by the Acquiring Fund under the Agreement and Plan of Reorganization.
PRINCIPAL INVESTMENT RISKS
All of the principal risks applicable to the Funds are described in the table below. As previously noted, the Acquiring Fund has an investment goal, policies and strategies that are similar to the Acquired Fund. Accordingly, an investment in the Acquiring Fund involves risks that are similar to those to which an investment in the Acquired Fund is subject.
PRINCIPAL RISKS | FUNDS SUBJECT TO RISK |
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. | Acquired Fund Acquiring 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. You could lose money if you redeem your Fund shares at a time when the Fund's portfolio is not performing as well as expected. | Acquired Fund Acquiring Fund |
FOREIGN SECURITY RISK 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 on the prevailing conditions at any given time. Among these potential risks are greater price volatility; comparatively weak supervision and regulations of security 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 developing economies. Since the Fund normally invests a substantial portion of its assets in these countries, it is exposed to the following additional risks: securities that are even less liquid and more volatile than those in more developed foreign countries; unusually long settlement delays; 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); abrupt changes in exchange rate regime or monetary policy; unusually large currency fluctuations and currency conversion costs; and high national debt levels (which may impede an issuer's payment of principal and/or interest on external debt). | Acquired Fund Acquiring Fund |
REGIONAL RISK -- Investing in the Pacific region involves special risks beyond those described above. For example, certain Pacific region countries may be vulnerable to trade barriers and other protectionist measures that could have an adverse effect on the value of the Fund's portfolio. The limited size of the markets for some Pacific region securities can also make them more susceptible to investor perceptions, which can impact their value and liquidity. | Acquiring Fund |
INFORMATION ABOUT THE ACQUISITION
General
Shareholders who object to the Acquisition of the Acquired Fund by the Acquiring Fund will not be entitled under Massachusetts law or Ivy Fund's Declaration of Trust to demand payment for, or an appraisal of, their shares. However, shareholders should be aware that the Acquisition as proposed is not expected to result in recognition of gain or loss to shareholders for federal income tax purposes and that, if the Acquisition is consummated, shareholders will be free to redeem the shares of the Acquiring Fund which they receive in the transaction at their current net asset value, less any applicable CDSC. In addition, you may redeem the Acquired Fund shares at any time prior to the consummation of the Acquisition.
Shares You Will Receive
If the Acquisition occurs, the shares you receive in exchange for your Acquired Fund shares will have the same characteristics as the shares you currently own.
After the Acquisition, the shares acquired in the Acquisition may be exchanged for shares of the same class of any other fund in the Ivy Funds or the W&R Funds, Inc. without the payment of an additional sales charge or CDSC.
No Class I shares of the Acquired Fund are outstanding as of the date of this Prospectus/Proxy, and Class I shares of the Acquired Fund are not currently available for sale. Therefore, the Acquisition will not involve the transfer of any Class I shares of the Acquired Fund.
Information concerning capitalization of each of the Funds is contained in Appendix C.
Reasons for the Acquisition
On December 16, 2002, Waddell & Reed Financial, Inc. completed its acquisition of the entire operation of Mackenzie Investment Management Inc. The Adviser and Ivy Mackenzie Distributors, Inc. became indirect subsidiaries of Waddell & Reed Financial, Inc. at that time. Ivy Fund is one of five mutual fund families constituting the funds in the Waddell & Reed complex. Management compared product offerings within Ivy Fund and the W&R Family of Funds, and the Adviser has proposed a number of acquisitions and one liquidation involving these mutual funds in addition to the Acquisition described in this Prospectus/Proxy.
At a meeting held on January 21, 2003, the Board of Trustees of Ivy Fund, including all Trustees who are not "interested persons" of Ivy Fund, determined that the Acquisition would be in the best interests of the shareholders of the Acquired Fund and the Acquiring Fund and that the interests of existing shareholders in the Acquired Fund and the Acquiring Fund would not be diluted as a result of the Acquisition. The Board of Trustees of Ivy Fund has unanimously approved the Acquisition and recommends that you vote in favor of the Acquisition by approving the Agreement and Plan of Reorganization, a form of which is attached as Appendix A to this Prospectus/Proxy.
In proposing the Acquisition, the Adviser presented to the Ivy Fund Board of Trustees, at meetings held on December 17, 2002 and January 21, 2003, the following reasons for the Acquired Fund to enter into the Acquisition:
---- | The Acquired Fund and the Acquiring Fund have the same portfolio manager and share similar investment goals and investment strategies. |
---- | Based on estimated expense ratios calculated using each Fund's net assets and numbers of shareholders as of December 31, 2002, shareholders of the Acquired Fund are expected to experience the same or lower net expenses, except Class A shareholders of the Acquired Fund may experience slightly higher net expenses. |
---- | Shareholders of the Acquired Fund will become shareholders in a larger,more diversified group of mutual funds, and after the Acquistion, shareholders will have the right to exchange among all Ivy Finds and W&R Funds |
---- | The Acquisition is intended to create a larger fund, and this will permit fixed costs to be spread over a larger asset base. |
---- | The Acquisition is intended to permit the Acquired Fund's shareholders to exchange their investment for an investment in the Acquiring Fund without recognizing gain or loss for federal income tax purposes. By contrast, if an Acquired Fund shareholder were to redeem his or her shares to invest in another fund, such as the Acquiring Fund, the transaction would be a taxable event for such shareholder. Similarly, if the Acquired Fund were liquidated or reorganized in a taxable transaction, the transaction would be a taxable event for the Acquired Fund's shareholders. After the Acquisition, shareholders may redeem any or all of their Acquiring Fund shares at net asset value (subject to any applicable CDSC, as with a redemption of their Acquired Fund shares) at any time, at which point they would recognize a taxable gain or loss. |
In addition, the Board of Trustees considered the relative Fund performance results set forth below under "Performance Information." No assurance can be given that the Acquiring Fund will achieve any particular level of performance after the Acquisition. In reviewing the Acquisition, the Trustees considered the change for Acquired Fund shareholders from a fund emphasizing investments in "developing" markets to a fund focusing on the Pacific region, including both "developed" and "developing" markets.
In addition, the Board considered that shareholders of the Acquired Fund who do not want to become shareholders of the Acquiring Fund, whether because they wish to realize an unrealized loss on their shares or otherwise, could redeem their shares in the Acquired Fund prior to the Acquisition.
If shareholders do not approve the transaction, the Trustees of the Ivy Fund will consider what alternatives may then be available.
Terms of the Agreement and Plan of Reorganization
If approved by the shareholders of the Acquired Fund, the Acquisition is expected to occur on or around June ____, 2003. A form of the Agreement and Plan of Reorganization is attached as Appendix A to this Prospectus/Proxy for your review. The following is a brief summary of the principal terms of the Agreement and Plan of Reorganization:
---- | The Acquired Fund will transfer all of the assets and liabilities attributable to each class of its shares to the Acquiring Fund in exchange for shares of the same class of the Acquiring Fund* with an aggregate net asset value equal to the net value of the transferred assets and liabilities. |
---- | The Acquisition will occur on the next business day after the time (currently scheduled to be 4:00 p.m. Eastern Time on June ___, 2003, or such other date and time as the parties may determine) when the assets of each Fund are valued for purposes of the Acquisition. |
---- | The shares of each class of the Acquiring Fund received by the Acquired Fund will be distributed to the Acquired Fund's respective shareholders of the corresponding class pro rata in accordance with their percentage ownership of such class of such Acquired Fund in full liquidation of such Acquired Fund. |
---- | After the Acquisition, the Acquired Fund will be terminated, and its affairs will be wound up in an orderly fashion. |
---- | The Acquisition requires approval by the Acquired Fund's shareholders and satisfaction of a number of other conditions; the Acquisition may be terminated at any time with the approval of the Board of Trustees of the Ivy Fund. |
----------------
*As there are no Class I shares of the Acquired Fund outstanding and Class I shares are not available for sale, no transfer of Class I shares of the Acquired Fund will be required.
Federal Income Tax Consequences
The Acquisition is intended to be a tax-free reorganization. Bell, Boyd & Lloyd LLC has delivered to the Acquired Fund and the Acquiring Fund an opinion, and the closing of the Acquisition will be conditioned on receipt of a letter from Bell, Boyd & Lloyd LLC confirming such opinion, to the effect that, on the basis of existing law under specified sections of the Internal Revenue Code of 1986, as amended (the "Code"), although not entirely free from doubt, for federal income tax purposes:
---- | under Section 361 or Section 354 of the Code, respectively, no gain or loss will be recognized by the Acquired Fund or the shareholders of the Acquired Fund as a result of the Acquisition; |
---- | under Section 358 of the Code, the tax basis of the Acquiring Fund shares you receive will be the same, in the aggregate, as the aggregate tax basis of your Acquired Fund shares exchanged therefor, as applicable; |
---- | under Section 1223(1) of the Code, your holding period for the Acquiring Fund shares you receive will include the holding period for your Acquired Fund shares exchanged therefor, as applicable, if you hold your shares as a capital asset; |
---- | under Section 1032 of the Code, no gain or loss will be recognized by the Acquiring Fund as a result of the Acquisition; |
---- | under Section 362(b) of the Code, the Acquiring Fund's tax basis in the assets that the Acquiring Fund receives from the Acquired Fund will be the same as the Acquired Fund's basis in such assets; and |
---- | under Section 1223(2) of the Code, the Acquiring Fund's holding period in such assets will include the Acquired Fund's holding period in such assets. |
Each opinion is, and each confirmation letter will be, based on certain factual certifications made by officers of the Ivy Fund. No opinion or confirmation letter is a guarantee that the tax consequences of the Acquisition will be as described above.
Prior to the closing of the Acquisition, the Acquired Fund will distribute to its shareholders all of its respective net investment company taxable income, if any, and net realized capital gains (after reduction by any available capital loss carryforwards), if any, that have not previously been distributed to shareholders. Such distributions will be taxable to shareholders.
A substantial portion of the portfolio assets of the Acquired Fund may be sold in connection with the Acquisition. The actual tax impact of such sales will depend on the difference between the price at which such portfolio assets are sold and the Acquired Fund's basis in such assets. Any net capital gains recognized in these sales not offset by capital loss carryforwards will be distributed to the Acquired Fund's shareholders as capital gain dividends (to the extent of net realized long-term capital gains) and/or ordinary dividends (to the extent of net realized short-term capital gains) during or with respect to the year of sale, and such distributions will be taxable to shareholders.
This description of the federal income tax consequences of the Acquisition does not take into account your particular facts and circumstances. Consult your own tax adviser about the effect of state, local, foreign, and other tax laws.
Performance Information
The chart below shows the percentage gain or loss for Class A shares of the Acquired Fund in each calendar year since it commenced operations. The chart should give you a general idea of how the Acquired Fund's returns have varied from year to year. Any applicable sales charges and account fees are not reflected, and if they were, the returns shown above would be lower. The returns for the Fund's other classes of shares during these periods were different from those of Class A because of variations in their respective expense structures. The calculations of total return assume the reinvestment of all dividends and capital gain distributions on the reinvestment date. Past performance is not an indication of future results. Performance results include the effect of expense reduction arrangements, if any. If these arrangements had not been in place, the performance results would have been lower.
Additional discussion of the manner of calculation of total return is contained in the Acquired Fund's Prospectus and Statement of Additional Information.
ACQUIRED FUND
ANNUAL TOTAL RETURNS FOR CLASS A SHARES
FOR THE YEARS ENDING DECEMBER 31
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For period shown in bar chart: |
The following tables list the average annual total returns for Class A, Class B, Class C, Class I and Advisor Class Shares of the Acquired Fund for the one-year, five-year and since inception periods ended December 31, 2002 (including applicable sales charges). These tables are intended to provide you with some indication of the risks of investing in the Acquired Fund. At the bottom of each table, you can compare the Acquired Fund's performance with a broad-based market index.
After-tax returns are presented for Class A shares and after-tax returns for other classes may vary. After-tax returns are intended to show the impact federal income taxes have on investments in the Acquired Fund. The Acquired Fund's return after taxes on distribution calculation shows the effect of taxable distributions, but assume that you hold the fund shares at the end of the period, thus not having any taxable gain or loss on your investment in shares of the Fund. The Acquired Fund's return after taxes on distribution and sale of Fund shares calculation shows the effect of both a distribution and any taxable gain or loss that would be realized if you purchased Fund shares at the beginning of a period and sold them at the end of the period.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation, and may differ from those shown. After-tax returns are relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts, or to shares held by non-taxable entities.
Class A(1) | Class B(1) | Class C(1) | Class I(2) | Advisor Class(3) | MSCI Emerging Markets Free Index(1)* | |
1 Year | ||||||
Return Before Taxes | -17.32% | -17.32% | -13.93% | N/A | -11.96% | -6.00% |
Return After Taxes on Distributions | ||||||
Return After Taxes on Distributions | ||||||
5 Years | ||||||
Return Before Taxes | -4.86% | -5.01% | -4.60% | N/A | N/A | -4.58% |
Return After Taxes on Distribution | ||||||
Return After Taxes on Distributions and | ||||||
Since Inception | ||||||
Return Before Taxes | -6.40% | -6.53% | -7.87% | N/A | -5.66% | |
Return After Taxes on Distribution | ||||||
Return After Taxes on Distributions |
*The Morgan Stanley Capital International (MSCI) Emerging Markets Free Index is an unmanaged index of stocks which assumes reinvestment of dividends and, unlike the Acquired Fund's returns, does not reflect any fees or expenses. It is not possible to invest in an index.
_________________
(1) The inception date for the Acquired Fund's Class A and Class B shares was November 1, 1994. The inception date for the Fund's Class C shares was April 30, 1996. Index performance is calculated from October 31, 1994.
(2) The Fund has no outstanding Class I shares.
(3) The inception date for the Acquired Fund's Advisor Class shares was April 30, 1998.
The chart below shows the percentage gain or loss for Class A shares of the Acquiring Fund in each calendar year since it commenced operations. The chart should give you a general idea of how the Acquiring Fund's returns have varied from year to year. Any applicable sales charges and account fees are not reflected, and if they were, the returns shown above would be lower. The returns for the Fund's other classes of shares during these periods were different from those of Class A because of variations in their respective expense structures. The calculations of total return assume the reinvestment of all dividends and capital gain distributions on the reinvestment date. Past performance is not an indication of future results. Performance results include the effect of expense reduction arrangements, if any. If these arrangements had not been in place, the performance results would have been lower.
Additional discussion of the manner of calculation of total return is contained in the Acquiring Fund's Prospectus and Statement of Additional Information.
ACQUIRING FUND
ANNUAL TOTAL RETURNS FOR CLASS A SHARES
FOR THE YEARS ENDING DECEMBER 31
![]() | |
For period shown in bar chart: |
The following tables list the average annual total returns for Class A, Class B, Class C, Class I and Advisor Class Shares of the Acquiring Fund for the one-year, five-year and since inception periods ended December 31, 2002 (including applicable sales charges). These tables are intended to provide you with some indication of the risks of investing in the Acquiring Fund. At the bottom of each table, you can compare the Acquiring Fund's performance with a broad-based market index.
After-tax returns are presented for Class A shares and after-tax returns for other classes may vary. After-tax returns are intended to show the impact federal income taxes have on investments in the Acquiring Fund. The Acquiring Fund's return after taxes on distribution calculation shows the effect of taxable distributions, but assume that you hold the fund shares at the end of the period, thus not having any taxable gain or loss on your investment in shares of the Fund. The Acquiring Fund's return after taxes on distribution and sale of Fund shares calculation shows the effect of both a distribution and any taxable gain or loss that would be realized if you purchased Fund shares at the beginning of a period and sold them at the end of the period.
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation, and may differ from those shown. After-tax returns are relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts, or to shares held by non-taxable entities.
Class A(1) | Class B(1) | Class C(1) | Class I(2) | Advisor Class(3) | MSCI Asia Pacific Ex-Japan Index(1)* | |
1 Year | ||||||
Return Before Taxes | -16.41% | -16.73% | -13.09% | N/A | -11.84% | -5.09% |
Return After Taxes on Distributions | ||||||
Return After Taxes on Distributions | ||||||
5 Years | ||||||
Return Before Taxes | -6.29% | -6.43% | -5.97% | N/A | N/A | -1.46% |
Return After Taxes on Distribution | ||||||
Return After Taxes on Distributions | ||||||
Since Inception | ||||||
Return Before Taxes | -5.41% | -5.60% | -6.84% | N/A | -5.41% | |
Return After Taxes on Distribution | ||||||
Return After Taxes on Distributions |
*The Morgan Stanley Capital International (MSCI) Asia Pacific Free (Excluding-Japan) Index is an unmanaged index of stocks which assumes reinvestment of dividends and, unlike the Acquiring Fund's returns, does not reflect any fees or expenses. It is not possible to invest in an index.
_________________
(1) The inception date for the Acquiring Fund's Class A and Class B shares was October 22, 1993. The inception date for the Fund's Class C shares was April 30, 1996. Index performance is calculated from October 31, 1993.
(2) The Fund has no outstanding Class I shares.
(3) The inception date for the Acquiring Fund's Advisor Class shares was February 10, 1998.
THE IVY FUND TRUSTEES UNANIMOUSLY RECOMMEND APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION.
Required Vote for the Proposal
Approval of the Agreement and Plan of Reorganization dated as of [___________], 2003, by and between Ivy Fund on behalf of the Acquired Fund and Acquiring Fund, will require the affirmative vote of a majority of the outstanding shares of the Acquired Fund with respect to the Acquisition. With respect to the approval of the Agreement and Plan of Reorganization, the term "majority of the outstanding shares" of the Acquired Fund means more than 50% of the outstanding shares of the Acquired Fund. A vote of the shareholders of the Acquiring Fund is not needed to approve the Acquisition.
GENERAL
VOTING INFORMATION
The Ivy Fund Board of Trustees is soliciting proxies from the shareholders of the Acquired Fund in connection with the Meeting, which has been called to be held at 10:00 a.m. Central Time on June 3, 2003, at the offices of Waddell & Reed Financial, Inc., 6300 Lamar Avenue, Overland Park, Kansas. The meeting notice, this Prospectus/Proxy and proxy inserts are being mailed to shareholders beginning on or about April ___, 2003.
Information About Proxies and the Conduct of the Meeting
Solicitation of Proxies. Proxies will be solicited primarily by mailing this Prospectus/Proxy and its enclosures, but proxies may also be solicited through further mailings, telephone calls, personal interviews or e-mail by officers of Ivy Fund or by employees or agents of its service contractors. In addition, Georgeson Shareholder Communications, Inc. has been engaged to assist in the solicitation of proxies, at an estimated cost of $[___] to the Acquired Fund, which will be paid by the Acquired Fund and the Adviser as noted below.
Voting Process
You can vote in any one of the following ways:
(a) By mail, by filling out and returning the enclosed proxy card;
(b) By phone or Internet (see enclosed proxy insert for instructions); or
(c) In person at the Meeting.
Shareholders who owned shares on the record date, April 7, 2003, are entitled to vote at the Meeting. For each full share of the Acquired Fund that you hold, you are entitled to one vote, and for each fractional share you hold, you are entitled to a proportionate fractional vote. If you choose to vote by mail and you are an individual account owner, please sign exactly as your name appears on the proxy card. Either owner of a joint account may sign the proxy card, but the signer's name must exactly match the name that appears on the card.
Costs. The Acquiring Fund will bear the transfer agency costs related to the Acquisition and the costs of registration of its shares to be issued to shareholders of the Acquired Fund upon the closing of the Acquisition. All other costs of the Meeting, including the costs of soliciting proxies, and the costs of the Acquisition will be borne by the Acquired Fund and the Adviser in the following percentages: Acquired Fund 50% and Adviser 50%. In the event that the shareholders of the Acquired Fund do not approve the Agreement and Plan of Reorganization or the Acquisition does not close for any reason, the Adviser will bear the costs of the failed Acquisition which would otherwise have been borne by the Acquired Fund and the Acquiring Fund.
Voting and Tabulation of Proxies. Shares represented by duly executed proxies will be voted as instructed on the proxy. If no instructions are given, the proxy will be voted in favor of the Proposal. You can revoke your proxy at any time before it is exercised by sending a signed, written letter of revocation to the Secretary of Ivy Fund, by properly executing and submitting a later-dated proxy or by attending the Meeting and voting in person.
Votes cast in person or by proxy at the Meeting will be counted by persons appointed by the Acquired Fund as proxies for the Meeting (the "Designees"). A quorum is constituted with respect to the Acquired Fund by presence in person or by proxy of the holders of more than 50% of the outstanding shares of the Acquired Fund entitled to vote at the Meeting. In determining whether a quorum is present, abstentions and "broker non-votes" will be treated as shares that are present and entitled to vote. Since these shares will be counted as present, but not as voting in favor of the Proposal, these shares will have the same effect as if they cast votes against the Proposal. "Broker non-votes" are shares held by brokers or nominees as to which (i) the broker or nominee does not have discretionary voting power and (ii) the broker or nominee has not received instructions from the beneficial owner or other person who is entitled to instruct how the shares will be voted.
Adviser and Underwriter. The address of the investment adviser to both the Acquired Fund and the Acquiring Fund is Waddell & Reed Ivy Investment Company, Inc., 6300 Lamar Avenue, P.O. Box 29217, Shawnee Mission, Kansas 66201. The Adviser is an indirect, wholly owned subsidiary of Waddell & Reed Financial, Inc. ("Waddell & Reed"), a publicly held company. During the fiscal year ended December 31, 2002, the Acquired Fund paid the Adviser advisory fees at an annual rate of [1.00%] as a percentage of the Acquired Fund's net assets. During the fiscal year ended December 31, 2002, the Acquiring Fund paid the Adviser advisory fees at an annual rate of [1.00%] as a percentage of the Acquiring Fund's net assets.
The address of the Acquired Fund's principal underwriter, Ivy Mackenzie Distributors, Inc., is 925 South Federal Highway, Suite 600, Boca Raton, Florida 33432.
Other Service Providers for the Acquiring Fund and the Acquired Fund. The Acquired Fund and Acquiring Fund have the same service providers. Upon completion of the Acquisition, the Acquiring Fund will continue to engage its existing service providers. Following are the names and addresses of certain service providers for the Acquiring Fund and the Acquired Fund.
ACQUIRING FUND | ||
Administrator | Waddell & Reed Ivy Investment Company, Inc. | |
Accounting Service Agent | Waddell & Reed Ivy Investment Company, Inc. | |
Transfer Agent/Shareholder Servicing Agent | PFPC Inc. | |
Custodian | Brown Brothers Harriman & Co. | |
Independent Auditors | Deloitte & Touche LLP |
Outstanding Shares and Significant Shareholders. Appendix B to this Prospectus/Proxy lists the total number of shares outstanding as of _______ __, 2003, for each class of the Acquired Fund entitled to vote at the Meeting. It also identifies holders of more than 5% or 25% of any class of shares of the Acquired Fund, and contains information about the executive officers and Trustees of Ivy Fund and their shareholdings in the Acquired Fund and in Ivy Fund.
Adjournments; Other Business. In the event that a quorum is not present at the Meeting with respect to a particular Acquired Fund, or if the Acquired Fund has not received enough votes by the time of the Meeting to approve the Proposal, the Designees, or their substitutes, may propose that such Meeting be adjourned one or more times to permit further solicitation of proxies. Any adjournment requires the affirmative vote of a majority of the total number of shares of the Acquired Fund that are present in person or by proxy when the adjournment is being voted on. If a quorum is present, the Designees will vote in favor of any such adjournment all proxies that they are entitled to vote in favor of the Proposal and the Designees will vote against any such adjournment any proxy that directs them to vote against the Proposal. The Designees will not vote any proxy that directs them to abstain from voting on the Proposal.
The Meeting has been called to transact any business that properly comes before it. The only business that management of the Acquired Fund intends to present or knows that others will present is the Proposal. If any other matters properly come before the Meeting, and on all matters incidental to the conduct of the Meeting, the Designees intend to vote the proxies in accordance with their judgment, unless the Secretary of Ivy Fund has previously received written contrary instructions from the shareholder entitled to vote the shares.
Shareholder Proposals at Future Meetings. Neither the Acquired Fund nor the Acquiring Fund holds annual or other regular meetings of shareholders. Shareholder proposals to be presented at any future meeting of shareholders of the Acquired Fund or Acquiring Fund must be received by the relevant Fund or Trust in writing a reasonable time before the Acquired Fund or Acquiring Fund, as the case may be, solicits proxies for that meeting in order to be considered for inclusion in the proxy materials for that meeting. Shareholder proposals should be sent to the relevant Fund, Attention: Secretary, at 925 South Federal Highway, Suite 600, Boca Raton, Florida 33432.
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of March __, 2003 by and between (i) Ivy Fund (the "Trust"), a Massachusetts business trust established under an Amended and Restated Agreement and Declaration of Trust dated December 10, 1992, as amended and in effect on the date hereof, on behalf of the Ivy Developing Markets Fund (the "Acquired Fund"), a series of the Trust, and (ii) the Trust, on behalf of the Ivy Pacific Opportunities Fund (the "Acquiring Fund"), a series of the Trust.
This Agreement is intended to be and is adopted as a plan of reorganization within the meaning of the regulations under Section 368(a) of the United States Internal Revenue Code of 1986, as amended (the "Code"). The reorganization will consist of the transfer of all of the assets of the Acquired Fund in exchange for Class A shares, Class B shares, Class C shares and Advisor Class shares of common stock of the Acquiring Fund (the "Acquiring Shares"), and the assumption by the Acquiring Fund of the liabilities of the Acquired Fund (other than certain expenses of the reorganization contemplated hereby) and the distribution of such shares of the Acquiring Fund to the shareholders of the Acquired Fund in liquidation of the Acquired Fund, all upon the terms and conditions set forth in this Agreement.
In consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF ACQUIRED FUND IN EXCHANGE FOR ASSUMPTION OF LIABILITIES AND ACQUIRING SHARES AND
LIQUIDATION OF ACQUIRED FUND.
1.1 Subject to the terms and conditions herein set forth and on the basis of the representations and warranties contained herein,
(a) The Trust, on behalf of the Acquired Fund, will transfer and deliver to the Trust, on behalf of the Acquiring Fund, and the Acquiring Fund will acquire, all the assets of the Acquired Fund as set forth in paragraph 1.2.
(b) The Acquiring Fund will assume all of the Acquired Fund's liabilities and obligations of any kind whatsoever, whether absolute, accrued, contingent or otherwise in existence on the Closing Date (as defined in paragraph 1.2 hereof) (collectively, the "Obligations"), except that expenses of reorganization contemplated hereby to be paid by the Acquired Fund pursuant to paragraph 9 shall not be assumed or paid by the Acquiring Fund.
(c) The Acquiring Fund will issue and deliver to the Acquired Fund in exchange for the assets transferred pursuant to paragraph 1.1(a) and the assumption of liabilities pursuant to paragraph 1.1(b) the number of full and fractional (rounded to the third decimal place) Class A shares, Class B shares, Class C shares, Class I shares and Advisor Class shares determined by dividing the net value of the Acquired Fund, computed in the manner and as of the time and date set forth in paragraph 2.1 ("Acquired Fund Value"), attributable to each such class of shares of the Acquired Fund by the net asset value ("NAV") of one Acquiring Share of the same class, computed in the manner and as of the time and date set forth in paragraph 2.2. Such transactions shall take place at the closing provided for in paragraph 3.1 (the "Closing").
1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund shall consist of all cash, securities, dividends and interest receivable, receivables for shares sold and all other assets which are owned by the Acquired Fund on the closing date provided in paragraph 3.1 (the "Closing Date"), including any deferred expenses, other than unamortized organizational expenses, shown as an asset on the books of the Acquired Fund on the Closing Date.
1.3 As provided in paragraph 3.4, as soon after the Closing Date as is conveniently practicable (the "Liquidation Date"), the Acquired Fund will liquidate and distribute pro rata to its shareholders of record (the "Acquired Fund Shareholders"), determined as of the close of business on the Valuation Date (as defined in paragraph 2.1), the Acquiring Shares received by the Acquired Fund pursuant to paragraph 1.1. Such liquidation and distribution will be accomplished by the transfer of the Acquiring Shares then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of the Acquired Fund Shareholders and representing the respective pro rata number of full and fractional (rounded to the third decimal place) Acquiring Shares due such shareholders, by class. The Acquiring Fund shall not be obligated to issue certificates representing Acquiring Shares in connection with such exchange.
1.4 With respect to Acquiring Shares distributable pursuant to paragraph 1.3 to an Acquired Fund Shareholder holding a certificate or certificates for shares of the Acquired Fund, if any, on the Valuation Date, the Trust will not permit such shareholder to receive Acquiring Share certificates therefor, exchange such Acquiring Shares for shares of other investment companies, effect an account transfer of such Acquiring Shares, or pledge or redeem such Acquiring Shares until such Shareholder has surrendered all his or her outstanding certificates for Acquired Fund shares or, in the event of lost certificates, posted adequate bond.
1.5 Any obligation of the Acquired Fund to make filings with governmental authorities is and shall remain the responsibility of the Acquired Fund through the Closing Date and up to and including such later date on which the Acquired Fund is terminated.
1.6 As promptly as possible after the Closing Date, the Acquired Fund shall be terminated pursuant to the provisions of the Trust's Declaration of Trust and the laws of the Commonwealth of Massachusetts, and, after the Closing Date, the Acquired Fund shall not conduct any business except in connection with its liquidation.
2. VALUATION.
2.1 For the purpose of paragraph 1, the value of the shares of each class of the Acquired Fund shall be equal to the net asset value of such shares of the Acquired Fund computed as of the close of regular trading on the New York Stock Exchange on the business day next preceding the Closing (such time and date being herein called the "Valuation Date") using the valuation procedures as adopted by the Board of Trustees of the Trust and as set forth in the then-current prospectus or prospectuses or statement or statements of additional information of the Trust (collectively, as amended or supplemented from time to time, the "Acquiring Fund Prospectus"), after deduction for the expenses of the reorganization contemplated hereby to be paid by the Acquired Fund pursuant to paragraph 9, and shall be certified by an authorized officer of the Trust.
2.2 For the purpose of paragraph 1, the net asset value per share of each class of Acquiring Shares shall be the net asset value per share computed as of the close of regular trading on the New York Stock Exchange on the Valuation Date, using the valuation procedures as adopted by the Board of Trustees of the Trust and as set forth in the Acquiring Fund Prospectus. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by or under the direction of Waddell & Reed Investment Management Company.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be on _____________, 2003 or on such other date as the parties may agree in writing. The Closing shall be held at 9:00 a.m. on the Closing Date at the offices of Waddell & Reed Financial, Inc., located at 6300 Lamar Avenue, Overland Park, Kansas or at such other time and/or place as the parties may agree.
3.2 The portfolio securities of the Acquired Fund shall be made available by the Acquired Fund to Brown Brothers Harriman & Co., as custodian for the Acquiring Fund (the "Custodian"), for examination no later than five business days preceding the Valuation Date. On the Closing Date, the portfolio securities of the Acquired Fund and all the Acquired Fund's cash shall be delivered by the Acquired Fund to the Custodian for the account of the Acquiring Fund, such portfolio securities to be duly endorsed in proper form for transfer in such manner and condition as to constitute good delivery thereof in accordance with the custom of brokers or, in the case of portfolio securities held in the U.S. Treasury Department's book-entry system or by the Depository Trust Company, Participants Trust Company or other third party depositories, by transfer to the account of the Custodian in accordance with Rule 17f-4, Rule 17f-5 or Rule 17f-7, as the case may be, under the Investment Company Act of 1940, as amended (the "1940 Act") and accompanied by all necessary federal and state stock transfer stamps or a check for the appropriate purchase price of such transfer stamps. The cash delivered shall be in the form of currency or certified or official bank checks, payable to the order of "Brown Brothers Harriman & Co., custodian for Ivy Pacific Opportunities Fund, a series of Ivy Fund."
3.3 In the event that on the Valuation Date (a) the New York Stock Exchange shall be closed to trading or general trading thereon shall be restricted, or (b) trading or the reporting of trading on said Exchange or elsewhere shall be disrupted so that accurate appraisal of the value of the net assets of the Acquired Fund is impracticable, the Valuation Date shall be postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been restored; provided that if trading shall not be fully resumed and reporting restored within three business days after the original Valuation Date, this Agreement may be terminated by either Fund upon the giving of written notice to the other Fund.
3.4 At the Closing, the Acquired Fund or its transfer agent shall deliver to the Acquiring Fund or its designated agent a list of the names and addresses of the Acquired Fund Shareholders and the number of outstanding shares of beneficial interest of each class of the Acquired Fund owned by each Acquired Fund Shareholder, all as of the close of business on the Valuation Date, certified by the Secretary or Assistant Secretary of the Trust. The Trust shall provide to the Acquired Fund evidence satisfactory to the Acquired Fund that the Acquiring Shares issuable pursuant to paragraph 1.1 have been credited to the Acquired Fund's account on the books of the Acquiring Fund. On the Liquidation Date, the Trust shall provide to the Acquired Fund evidence satisfactory to the Acquired Fund that such Acquiring Shares have been credited pro rata to open accounts in the names of the Acquired Fund Shareholders as provided in paragraph 1.3.
3.5 At the Closing each party shall deliver to the other such bills of sale, instruments of assumption of liabilities, checks, assignments, stock certificates, receipts or other documents as such other party or its counsel may reasonably request in connection with the transfer of assets, assumption of liabilities and liquidation contemplated by paragraph 1.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Trust, on behalf of the Acquired Fund, represents and warrants the following to the Acquiring Fund as of the date hereof and agrees to confirm the continuing accuracy and completeness in all material respects of the following on the Closing Date:
(a) The Trust is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts and has the power to own all of its property and assets and to conduct its business as currently conducted;
(b) The Trust is a duly registered investment company classified as a management company of the open-end type and its registration with the Securities and Exchange Commission (the "SEC") as an investment company under the 1940 Act is in full force and effect, and the Acquired Fund is a separate series thereof duly established, designated and existing in accordance with the applicable provisions of the Declaration of Trust of the Trust and the 1940 Act;
(c) The Acquired Fund's current prospectus or prospectuses and statement of additional information or statements of additional information (collectively, as amended or supplemented from time to time, the "Acquired Fund Prospectus") conform in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the "1933 Act"), and the rules and regulations of the SEC thereunder and does not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and there are no material contracts to which the Acquired Fund is a party that are not referred to in the Acquired Fund Prospectus or in the registration statement of which it is a part;
(d) The Trust is not in violation in any material respect of any provision of its Declaration of Trust or By-laws or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Trust is a party or by which the Acquired Fund is bound, and the execution, delivery and performance of this Agreement will not result in any such violation;
(e) The Trust has no material contracts or other commitments (other than this Agreement and such other contracts as may be entered into in the ordinary course of its business) which if terminated may result in material liability to the Acquired Fund or under which (whether or not terminated) any material payments for periods subsequent to the Closing Date will be due from the Acquired Fund;
(f) No litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened against the Acquired Fund, any of its properties or assets or any person whom the Acquired Fund may be obligated to indemnify in connection with such litigation, proceeding or investigation. The Acquired Fund knows of no facts which might form the basis for the institution of such proceedings, and is not a party to or subject to any order, decree or judgment of any court or governmental body which materially and adversely affects its business or its ability to consummate the transactions contemplated hereby;
(g) The statement of assets and liabilities, the statement of operations, the statement of changes in net assets and the schedule of investments at, as of and for the two years ended December 31, 2002, of the Acquired Fund, audited by Deloitte & Touche LLP for the year ended December 31, 2002 and by PricewaterhouseCoopers LLP for the year ended December 31, 2001, copies of which have been furnished to the Acquiring Fund, fairly reflect the financial condition and results of operations of the Acquired Fund as of such dates and the results of its operations for the periods then ended in accordance with generally accepted accounting principles consistently applied, and the Acquired Fund has no known liabilities of a material amount, contingent or otherwise, other than those shown on the statement of net assets referred to above or those incurred in the ordinary course of its business since December 31, 2002;
(h) Since December 31, 2002, there has not been any material adverse change in the Acquired Fund's financial condition, assets, liabilities or business (other than changes occurring in the ordinary course of business), or any incurrence by the Acquired Fund of indebtedness, except as disclosed in writing to the Acquiring Fund. For the purposes of this subparagraph (g), distributions of net investment income and net realized capital gains, changes in portfolio securities, changes in the market value of portfolio securities or net redemptions shall be deemed to be in the ordinary course of business;
(i) By the Closing Date, all federal and other tax returns and reports of the Acquired Fund required by law to have been filed by such date (giving effect to extensions) shall have been filed, and all federal and other taxes shown to be due on said returns and reports shall have been paid so far as due, or provision shall have been made for the payment thereof, and to the best of the Acquired Fund's knowledge no such return is currently under audit and no assessment has been asserted with respect to any such return;
(j) For all taxable years and all applicable quarters of such years from the date of its inception, the Acquired Fund has met, and for the taxable year ending on the Closing Date, will meet the requirements of Subchapter M of the Code for treatment as a "regulated investment company" within the meaning of Section 851 of the Code, and the Acquired Fund has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M did not apply to it. Neither the Trust nor the Acquired Fund has at any time since its inception been liable for nor is now liable for any material tax pursuant to Sections 852 or 4982 of the Code, except as previously disclosed in writing to and accepted by the Acquiring Fund. The Acquired Fund has duly filed all federal, state, local and foreign tax returns which are required to have been filed, and all taxes of the Acquired Fund which are due and payable have been paid except for amounts that alone or in the aggregate would not reasonably be expected to have a material adverse effect. The Acquired Fund is in compliance in all material respects with applicable regulations of the Internal Revenue Service pertaining to the reporting of dividends and other distributions on and redemptions of its capital stock and to withholding in respect of dividends and other distributions to shareholders, and is not liable for any material penalties which could be imposed thereunder;
(k) The authorized capital of the Trust consists of an unlimited number of shares of beneficial interest, no par value, of such number of different series as the Board of Trustees of the Trust may authorize from time to time. The outstanding shares of beneficial interest in the Acquired Fund are, and at the Closing Date will be, divided into Class A shares, Class B shares, Class C shares, Class I shares and Advisor Class shares, each having the characteristics described in the Acquired Fund Prospectus. All issued and outstanding shares of the Acquired Fund are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and (except as set forth in the Acquired Fund Prospectus), nonassessable by the Acquired Fund and will have been issued in compliance with all applicable registration or qualification requirements of federal and state securities laws. No options, warrants or other rights to subscribe for or purchase, or securities convertible into, any shares of beneficial interest of the Acquired Fund are outstanding and none will be outstanding on the Closing Date;
(l) The Acquired Fund's investment operations from inception to the date hereof have been in compliance in all material respects with the investment policies and investment restrictions set forth in its prospectus and statement of additional information as in effect from time to time, except as previously disclosed in writing to and accepted by the Acquiring Fund;
(m) The execution, delivery and performance of this Agreement has been duly authorized by the Trustees of the Trust, and, upon approval thereof by the required majority of the shareholders of the Acquired Fund, this Agreement will constitute the valid and binding obligation of the Acquired Fund, enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and other equitable principles;
(n) The Acquiring Shares to be issued to the Acquired Fund pursuant to paragraph 1 will not be acquired for the purpose of making any distribution thereof other than to the Acquired Fund Shareholders as provided in paragraph 1.3;
(o) The information provided by the Acquired Fund for use in the Registration Statement and Proxy Statement referred to in paragraph 5.3 and any information provided by the Acquired Fund for use in any governmental filings in connection with the transactions contemplated hereby, including without limitation applications for exemption orders or no-action letters, shall be accurate and complete in all material respects and shall comply with federal securities and other laws and regulations applicable thereto;
(p) No consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Acquired Fund of the transactions contemplated by this Agreement, except such as may be required under the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940 Act and state insurance, securities or blue sky laws (which term as used in this Agreement shall include the laws of the District of Columbia and of Puerto Rico);
(q) At the Closing Date, the Trust, on behalf of the Acquired Fund, will have good and marketable title to its assets to be transferred to the Acquiring Fund pursuant to paragraph 1.1 and will have full right, power and authority to sell, assign, transfer and deliver the Investments (as defined below) and any other assets of the Acquired Fund to be transferred to the Acquiring Fund pursuant to this Agreement. At the Closing Date, subject only to the delivery of the Investments and any such other assets and payment therefor as contemplated by this Agreement, the Acquiring Fund will acquire good and marketable title thereto and will acquire the Investments and any such other assets subject to no encumbrances, liens or security interests whatsoever and without any restrictions upon the transfer thereof, except as previously disclosed to and accepted by the Acquiring Fund. As used in this Agreement, the term "Investments" shall mean the Acquired Fund's investments shown on the sc hedule of its investments as of December 31, 2002, referred to in Section 4.1(f) hereof, as supplemented with such changes in the portfolio as the Acquired Fund shall make, and changes resulting from stock dividends, stock splits, mergers and similar corporate actions through the Closing Date;
(r) At the Closing Date, the Acquired Fund will have sold such of its assets, if any, as are necessary to assure that, after giving effect to the acquisition of the assets of the Acquired Fund pursuant to this Agreement, the Acquiring Fund will remain [a "diversified company" within the meaning of Section 5(b)(1) of the 1940 Act and] in compliance with such [other] mandatory investment restrictions as are set forth in the Acquiring Fund Prospectus, as amended through the Closing Date; and
(s) No registration of any of the Investments under the Securities Act or under any state securities or blue sky laws would be required if they were, as of the time of such transfer, the subject of a public distribution by either of the Acquiring Fund or the Acquired Fund, except as previously disclosed by the Acquired Fund to and accepted by the Acquiring Fund.
4.2 The Trust, on behalf of the Acquiring Fund, represents and warrants the following to the Acquired Fund as of the date hereof and agrees to confirm the continuing accuracy and completeness in all material respects of the following on the Closing Date:
(a) The Trust is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts and has the power to own all of its property and assets and to conduct its business as currently conducted;
(b) The Trust is a duly registered investment company classified as a management company of the open-end type and its registration with the SEC as an investment company under the 1940 Act is in full force and effect, and the Acquiring Fund is a separate series thereof duly established, designated and existing in accordance with the applicable provisions of the Declaration of Trust of the Trust and the 1940 Act;
(c) The Acquiring Fund Prospectus conforms in all material respects with the applicable requirements of the 1933 Act and the rules and regulations of the SEC thereunder and does not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and there are no material contracts to which the Acquiring Fund is a party that are not referred to in the Acquiring Fund Prospectus or in the registration statement of which it is a part;
(d) At the Closing Date, the Acquiring Fund will have good and marketable title to its assets;
(e) The Trust is not in violation in any material respect of any provisions of its Declaration of Trust or By-laws or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Trust is a party or by which the Acquiring Fund is bound, if any, and the execution, delivery and performance of this Agreement will not result in any such violation;
(f) No litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened against the Acquiring Fund or any of its properties or assets. The Acquiring Fund knows of no facts which might form the basis for the institution of such proceedings, and is not a party to or subject to any order, decree or judgment of any court or governmental body which materially and adversely affects its business or its ability to consummate the transactions contemplated hereby;
(g) The statement of assets and liabilities, the statement of operations, the statement of changes in net assets and the schedule of investments at, as of and for the two years ended December 31, 2002, of the Acquiring Fund, audited by Deloitte & Touche LLP for the year ended December 31, 2002 and by PricewaterhouseCoopers LLP for the year ended December 31, 2001, copies of which have been furnished to the Acquired Fund, fairly reflect the financial condition and results of operations of the Acquiring Fund as of such dates and the results of its operations for the periods then ended in accordance with generally accepted accounting principles consistently applied, and the Acquiring Fund has no known liabilities of a material amount, contingent or otherwise, other than those shown on the statement of net assets referred to above or those incurred in the ordinary course of its business since December 31, 2002.
(h) Since December 31, 2002, there has not been any material adverse change in the Acquiring Fund's financial condition, assets, liabilities or business (other than changes occurring in the ordinary course of business), or any incurrence by the Acquiring Fund of indebtedness, except as disclosed in writing to the Acquired Fund. For the purposes of this subparagraph (h), changes in portfolio securities, changes in the market value of portfolio securities or net redemptions shall be deemed to be in the ordinary course of business;
(i) By the Closing Date, all federal and other tax returns and reports of the Acquiring Fund required by law to have been filed by such date (giving effect to extensions) shall have been filed, and all federal and other taxes shown to be due on said returns and reports shall have been paid so far as due, or provision shall have been made for the payment thereof, and to the best of the Acquiring Fund's knowledge no such return is currently under audit and no assessment has been asserted with respect to such returns;
(j) For all taxable years and all applicable quarters of such years from the date of its inception, the Acquiring Fund has met, and for the current taxable year will meet, the requirements of Subchapter M of the Code for treatment as a "regulated investment company" within the meaning of Section 851 of the Code. Neither the Trust nor the Acquiring Fund has at any time since its inception been liable for nor is now liable for any material tax pursuant to Sections 852 or 4982 of the Code, except as previously disclosed in writing to and accepted by the Acquired Fund. The Acquiring Fund has duly filed all federal, state, local and foreign tax returns which are required to have been filed, and all taxes of the Acquiring Fund which are due and payable have been paid except for amounts that alone or in the aggregate would not reasonably be expected to have a material adverse effect. The Acquiring Fund is in compliance in all material respects with applicable regulations of the Inte rnal Revenue Service pertaining to the reporting of dividends and other distributions on and redemptions of its capital stock and to withholding in respect of dividends and other distributions to shareholders, and is not liable for any material penalties which could be imposed thereunder;
(k) The authorized capital of the Trust consists of an unlimited number of shares of beneficial interest, no par value, of such number of different series as the Board of Trustees of the Trust may authorize from time to time. The outstanding shares in the Acquiring Fund are, and at the Closing Date will be, divided into Class A shares, Class B shares, Class C shares, Class I shares and Advisor Class shares, each having the characteristics described in the Acquiring Fund Prospectus. All issued and outstanding shares of the Acquiring Fund are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and (except as set forth in the Acquiring Fund Prospectus) non-assessable by the Trust, and will have been issued in compliance with all applicable registration or qualification requirements of federal and state securities laws. No options, warrants or other rights to subscribe for or purchase, or securities convertible into, any shares of com mon stock in the Acquiring Fund of any class are outstanding and none will be outstanding on the Closing Date (except such rights as the Acquiring Fund may have pursuant to this Agreement);
(l) The Acquiring Fund's investment operations from inception to the date hereof have been in compliance in all material respects with the investment policies and investment restrictions set forth in its prospectus or prospectuses and statement or statements of additional information as in effect from time to time;
(m) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Trust, and this Agreement constitutes the valid and binding obligation of the Trust and the Acquiring Fund enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and other equitable principles;
(n) The Acquiring Shares to be issued and delivered to the Acquired Fund pursuant to the terms of this Agreement will at the Closing Date have been duly authorized and, when so issued and delivered, will be duly and validly issued Class A shares, Class B shares, Class C shares, or Advisor Class shares, as the case may be, in the Acquiring Fund, and will be fully paid and (except as set forth in the Acquiring Fund Prospectus) non-assessable by the Trust, and no shareholder of the Trust will have any preemptive right of subscription or purchase in respect thereof;
(o) The information to be furnished by the Acquiring Fund for use in the Registration Statement and the Proxy Statement referred to in paragraph 5.3 and any information furnished by the Acquiring Fund for use in any governmental filings in connection with the transactions contemplated hereby, including without limitation applications for exemption orders or no-action letters, shall be accurate and complete in all material respects and shall comply with federal securities and other laws and regulations applicable thereto; and
(p) No consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Acquiring Fund of the transactions contemplated by this Agreement, except such as may be required under 1933 Act, the 1934 Act, the 1940 Act and state insurance, securities or blue sky laws.
5. COVENANTS OF THE ACQUIRED FUND AND THE ACQUIRING FUND.
The Trust, on behalf of the Acquiring Fund on the one hand and the Acquired Fund on the other hand, hereby covenants and agrees as follows:
5.1 The Acquired Fund will operate its business in the ordinary course between the date hereof and the Closing Date, it being understood that such ordinary course of business may include paying regular and customary periodic dividends and other distributions.
5.2 The Acquired Fund will call a meeting of its shareholders to be held prior to the Closing Date to consider and approve this Agreement and take all other reasonable action necessary to obtain the required shareholder approval of the transactions contemplated hereby.
5.3 In connection with the Acquired Fund shareholders' meeting referred to in paragraph 5.2, the Acquired Fund will prepare a Proxy Statement for such meeting, to be included in a Registration Statement on Form N-14 (the "Registration Statement") which the Trust will prepare and file for the registration under the 1933 Act of the Acquiring Shares to be distributed to the Acquired Fund Shareholders pursuant hereto, all in compliance with the applicable requirements of the 1933 Act, the 1934 Act, and the 1940 Act.
5.4 The information to be furnished by the Acquired Fund for use in the Registration Statement and the information to be furnished by the Acquiring Fund for use in the Proxy Statement, each as referred to in paragraph 5.3, shall be accurate and complete in all material respects and shall comply with federal securities and other laws and regulations thereunder applicable thereto.
5.5 The Acquiring Fund will advise the Acquired Fund promptly if at any time prior to the Closing Date the Acquiring Fund becomes aware that the assets of the Acquired Fund include any securities which the Acquiring Fund is not permitted to acquire.
5.6 Subject to the provisions of this Agreement, the Acquired Fund and the Acquiring Fund will each take or cause to be taken all actions, and do or cause to be done all things reasonably necessary, proper or advisable to cause the conditions to the other party's obligations to consummate the transactions contemplated hereby to be met or fulfilled and otherwise to consummate and make effective such transactions.
5.7 The Acquiring Fund will use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act and such of the state securities or blue sky laws as it may deem appropriate in order to continue its operations after the Closing Date.
5.8 At the Closing, the Trust will turn over to the Acquiring Fund any all its books and records regarding the Acquired Fund, including all books and records required to be maintained under the 1940 Act and the rules and regulations thereunder.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions provided for herein shall be subject, at its election, to the performance by the Trust, on behalf of the Acquiring Fund, of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, to the following further conditions:
6.1 The Trust, on behalf of the Acquiring Fund, shall have delivered to the Acquired Fund a certificate executed in its name by its President or Vice President and its Treasurer or Assistant Treasurer, in form satisfactory to the Acquired Fund and dated as of the Closing Date, to the effect that the representations and warranties of the Trust on behalf of the Acquiring Fund made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and that the Trust and the Acquiring Fund have complied with all the covenants and agreements and satisfied all of the conditions on their parts to be performed or satisfied under this Agreement at or prior to the Closing Date.
6.2 The Trust shall have received a favorable opinion from Kirkpatrick & Lockhart LLP, counsel to the Acquiring Fund, dated the Closing Date and in a form satisfactory to the Trust, to the following effect:
(a) The Trust is a business trust duly organized and validly existing under the laws of the State of Massachusetts and has corporate power and authority necessary to own all of its properties and assets and to carry on its business as presently conducted, and the Acquiring Fund is a separate series of the Trust duly constituted in accordance with the applicable provisions of the 1940 Act and the Declaration of Trust of the Trust; (b) this Agreement has been duly authorized, executed and delivered on behalf of the Acquiring Fund and, assuming the Proxy Statement and the Registration Statement referred to in paragraph 5.3 comply with all applicable provisions of federal securities laws, this Agreement constitutes the valid and binding obligation of the Acquiring Fund enforceable against the Acquiring Fund in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights and ge neral principles of equity; (c) the Acquiring Fund has the power to assume the liabilities to be assumed by it hereunder and upon consummation of the transactions contemplated hereby the Acquiring Fund will have duly assumed such liabilities; (d) the Acquiring Shares to be issued for transfer to the shareholders of the Acquired Fund as provided by this Agreement are duly authorized and upon such transfer and delivery will be validly issued and outstanding and fully paid and nonassessable Class A shares, Class B shares, Class C shares and Advisor Class shares of the Acquiring Fund, assuming that as consideration for such shares not less than the net asset value and the par value of such shares has been paid and that the conditions set forth in this Agreement have been satisfied; and no shareholder of the Acquiring Fund has any preemptive right of subscription or purchase in respect of such shares; (e) the execution and delivery by the Trust on behalf of the Acquiring Fund of this Agreement did not, and the pe rformance by the Trust and the Acquiring Fund of their respective obligations hereunder will not, violate the Trust's Declaration of Trust or By-laws, or any provision of any agreement filed as an exhibit to the Trust's Registration Statement on Form N-1A, as amended to date, and to which the Trust or the Acquiring Fund is a party or by which either of them is bound, or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty under any such agreement or any judgment or decree to which the Trust or the Acquiring Fund is a party or by which either of them is bound; (f) to the knowledge of such counsel, no consent, approval, authorization or order of any United States federal or Massachusetts state court or governmental authority is required for the consummation by the Trust or the Acquiring Fund of the transactions contemplated by this Agreement, except such as may be required under state securities or blue sky laws or such as have been obtained; (g) afte r inquiry of officers of the Trust by such counsel, but without having made any other investigation, there is no legal or governmental proceeding relating to the Trust or the Acquiring Fund on or before the date of mailing of the Proxy Statement referred to in paragraph 5.3 or the date hereof which is required to be described in the Registration Statement referred to in paragraph 5.3 which is not disclosed therein; (h) the Trust is duly registered with the SEC as an investment company under the 1940 Act; and (i) to the knowledge of such counsel, after having made inquiry of officers of the Trust but without having made any other investigation, there is no litigation or administrative proceeding or investigation of or before any court or governmental body presently pending or threatened as to the Trust or the Acquiring Fund or any of their respective properties or assets that places in question the validity or enforceability of, or seeks to enjoin the performance of, the Trust's obligations under this Agreeme nt, and neither the Trust nor the Acquiring Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body, which materially and adversely affects either of their respective businesses.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to consummate the transactions provided for herein shall be subject, at its election, to the performance by the Trust, on behalf of the Acquired Fund, of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, to the following further conditions:
7.1 The Trust, on behalf of the Acquired Fund, shall have delivered to the Acquiring Fund a certificate executed in its name by its President or Vice President and its Treasurer or Assistant Treasurer, in form and substance satisfactory to the Acquiring Fund and dated the Closing Date, to the effect that the representations and warranties of the Trust, on behalf of the Acquired Fund, made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and that the Trust and the Acquired Fund have complied with all the covenants and agreements and satisfied all of the conditions on their part to be performed or satisfied under this Agreement at or prior to the Closing Date;
7.2 The Trust shall have received a favorable opinion from Bell, Boyd & Lloyd LLC, counsel to the Trust, dated the Closing Date and in a form reasonably satisfactory to the Trust, substantially to the following effect (for purposes of rendering opinions with respect to matters of Massachusetts law, Bell, Boyd & Lloyd LLC may rely on the opinion of Kirkpatrick & Lockhart LLP):
(a) The Trust is a business trust duly organized and validly existing under the laws of the Commonwealth of Massachusetts and has the power and authority necessary to own all of its properties and assets and to carry on its business as presently conducted, and the Acquired Fund is a separate series of the Trust duly constituted in accordance with the applicable provisions of the 1940 Act and the Declaration of Trust and By-laws of the Trust; (b) this Agreement has been duly authorized, executed and delivered on behalf of the Acquired Fund and, assuming the Proxy Statement and the Registration Statement referred to in paragraph 5.3 comply with all applicable provisions of federal securities laws, this Agreement constitutes the valid and binding obligation of the Acquired Fund enforceable against the Acquired Fund in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' ri ghts and general principles of equity; (c) the Acquired Fund has the power to sell, assign, transfer and deliver the assets to be transferred by it under this Agreement, and, upon consummation of the transactions contemplated by this Agreement, the Acquired Fund will have duly transferred such assets to the Acquiring Fund; (d) the execution and delivery by the Trust on behalf of the Acquired Fund of this Agreement did not, and the performance by the Trust and the Acquired Fund of their respective obligations hereunder will not, violate the Trust's Declaration of Trust or By-laws, or any provision of any agreement filed as an exhibit to the Trust's Registration Statement on Form N-1A, as amended to date, and to which the Trust or the Acquired Fund is a party or by which either of them is bound, or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty under any such agreement or any judgment or decree to which the Trust or the Acquired Fund is a party or by which either of them is bound; (e) to the knowledge of such counsel, no consent, approval, authorization or order of any United States federal or Massachusetts state court or governmental authority is required for the consummation by the Trust or the Acquired Fund of the transactions contemplated by this Agreement, except such as may be required under state securities or blue sky laws or such as have been obtained; (f) after inquiry of officers of the Trust by such counsel, but without having made any other investigation, there is no legal or governmental proceeding relating to the Trust or the Acquired Fund on or before the date of mailing of the Proxy Statement referred to in paragraph 5.3 or the date of such opinion which is required to be described in the Registration Statement referred to in paragraph 5.3 which is not disclosed therein; (g) the Trust is duly registered with the SEC as an investment company under the 1940 Act; (h) to the knowledge of such counsel, after having made inquiry of offic ers of the Trust but without having made any other investigation, there is no litigation or administrative proceeding or investigation of or before any court or governmental body presently pending or threatened as to the Trust or the Acquired Fund or any of their respective properties or assets that places in question the validity or enforceability of, or seeks to enjoin the performance of, the Trust's obligations under this Agreement, and neither the Trust nor the Acquired Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body, which materially and adversely affects either of their respective businesses; and (i) all issued and outstanding shares of the Acquired Fund are validly issued, fully paid and non-assessable, assuming that as consideration for such shares not less than the net asset value of such shares has been paid, and assuming that such shares were issued in accordance with the Acquired Fund's registration statement, or any amendments th ereto, in effect at the time of such issuance.
7.3 The Acquired Fund shall have furnished to the Acquiring Fund tax returns, signed by a partner of Deloitte & Touche LLP, for the fiscal year ended December 31, 2002 and signed pro forma tax returns for the period from December 31, 2002 to the Closing Date (which pro forma tax returns shall be furnished promptly after the Closing Date).
7.4 Prior to the Closing Date, the Acquired Fund shall have declared a dividend or dividends which, together with all previous dividends, shall have the effect of distributing all of the Acquired Fund's investment company taxable income for its taxable years ending on or after December 31, 2002 and on or prior to the Closing Date (computed without regard to any deduction for dividends paid), and all of its net capital gains realized in each of its taxable years ending on or after December 31, 2002 and on or prior to the Closing Date.
7.5 The Acquired Fund shall have furnished to the Acquiring Fund a certificate, signed by the President (or any Vice President) and the Treasurer of the Trust, as to the adjusted tax basis in the hands of the Acquired Fund of the securities delivered to the Acquiring Fund pursuant to this Agreement.
7.6 The custodian of the Acquired Fund shall have delivered to the Acquiring Fund a certificate identifying all of the assets of the Acquired Fund held by such custodian as of the Valuation Date, and the Acquired Fund shall have delivered to the Acquiring Fund a statement of assets and liabilities of the Acquired Fund as of the Valuation Date, prepared in accordance with generally accepted accounting principles consistently applied from the prior audited period, certified by the Treasurer of the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH
OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
The obligations of the Trust on behalf of the Acquired Fund on the one hand and on behalf of the Acquiring Fund on the other hand hereunder are subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have been approved by the vote of the required majority of the holders of the outstanding shares of the Acquired Fund of record on the record date for the meeting of its shareholders referred to in paragraph 5.2;
8.2 On the Closing Date no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated hereby;
8.3 All consents of other parties and all other consents, orders and permits of federal, state and local regulatory authorities (including those of the SEC and of state blue sky and securities authorities) deemed necessary by the Trust to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or properties of the Acquiring Fund or the Acquired Fund;
8.4 The Registration Statement referred to in paragraph 5.3 shall have become effective under the 1933 Act and no stop order suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act;
8.5 The Trust on behalf of each of the Acquired Fund and the Acquiring Fund shall have received a favorable opinion of Bell, Boyd & Lloyd LLC satisfactory to the Trust substantially to the effect that, for federal income tax purposes:
(a) The acquisition by the Acquiring Fund of the assets of the Acquired Fund in exchange for the Acquiring Fund's assumption of the Obligations of the Acquired Fund and issuance of the Acquiring Shares, followed by the distribution by the Acquired Fund of such Acquiring Shares to the shareholders of the Acquired Fund in exchange for their shares of the Acquired Fund, all as provided in paragraph 1 hereof, will constitute a reorganization within the meaning of Section 368(a) of the Code, and the Acquired Fund and the Acquiring Fund will each be "a party to a reorganization" within the meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized to the Acquired Fund (i) upon the transfer of its assets to the Acquiring Fund in exchange for the Acquiring Shares and the Acquiring Fund's assumption of the Obligations or (ii) upon the distribution of the Acquiring Shares to the shareholders of the Acquired Fund as contemplated in paragraph 1 hereof;
(c) No gain or loss will be recognized by the Acquiring Fund upon the receipt of the assets of the Acquired Fund in exchange for the assumption of the Obligations and issuance of the Acquiring Shares as contemplated in paragraph 1 hereof;
(d) The tax basis of the assets of the Acquired Fund acquired by the Acquiring Fund will be the same as the basis of those assets in the hands of the Acquired Fund immediately prior to the transfer, and the holding period of the assets of the Acquired Fund in the hands of the Acquiring Fund will include the period during which those assets were held by the Acquired Fund;
(e) The Acquired Fund Shareholders will recognize no gain or loss upon the exchange of their shares of the Acquired Fund for the Acquiring Shares;
(f) The tax basis of the Acquiring Shares to be received by each Acquired Fund Shareholder will be the same in the aggregate as the aggregate tax basis of the shares of the Acquired Fund surrendered in exchange therefor;
(g) The holding period of the Acquiring Shares to be received by each Acquired Fund Shareholder will include the period during which the shares of the Acquired Fund surrendered in exchange therefor were held by such shareholder, provided such shares of the Acquired Fund were held as a capital asset on the date of the exchange; and
(h) The Acquiring Fund will succeed to and take into account the items of the Acquired Fund described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the regulations thereunder.
8.6 At any time prior to the Closing, any of the foregoing conditions of this paragraph 8 may be waived by the Board of Trustees of the Trust if, in their judgment, such waiver will not have a material adverse effect on the interests of the shareholders of the Acquired Fund and the Acquiring Fund.
9. FEES AND EXPENSES.
9.1 All fees paid to governmental authorities for the registration or qualification of the Acquiring Shares and all transfer agency costs related to the Acquiring Shares shall be allocated to the Trust, on behalf of the Acquiring Fund. All of the other expenses of the transactions, including without limitation, fees and expenses related to printing, mailing, solicitation of proxies, tabulation of votes and accounting, legal and custodial expenses, contemplated by this Agreement shall be allocated to the Trust, on behalf of the Acquired Fund. The expenses detailed above shall be borne as follows: (a) as to expenses allocable to the Trust, on behalf of the Acquired Fund, fifty percent (50%) of such expenses shall be borne by the Acquired Fund and fifty percent (50%) by Waddell & Reed Ivy Investment Company; and (b) as to expenses allocable to the Trust, on behalf of the Acquiring Fund, all of such expenses shall be borne by the Acquiring Fund. Neither Fund will be reimburse d for any expenses incurred by it or on its behalf in connection with the reorganization contemplated by this Agreement unless those expenses are solely and directly related to the reorganization contemplated by this Agreement (determined in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B. 187).
9.2 In the event the transactions contemplated by this Agreement are not consummated, then Waddell & Reed Ivy Investment Company agrees that it shall bear all of the costs and expenses incurred by both the Acquiring Fund and the Acquired Fund in connection with such transactions.
9.3 Notwithstanding any other provisions of this Agreement, if for any reason the transactions contemplated by this Agreement are not consummated, neither the Acquiring Fund nor the Acquired Fund shall be liable to the other for any damages resulting therefrom, including, without limitation, consequential damages.
9.4 Notwithstanding any of the foregoing, costs and expenses will in any event be paid by the party directly incurring them if and to the extent that the payment by another party of such costs and expenses would result in the disqualification of such party as a "regulated investment company" within the meaning of Section 851 of the Code.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES.
10.1 The Trust on behalf of the Acquired Fund and the Trust on behalf of the Acquiring Fund agree that neither party has made any representation, warranty or covenant to the other not set forth herein and that this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall not survive the consummation of the transactions contemplated hereunder except paragraphs 1.1, 1.3, 1.4, 1.5, 1.6, 3.4, 5.4, 7.3, 9, 10, 13 and 14.
11. TERMINATION.
11.1 The Trust may at its option terminate this Agreement at or prior to the Closing Date:
(a) Because of a material breach by the Acquired Fund or Acquiring Fund of any representation, warranty, covenant or agreement contained herein to be performed by the other party at or prior to the Closing Date;
(b) If a condition herein expressed to be precedent to the obligations of the terminating party has not been met and it reasonably appears that it will not or cannot be met; or
(c) Any governmental authority of competent jurisdiction shall have issued any judgment, injunction, order, ruling or decree or taken any other action restraining, enjoining or otherwise prohibiting this Agreement or the consummation of any of the transactions contemplated herein and such judgment, injunction, order, ruling, decree or other action becomes final and non-appealable; provided that the party seeking to terminate this Agreement pursuant to this Section 11.1(c) shall have used its reasonable best efforts to have such judgment, injunction, order, ruling, decree or other action lifted, vacated or denied.
11.2 If the transactions contemplated by this Agreement have not been substantially completed by September 30, 2003, this Agreement shall automatically terminate on that date unless a later date is agreed to by the Trust.
12. AMENDMENTS.
This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of the Trust on behalf of the Acquiring Fund and the Trust on behalf of the Acquiring Fund; provided, however, that following the shareholders' meeting called by the Acquired Fund pursuant to paragraph 5.2, no such amendment may have the effect of changing the provisions for determining the number of the Acquiring Shares to be issued to the Acquired Fund Shareholders under this Agreement to the detriment of such shareholders without their further approval.
13. NOTICES.
Any notice, report, statement or demand required or permitted by any provisions of this Agreement shall be in writing and shall be given by prepaid courier, telecopy or certified mail addressed to: Ivy Fund, Via Mizner Financial Plaza, 925 South Federal Highway, Suite 600, Boca Raton, FL 33432 attn: Secretary.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
NON-RECOURSE; FINDERS' FEES.
14.1 The article and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the domestic substantive laws of the Commonwealth of Massachusetts, without giving effect to any choice or conflicts of law rule or provision that would result in the application of the domestic substantive laws of any other jurisdiction.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.
14.5 A copy of the Declaration of Trust of the Trust is on file with the Secretary of the Commonwealth of Massachusetts, and notice is hereby given that no trustee, director, officer, agent or employee of the Trust shall have any personal liability under this Agreement, and that this Agreement is binding only upon the assets and properties of the Acquired Fund and the Acquiring Fund.
14.6 The Trust, on behalf of the Acquired Fund, and the Trust, on behalf of the Acquiring Fund, represents and warrants that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as a sealed instrument by its President or Vice President and its corporate seal to be affixed thereto and attested by its Secretary or Assistant Secretary.
By: Name: Title: | IVY FUND, By: Name: Title: |
By: Title: |
By: Name: Title: |
ATTEST: By: Name: Title: | Agreed and accepted as to paragraph 9 only: WADDELL & REED IVY INVESTMENT COMPANY By: NameTitle |
APPENDIX B
FUND INFORMATION
SHARES OUTSTANDING AND ENTITLED TO VOTE OF THE ACQUIRED FUND
Only the shareholders of record of the Acquired Fund at the close of business on ________ __, 2003, will be entitled to vote at the Meeting. On that date, the number of shares outstanding of the Acquired Fund was as follows:
|
| NUMBER OF SHARES OUTSTANDING AND ENTITLED TO VOTE |
|
| |
Class B | ||
Class C | ||
Advisor Class | ||
TOTAL |
OWNERSHIP OF SHARES
As of March __, 2003, Ivy Fund believes that its Trustees and officers, as a group, owned [less than one percent] of each class of shares of each Fund and of Ivy Fund as a whole. As of March __, 2003, the following shareholders of record owned 5% or more of the outstanding shares of the noted class of shares of the noted Fund:
|
| NUMBER OF OUTSTANDING SHARES OF | PERCENTAGE OF OUTSTANDING SHARES OF CLASS OWNED |
|
Class A ...................... | ||||
Class B ....................... | ||||
Class C ....................... | ||||
Advisor Class ........... |
|
| NUMBER OF OUTSTANDING SHARES OF | PERCENTAGE OF OUTSTANDING SHARES OF CLASS OWNED |
|
Class A ....................... | ||||
Class B ........................ | ||||
Class C ........................ | ||||
Advisor Class ............ |
OWNERSHIP OF SHARES UPON CONSUMMATION OF ACQUISITION
The shareholders of record that owned 5% or more of the outstanding shares of the noted class of shares of the noted Fund as of _______ __, 2003 would own the following percentages of the Acquiring Fund noted below upon consummation of the Acquisition. The percentages presented below assume that the Acquisition of the Acquired Fund is consummated.
|
| PERCENTAGE OF OUTSTANDING SHARES OF CLASS OWNED UPON CONSUMMATION OF ACQUISITION |
|
Class A .................... | |||
Class B ..................... | |||
Class C ..................... | |||
Advisor Class ......... |
APPENDIX C
CAPITALIZATION
The following table shows on an unaudited basis the capitalization of each of the Acquired Fund and the Acquiring Fund as of February 28, 2003, and on a pro forma combined basis, giving effect to the acquisition of the assets and liabilities of Acquired Fund by the Acquiring Fund at net asset value as of that date.
|
|
| ACQUIRING FUND | |
Class A(3) | ||||
Net asset value | 1,487,592 | 5,145,330 | (79,300)(4) | 6,629,522 |
Shares outstanding | 284,669 | 880,032 | 9,865,606 | 1,133,740 |
Net asset value per share | 5.23 | 5.85 | 5.85 | |
Class B (3) | ||||
Net asset value | 1,306,644 | 2,283,704 | (1,700)(4) | 3,587,348 |
Shares outstanding | 263,468 | 405,589 | 205,628 | 637,142 |
Net asset value per share | 4.96 | 5.63 | 5.63 | |
Class C (3) | ||||
Net asset value | 401,523 | 467,424 | (100)(4) | 868,047 |
Shares outstanding | 80,589 | 83,053 | 13,043 | 154,212 |
Net asset value per share | 4.98 | 5.63 | 5.63 | |
Advisor Class (3) | (100)(4) | |||
Net asset value | 36,188 | 32,996 | 8,816 | 69,084 |
Shares outstanding | 6,908 | 5,791 | 12,122 | |
Net asset value per share | 5.24 | 5.70 | 5.70 | |
------------------------
+ The Acquiring Fund will be the accounting survivor for financial statement purposes.
(1) Assumes the Acquisition was consummated on February 28, 2003, and is for information purposes only. No assurance can be given as to how many shares of the Acquiring Fund will be received by the shareholders of the Acquired Fund on the date the Acquisition takes place, and the foregoing should not be relied upon to reflect the number of shares of the Acquiring Fund that actually will be received on or after such date.
(2) Class A Shares, Class B Shares, Class C Shares and Advisor Class Shares of the Acquired Fund will be exchanged for new Class A shares, Class B shares, Class C shares and Advisor Class shares, respectively, of the Acquiring Fund upon consummation of the Acquisition. As no Class I shares are outstanding as of February 28, 2003, and the shares are not available for purchase, no Class I shares will be transferred as part of the Acquisition.
(3) Capitalization information is for Class A Shares, Class B Shares, and Class C Shares and Advisor Class Shares of the Acquired Fund and Class A shares, Class B shares, Class C shares and Advisor Class shares, respectively, of the Acquiring Fund pro forma combined.
(4) Adjustments reflect estimated one-time proxy, accounting, legal and other costs of the reorganization of $_________ to be borne by the Acquired Fund.
APPENDIX D
[TO BE FILED BY AMENDMENT]
APPENDIX E
[TO BE FILED BY AMENDMENT]
APPENDIX F
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
FOR THE IVY PACIFIC OPPORTUNITIES FUND
Manager's Discussion
December 31, 2002
Ivy Pacific Opportunities Fund was managed by Moira McLachlan and the Ivy International Equities team until December 16, 2002. Below, she discusses factors relating to Fund performance in 2002. Thomas A. Mengel, Senior Vice President of Waddell & Reed Ivy Investment Company, assumed management of Ivy Pacific Opportunities Fund on December 17, 2002. He discusses how the Fund is positioned going forward.
This report relates to the operation of Ivy Fund -- Ivy Pacific Opportunities Fund for the fiscal year ended December 31, 2002. The following discussion, graphs and tables provide you with information regarding the Fund's performance during that period.
The Fund's goal: to provide long-term capital growth by investing in securities traded in Pacific region markets. Examples of Pacific region countries include Australia, China, Hong Kong, India, Korea, Singapore, Sri Lanka and Taiwan.
Lipper Category: Pacific ex-Japan
Moira, how did Ivy Pacific Opportunities Fund perform in 2002?
For 2002, Ivy Pacific Opportunities Fund returned --16.41%, including the impact of the maximum sales charge, and --11.31% without the sales charge. The Fund underperformed its benchmark, the MSCI Asia pacific Free Ex-Japan index, which returned --5.09%, and its peer group (as measured by the Lipper Pacific Ex-Japan Funds average), which returned --7.98%. It should be noted that the benchmark index and Lipper category do not reflect sales charges.
How were market conditions?
While ex-Japan Asia was a relative outperformer in 2002, most regional stock markets finished the year in negative territory. Stocks were depressed by sluggish economic growth and turmoil in the U.S. and European markets. The major Asian markets fell heavily, with Hong Kong, Singapore and Taiwan all posting double-digit declines. However, a number of the smaller, more speculative markets posted gains. Despite a sharp sell-off after the Bali disco bombing, the Indonesia market ended the year in positive territory. The Thai market gained around 17% and the Pakistani market was up over 100%.
What factors affected performance?
An overweight position in Taiwanese technology stocks had a negative impact on performance. These stocks performed strongly in the last quarter of 2001 and into the first quarter of 2002. However, they then sold off sharply as investors worried about a recovery in end-user demand. While we locked in some gains early in the year, performance suffered from not cutting the Fund's exposure further than we did.
The Fund's exposure to Hong Kong financials also hurt performance. Interest rate sensitive stocks in Hong Kong -- banks and property stocks -- came under pressure as investors worried that an Argentine-style default in Brazil would prove the final blow to the Hong Kong dollar's peg to the U.S. currency.
Stock selection in Australia made the most significant positive contribution to performance. As commodity prices recovered from the sharp declines of 2001, the Fund benefited from overweight positions in commodity producers. The Fund also benefited from exposure to Australian banks, which did not suffer the credit-quality problems plaguing other developed-market banks.
In South Korea, performance benefited from both an overweight position and good stock selection. The Korean market performed well due to financial sector reform, attractive valuations and strong growth in domestic consumption. Korean exporters also posted solid gains as a result, in part, of strong demand from China.
Thomas, what is your strategy going forward?
The Fund will likely be less concentrated in the future, as we increase the number of holdings and thereby reduce the average weighting of each stock. Along with this broader dispersion, we will reduce exposure to the technology sector in an effort to reduce volatility. We intend to concentrate on the core Asian markets of Hong Kong, China, South Korea, Australia and Taiwan, with particular focus on industry leaders that we believe benefit most from the continued Chinese dominance of business demand in the region. During our gradual process of restructuring this Fund its cash position may be slightly higher than what we would consider normal, but only until the transition is completed.
What is your outlook for the region?
Global equity markets are expected to remain volatile as investors continue to monitor corporate, financial, economic and geopolitical issues. However, we feel that Asian economies are better positioned for domestic growth than many other markets, and regional trade remains impressive. We believe that our refocusing of the Fund will allow us to take better advantage of investment opportunities in the region as we move forward.
____________________________________
Performance cited is for Class A shares at net asset value and at maximum sales load of 5.75%. The opinions expressed in this Appendix F are those of the portfolio managers and are current only through December 31, 2002. The managers' views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed.
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 2002 | |||||
Share Class/ | 1 Year | 5 Years | 10 Years | Since | |
A Shares | w/Reimb. & 5.75% sales charge | (16.41%) | (6.29%) | N/A | (5.41%) |
IPOAX | w/o Reimb. & 5.75% sales charge | (17.56%) | (7.25%) | N/A | (6.10%) |
B Shares | w/Reimb. & w/ 5.00% CDSC | (16.73%) | (6.43%) | N/A | (5.60%) |
IPOBX | w/Reimb. & w/o 5.00% CDSC | (12.35%) | (6.05%) | N/A | (5.60%) |
w/o Reimb. & w/ 5.00% CDSC | (17.92%) | (7.36%) | N/A | (6.27%) | |
w/o Reimb. & w/o 5.00% CDSC | (13.59%) | (6.98%) | N/A | (6.27%) | |
C Shares | w/Reimb. & w/ 1.00% CDSC | (13.09%) | (5.97%) | N/A | (6.84%) |
IPOCX | w/Reimb. & w/o 1.00% CDSC | (12.21%) | (5.97%) | N/A | (6.84%) |
w/o Reimb. & w/ 1.00% CDSC | (14.33%) | (6.90%) | N/A | (7.56%) | |
w/o Reimb. & w/o 1.00% CDSC | (13.46%) | (6.90%) | N/A | (7.56%) | |
Advisor Shares | w/Reimb. | (11.84%) | N/A | N/A | (5.41%) |
IPOVX | w/o Reimb. | (13.08%) | N/A | N/A | (6.18%) |
CDSC = Contingent Deferred Sales Charge.
Advisor Class Shares are not subject to an initial sales charge or a CDSC.
Class A and Class B commenced operations October 22, 1993; Class C commenced operations April 30, 1996; Advisor Class commenced operations February 10, 1998.
Total returns in some periods were higher due to reimbursement of certain Fund expenses.
All charts and tables reflect past results and assume reinvestment of dividends and capital gain distributions. Future results will, of course, be different. The investment return and principal value of Ivy Pacific Opportunities Fund will fluctuate and at redemption shares may be worth more or less than the amount of the original investment.
Performance Comparison of the Acquiring Fund
Since Inception (10/93) of a $10,000 Investment
(Class A shares including 5.75% maximum sales charge)
| MSCI Asia Pacific Free (Excluding Japan) Index | |
10/25/93 | $ 9,425 | $10,000 |
10/31/93 | 9,652 | 10,000 |
11/30/93 | 9,685 | 9,788 |
12/31/93 | 10,900 | 11,878 |
01/31/94 | 10,426 | 11,493 |
02/28/94 | 9,837 | 10,977 |
03/31/94 | 9,011 | 9,872 |
04/30/94 | 9,111 | 10,255 |
05/31/94 | 9,392 | 10,669 |
06/30/94 | 8,905 | 10,269 |
07/31/94 | 9,309 | 10,799 |
08/31/94 | 9,647 | 11,597 |
09/30/94 | 9,624 | 11,303 |
10/31/94 | 9,431 | 11,519 |
11/30/94 | 8,620 | 10,622 |
12/31/94 | 8,188 | 10,419 |
01/31/95 | 7,289 | 9,471 |
02/28/95 | 7,760 | 10,150 |
03/31/95 | 7,927 | 10,137 |
04/30/95 | 7,732 | 10,191 |
05/31/95 | 8,452 | 11,021 |
06/30/95 | 8,352 | 10,858 |
07/31/95 | 8,825 | 11,218 |
08/31/95 | 8,506 | 10,843 |
09/30/95 | 8,722 | 10,937 |
10/31/95 | 8,545 | 10,753 |
11/30/95 | 8,244 | 10,600 |
12/31/95 | 8,318 | 11,053 |
01/31/96 | 9,247 | 11,792 |
02/29/96 | 9,189 | 11,969 |
03/31/96 | 9,044 | 12,035 |
04/30/96 | 9,160 | 12,486 |
05/31/96 | 9,209 | 12,342 |
06/30/96 | 9,121 | 12,136 |
07/31/96 | 8,782 | 11,341 |
08/31/96 | 8,966 | 11,758 |
09/30/96 | 9,063 | 11,924 |
10/31/96 | 9,131 | 11,840 |
11/30/96 | 9,731 | 12,378 |
12/31/96 | 10,023 | 12,339 |
01/31/97 | 9,935 | 12,457 |
02/28/97 | 10,081 | 12,588 |
03/31/97 | 9,682 | 12,006 |
04/30/97 | 10,198 | 11,926 |
05/31/97 | 10,967 | 12,413 |
06/30/97 | 11,356 | 12,866 |
07/31/97 | 11,736 | 12,930 |
08/31/97 | 11,463 | 10,924 |
09/30/97 | 11,210 | 11,004 |
10/31/97 | 8,495 | 8,795 |
11/30/97 | 7,970 | 8,296 |
12/31/97 | 7,824 | 8,119 |
01/31/98 | 6,529 | 7,750 |
02/28/98 | 7,989 | 8,924 |
03/31/98 | 7,795 | 8,829 |
04/30/98 | 7,191 | 8,238 |
05/31/98 | 6,267 | 7,209 |
06/30/98 | 5,498 | 6,634 |
07/31/98 | 5,060 | 6,527 |
08/31/98 | 4,350 | 5,596 |
09/30/98 | 4,953 | 6,071 |
10/31/98 | 6,053 | 7,133 |
11/30/98 | 6,286 | 7,668 |
12/31/98 | 6,215 | 7,760 |
01/31/99 | 5,732 | 7,832 |
02/28/99 | 5,653 | 7,672 |
03/31/99 | 6,176 | 8,377 |
04/30/99 | 7,320 | 9,700 |
05/31/99 | 7,162 | 9,294 |
06/30/99 | 8,692 | 10,464 |
07/31/99 | 8,366 | 10,302 |
08/31/99 | 8,484 | 10,335 |
09/30/99 | 7,991 | 9,796 |
10/31/99 | 8,090 | 9,974 |
11/30/99 | 8,800 | 10,812 |
12/31/99 | 9,119 | 11,627 |
01/31/00 | 9,009 | 11,467 |
02/29/00 | 8,631 | 11,219 |
03/31/00 | 9,488 | 11,404 |
04/30/00 | 8,969 | 10,538 |
05/31/00 | 8,551 | 9,750 |
06/30/00 | 9,189 | 10,454 |
07/31/00 | 9,448 | 9,969 |
08/31/00 | 9,169 | 9,928 |
09/30/00 | 8,312 | 8,948 |
10/31/00 | 7,485 | 8,276 |
11/30/00 | 7,116 | 8,083 |
12/31/00 | 7,455 | 8,143 |
01/31/01 | 8,198 | 9,021 |
02/28/01 | 7,565 | 8,599 |
03/31/01 | 6,932 | 7,646 |
04/30/01 | 6,993 | 7,870 |
05/31/01 | 6,832 | 7,858 |
06/30/01 | 6,731 | 7,786 |
07/31/01 | 6,450 | 7,477 |
08/31/01 | 6,219 | 7,407 |
09/30/01 | 5,174 | 6,306 |
10/31/01 | 5,566 | 6,707 |
11/30/01 | 6,279 | 7,499 |
12/31/01 | 6,762 | 7,945 |
01/31/02 | 6,883 | 8,178 |
02/28/02 | 6,984 | 8,234 |
03/31/02 | 7,225 | 8,710 |
04/30/02 | 7,346 | 8,744 |
05/31/02 | 7,316 | 8,765 |
06/30/02 | 6,994 | 8,339 |
07/31/02 | 6,611 | 7,910 |
08/31/02 | 6,460 | 7,893 |
09/30/02 | 5,847 | 7,188 |
10/31/02 | 6,128 | 7,565 |
11/30/02 | 6,420 | 7,891 |
12/31/02 | 5,998 | 7,541 |
The Moran Stanley Capital International (MSCI) Asia Pacific Free (Excluding-Japan) Index is an unmanaged index of stocks which assumes reinvestment of dividends and, unlike Fund returns, does not reflect any fees or expenses. It is not possible to invest in an index.
Past performance does not guarantee future results. The chart and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemptions.
Country Breakdown | 12/31/02 |
% of Total Net Assets | |
1. Australia | 27% |
2. South Korea | 22% |
3. Hong Kong | 21% |
4. Taiwan | 11% |
5. Singapore | 7% |
6. India | 7% |
Sector Breakdown | 12/31/02 |
% of Total Net Assets | |
1. Financials | 27% |
2. Materials | 16% |
3. Information Technology | 15% |
4. Consumer Discretionary | 13% |
5. Consumer Staples | 9% |
6. Telecommunication Services | 8% |
7. Industrials | 7% |
Top Ten Holdings | 12/31/02 |
Security | % of Total Net Assets |
1. POSCO | 5.8% |
2. BHP Limited | 4.9% |
3. Rio Tinto Ltd. | 4.9% |
4. Westpac Banking Corp. Ltd. | 4.6% |
5. Samsung Electronics | 4.4% |
6. Hyundai MotorCo., Ltd. | 4.4% |
7. Australia & New Zealand Banking | 4.3% |
8. Hero Honda Motors Ltd. | 4.1% |
9. Cathay Pacific Airways | 4.0% |
10. Sun Hung Kai Properties Ltd. | 3.7% |
The top 10 holdings and the country and sector breakdowns are as of 12/31/02 and may not be representative of the Fund's current or future investments.
Ivy Fund 925 South Federal Highway, Suite 600 Boca Raton, Florida 33432 1-800-456-5111 FORM N-14 PART B STATEMENT OF ADDITIONAL INFORMATION APRIL ___, 2003 This Statement of Additional Information (the "SAI") relates to the proposed Acquisition (the "Acquisition") of the Ivy Developing Markets Fund, a series of the Ivy Fund (the "Acquired Fund") by the Ivy Pacific Opportunities Fund, also a series of the Ivy Fund (the "Acquiring Fund"). This SAI contains information which may be of interest to shareholders but which is not included in the Combined Prospectus and Proxy Statement dated April ___, 2003 (the "Prospectus/Proxy Statement") of the Acquiring Fund which relates to the Acquisition. As described in the Prospectus/Proxy Statement, the Acquisition would involve the transfer of all the assets of the Acquired Fund in exchange for shares of the Acquiring Fund and the assumption of all the liabilities of the Acquired Fund. The Acquired Fund would distribute the Acquiring Fund shares it receives to its shareholders in complete liquidation of the Acquired Fund. This SAI is not a prospectus and should be read in conjunction with the Prospectus/Proxy Statement. The Prospectus/Proxy Statement has been filed with the Securities and Exchange Commission and is available upon request and without charge by writing to or calling the Fund at the address or telephone number set forth above. Unless otherwise indicated, capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus/Proxy Statement. Table of Contents I. Additional Information about the Acquiring Fund and the Acquired Fund.. 1 II. Financial Statements................................................... 2 I. Additional Information about the Acquiring Fund and the Acquired Fund. Attached hereto as Appendix A is additional information for the Acquiring Fund. Further information about Class A shares, Class B shares, Class C shares, Class I shares and Advisor Class shares of each of the Acquiring Fund and Acquired Fund is contained in and incorporated herein by reference to the Statement of Additional Information for each of the Funds dated April 30, 2002, as supplemented. II. Financial Statements. The audited financial statements and related Report of Independent Auditors included in the Annual Report for the year ended December 31, 2002, for each of the Acquired Fund and the Acquiring Fund are incorporated herein by reference. No other parts of the Annual Report are incorporated herein by reference. IVY PACIFIC OPPORTUNITIES FUND IVY DEVELOPING MARKETS FUND PRO FORMA COMBINED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 (UNAUDITED) The following unaudited Pro Forma Combined Statement of Assets and Liabilities, including the unaudited Pro Forma Combined Investments of Acquiring Fund and Acquired Fund as of December 31, 2002 has been derived from the respective statements of assets and liabilities, including the schedules of investments, of Acquiring Fund and Acquired Fund as of December 31, 2002. The pro forma statements give effect to the proposed transfer of all of the assets of the Acquired Fund to the Acquiring Fund in exchange for the assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund and for a number of the Acquiring Fund's shares equal in value to the value of the net assets of the Acquired Fund transferred to the Acquiring Fund. Assuming the shareholders of the Acquired Fund approve the combination, the Acquiring Fund will be the accounting survivor for financial statement purposes. The unaudited Pro Forma Combined Statement of Assets and Liabilities is presented for informational purposes only and does not purport to be indicative of future operations or the actual financial condition that would have resulted if the Reorganization had been consummated on December 31, 2002. The unaudited Pro Forma Financial Statements should be read in conjunction with the respective financial statements and related notes of Acquiring Fund and Acquired Fund incorporated by reference in this Statement of Additional Information.
(Unaudited) | ||||||||||||
SHARES | DESCRIPTION | VALUE | ||||||||||
IVY PACIFIC | IVY | PRO | IVY PACIFIC | IVY | PRO | |||||||
OPPORTUNITIES | DEVELOPING | FORMA | OPPORTUNITIES | DEVELOPING | FORMA | |||||||
FUND | MARKETS FUND | COMBINED | FUND | MARKETS FUND | COMBINED | |||||||
COMMON STOCKS | ||||||||||||
Australia | ||||||||||||
38,005 | 38,005 | Australia & New Zealand Banking Group Ltd. | 371,301 | 371,301 | ||||||||
73,748 | 73,748 | BHP Ltd. | 421,505 | 421,505 | ||||||||
110,849 | 110,849 | Foster's Brewing Group Ltd. | 280,886 | 280,886 | ||||||||
62,519 | 62,519 | Qantas Airways Limited | 134,833 | 134,833 | ||||||||
21,827 | 21,827 | Rio Tinto Ltd. | 417,273 | 417,273 | ||||||||
51,040 | 51,040 | Westpac Banking Corp. Ltd. | 395,184 | 395,184 | ||||||||
41,445 | 41,445 | Woolsworths Ltd. | 266,050 | 266,050 | ||||||||
Total | 2,287,032 | 0 | 2,287,032 | |||||||||
Brazil | ||||||||||||
Cia Braxileira de Distribuicao Grupo | ||||||||||||
3,498,100 | 3,498,100 | Pao de Acucar | 53,854 | 53,854 | ||||||||
13,300 | 13,300 | Cia Vale do Rio Doce* | 0 | 0 | ||||||||
Embraer Brasileira de Aeronautica | ||||||||||||
7,553 | 7,553 | S.A. (Embraer) | 120,093 | 120,093 | ||||||||
9,143 | 9,143 | Petroleo Brasileiro S.A. - Petrobras | 119,839 | 119,839 | ||||||||
12,406 | 12,406 | Tele Norte Leste Participacoes S.A. | 91,184 | 91,184 | ||||||||
1 | 1 | Telesp Celular Participacoes S.A. | 0 | 0 | ||||||||
Total | 0 | 384,970 | 384,970 | |||||||||
Chile | ||||||||||||
5,363 | 5,363 | Antofagasta plc | 53,962 | 53,962 | ||||||||
Hong Kong | ||||||||||||
250,000 | 67,000 | 317,000 | Cathay Pacific Airways | 341,418 | 91,500 | 432,918 | ||||||
92,200 | 38,300 | 130,500 | China Mobile (Hong Kong) Ltd.* | 219,316 | 91,104 | 310,420 | ||||||
60,000 | 60,000 | Esprit Holdings Limited | 101,175 | 101,175 | ||||||||
273,500 | 273,500 | Hang Lung Properties Ltd. | 264,789 | 264,789 | ||||||||
26,600 | 26,600 | Hang Seng Bank | 283,111 | 283,111 | ||||||||
82,000 | 82,000 | Henderson Land Development Company Ltd. | 246,052 | 246,052 | ||||||||
24,000 | 24,000 | Hutchison Whampoa Ltd. | 150,185 | 150,185 | ||||||||
53,000 | 20,000 | 73,000 | Sun Hung Kai Properties | 313,989 | 118,486 | 432,475 | ||||||
Total | 1,818,860 | 402,265 | 2,221,125 | |||||||||
Hungary | ||||||||||||
23,600 | 23,600 | Magyar Tavkozlesi Rt | 85,557 | 85,557 | ||||||||
9,000 | 9,000 | OTP Bank Rt | 88,475 | 88,475 | ||||||||
Total | 0 | 174,032 | 174,032 | |||||||||
India | ||||||||||||
62,715 | 17,600 | 80,315 | Hero Honda Motors Ltd. | 354,971 | 99,617 | 454,588 | ||||||
15,300 | 15,300 | ITC Ltd. | 210,722 | 210,722 | ||||||||
Total | 565,693 | 99,617 | 665,310 | |||||||||
Israel | ||||||||||||
4,700 | 4,700 | Check Point Software Technologies Ltd.* | 60,959 | 60,959 | ||||||||
Luxembourg | ||||||||||||
3,861 | 3,861 | Tenaris S.A.* | 74,208 | 74,208 | ||||||||
Mexico | ||||||||||||
6,900 | 6,900 | America Movil S.A. de C.V. | 99,084 | 99,084 | ||||||||
22,955 | 22,955 | Cemex S.A. De C.V. | 98,563 | 98,563 | ||||||||
4,100 | 4,100 | Fomento Economico Mexicano, S.A. Sponsored ADR | 149,322 | 149,322 | ||||||||
30,580 | 30,580 | Grupo Financiero Banorte S.A. de C.V. | 74,521 | 74,521 | ||||||||
Grupo Financiero BBVA Bancomer, S.A. | ||||||||||||
160,000 | 160,000 | de C.V. (GFB)* | 120,948 | 120,948 | ||||||||
4,000 | 4,000 | Grupo Televisa S.A. Sponsored GDR* | 111,720 | 111,720 | ||||||||
4,600 | 4,600 | Telefonos de Mexico S.A. Class L - ADR | 147,108 | 147,108 | ||||||||
Total | 0 | 801,266 | 801,266 | |||||||||
Peru | ||||||||||||
4,200 | 4,200 | Cia de Minas Buenaventura S.A. | 110,838 | 110,838 | ||||||||
Poland | ||||||||||||
4,000 | 4,000 | Bank Pekao S.A.* | 98,578 | 98,578 | ||||||||
28,200 | 28,200 | Telekomunikacja Polska S.A.* | 93,767 | 93,767 | ||||||||
Total | 0 | 192,345 | 192,345 | |||||||||
Russia | ||||||||||||
1,200 | 1,200 | LUKOIL | 73,455 | 73,455 | ||||||||
Singapore | ||||||||||||
237,000 | 237,000 | Capitaland Limited | 151,668 | 151,668 | ||||||||
1,551 | 1,551 | Haw Par Corporation Limited | 2,915 | 2,915 | ||||||||
21,000 | 21,000 | Singapore Press Holdings Ltd. | 220,350 | 220,350 | ||||||||
38,000 | 38,000 | United Overseas Bank Limited | 258,517 | 258,517 | ||||||||
Total | 633,450 | 0 | 633,450 | |||||||||
South Africa | ||||||||||||
8,400 | 8,400 | Nedcor Limited | 108,763 | 108,763 | ||||||||
38,067 | 38,067 | Standard Bank Group Limited | 133,759 | 133,759 | ||||||||
Total | 0 | 242,522 | 242,522 | |||||||||
South Korea | ||||||||||||
16,030 | 4,800 | 20,830 | Hyundai Motor Co., Ltd. | 375,054 | 112,306 | 487,360 | ||||||
6,141 | 4,140 | 10,281 | Kookmin Bank | 217,463 | 146,604 | 364,067 | ||||||
4,000 | 3,300 | 7,300 | Korea Telecom Corporation | 170,988 | 141,065 | 312,053 | ||||||
3,600 | 3,600 | LG Chem Limited | 123,233 | 123,233 | ||||||||
4,980 | 1,490 | 6,470 | POSCO | 495,460 | 148,240 | 643,700 | ||||||
1,430 | 590 | 2,020 | Samsung Electronics | 378,584 | 156,199 | 534,783 | ||||||
1,378 | 620 | 1,998 | SK Telecom Co., Ltd. | 266,061 | 119,708 | 385,769 | ||||||
Total | 1,903,610 | 947,355 | 2,850,965 | |||||||||
Taiwan | ||||||||||||
54,150 | 24,000 | 78,150 | Asustek Computer Inc. | 95,000 | 42,105 | 137,105 | ||||||
44,940 | 44,940 | Formosa Plastic Corporation | 58,938 | 58,938 | ||||||||
83,808 | 30,360 | 114,168 | Hon Hai Precision Industry Co., Ltd. | 289,242 | 104,780 | 394,022 | ||||||
65,550 | 65,550 | Quanta Computer Inc. | 107,459 | 107,459 | ||||||||
243,637 | 96,360 | 339,997 | Taiwan Semiconductor Manufacturing Company* | 298,502 | 118,060 | 416,562 | ||||||
211,858 | 113,763 | 325,621 | United Microelectronics Corporation* | 128,565 | 69,036 | 197,601 | ||||||
Total | 918,768 | 392,919 | 1,311,687 | |||||||||
United Kingdom | ||||||||||||
4,850 | 4,850 | Anglo American plc | 72,069 | 72,069 | ||||||||
15,500 | 15,500 | South African Breweries plc | 109,984 | 109,984 | ||||||||
Total | 0 | 182,053 | 182,053 | |||||||||
TOTAL COMMON STOCKS | 8,127,413 | 4,192,766 | 12,320,179 | |||||||||
CASH AND OTHER ASSETS, NET OF LIABILITIES | 441,284 | -12,352 | 428,932 | |||||||||
NET ASSETS | 8,568,697 | 4,180,414 | 12,749,111 | |||||||||
Notes to Schedule of Investments | ||||||||||||
* | No income dividends were paid during the preceding 12 months. | |||||||||||