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Previous: LEPERCQ ISTEL TRUST, 497, 1996-05-03 |
Next: IVY FUND, 485APOS, 1996-05-03 |
April 30, 1996
Ivy
U.S. Equity
and Fixed
Income
Funds
PROSPECTUS
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
[PHOTO]
THROUGHOUT
THE
CENTURIES,
THE CASTLE KEEP
HAS
BEEN A
SOURCE
OF LONG-RANGE
VISION
AND
STRATEGIC
ADVANTAGE.
Ivy Fund (the "Trust") is a registered
investment
company
currently
consisting of thirteen separate portfolios.
Four of
these
portfolios, as
identified below (the "Funds"), are described
in this
Prospectus.
Each Fund has
its own investment objectives and policies,
and your
interest is
limited to the
Fund in which you own shares.
The four Ivy U.S. equity and fixed
income funds
are:
Ivy Bond Fund
Ivy Emerging Growth Fund
Ivy Growth Fund
Ivy Growth with Income Fund
This Prospectus sets forth concisely the
information about
the Funds that
a prospective investor should know before
investing.
Please read
it carefully
and retain it for future reference.
Additional
information about
the Funds is
contained in the Statement of Additional
Information
for the
Funds dated April
30, 1996 (the "SAI"), which has been filed
with the
Securities
and Exchange
Commission ("SEC") and is incorporated by
reference
into this
Prospectus. The
SAI is available upon request and without
charge from
the Trust
at the
Distributor's address and telephone number
below.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED
BY THE
SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION,
NOR HAS
THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES
COMMISSION PASSED
UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS
A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Expense
Information..................................
2
The Funds' Financial
Highlights......................
5
Investment Objectives and
Policies...................
9
Risk Factors and Investment
Techniques...............
10
Organization and Management of the
Funds.............
12
Investment
Manager...................................
12
Fund Administration and
Accounting...................
12
Transfer
Agent.......................................
13
Alternative Purchase
Arrangements....................
13
Dividends and
Taxes..................................
13
Performance
Data.....................................
14
How to Buy
Shares....................................
14
How Your Purchase Price is
Determined................
15
How Each Fund Values Its
Shares......................
15
Initial Sales Charge Alternative-Class A
Shares......
15
Contingent Deferred Sales Charge-Class A
Shares......
15
Qualifying for a Reduced Sales
Charge................
16
Contingent Deferred Sales Charge Alternative-
Class B and Class C
Shares......................
17
How to Redeem
Shares.................................
18
Minimum Account Balance
Requirements.................
18
Signature
Guarantees.................................
19
Choosing a Distribution
Option.......................
19
Tax Identification
Number............................
19
Certificates.........................................
19
Exchange
Privilege...................................
19
Reinvestment
Privilege...............................
20
Systematic Withdrawal
Plan...........................
20
Automatic Investment
Method..........................
21
Consolidated Account
Statements......................
21
Retirement
Plans.....................................
21
Shareholder
Inquiries................................
21
BOARD OF
TRUSTEES
John S.
Anderegg, Jr.
Paul H.
Broyhill
Stanley
Channick
Frank W.
DeFriece, Jr.
Roy J.
Glauber
Michael G.
Landry
Michael R.
Peers
Joseph G.
Rosenthal
Richard N.
Silverman
J. Brendan
Swan
OFFICERS
Michael G. Landry,
President
Keith J. Carlson,
Vice
President
C. William
Ferris,
Secretary/Treasurer
Michael R. Peers,
Chairman
LEGAL
COUNSEL
Dechert Price &
Rhoads
Boston, MA
CUSTODIAN
Brown Brothers
Harriman & Co.
TRANSFER
AGENT
Ivy
Mackenzie
Services
Corp.
P.O. Box
3022
Boca Raton, FL
33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand
L.L.P.
Ft.
Lauderdale, FL
INVESTMENT
MANAGER
Ivy Management,
Inc.
700 South Federal
Highway
Boca Raton, FL
33432
1-800-456-5111
DISTRIBUTOR
Ivy
Mackenzie
Distributors,
Inc.
Via Mizner
Financial Plaza
700 South Federal
Highway
Boca Raton, FL
33432
1-800-456-5111
<PAGE>
EXPENSE INFORMATION
The tables and examples below are
designed to
assist you in
understanding
the various costs and expenses that you will
bear
directly or
indirectly as an
investor in each Fund. The information is
based on each
Funds'
expenses during
fiscal year 1995.
SHAREHOLDER
TRANSACTION
EXPENSES
MAXIMUM SALES LOAD
MAXIMUM
CONTINGENT
IMPOSED ON PURCHASES
DEFERRED SALES
CHARGE
(AS A % OF (AS
A % OF
ORIGINAL
OFFERING PRICE)
PURCHASE
PRICE)
--------------------
---------------------
IVY BOND FUND
Class
A................................................................
.......... 4.75%(1)
None(2)
Class
B................................................................
.......... None
5.00%(3)
Class
C................................................................
.......... None
1.00%(4)
Class
I................................................................
.......... None
None
IVY EMERGING GROWTH FUND
Class
A................................................................
.......... 5.75%(1)
None(2)
Class
B................................................................
.......... None
5.00%(3)
Class
C................................................................
.......... None
1.00%(4)
IVY GROWTH FUND
Class
A................................................................
.......... 5.75%(1)
None(2)
Class
B................................................................
.......... None
5.00%(3)
Class
C................................................................
.......... None
1.00%(4)
IVY GROWTH WITH INCOME FUND
Class
A................................................................
.......... 5.75%(1)
None(2)
Class
B................................................................
.......... None
5.00%(3)
Class
C................................................................
.......... None
1.00%(4)
None of the Funds charge a redemption fee, an
exchange
fee, or a
sales load on
reinvested dividends.
---------------
(1) Class A shares may be purchased under a
variety
of plans
that provide for the reduction or elimination
of the
sales
charge.
(2) A contingent deferred sales charge
("CDSC") may
apply to
the redemption of Class A shares that are
purchased
without an
initial sales charge. See "Purchases of
Class A
Shares at
Net Asset Value" and "Contingent Deferred
Sales Charge
-- Class A
Shares."
(3) The maximum CDSC on Class B shares
applies to
redemptions
during the first year after purchase. The
charge
declines to 4%
during the second year; 3% during the
third and
fourth
years; 2% during the fifth year; 1% during
the sixth
year; and 0%
in
the seventh year and thereafter.
(4) The CDSC on Class C shares applies to
redemptions
during
the first year after purchase.
2
<PAGE>
ANNUAL FUND
OPERATING EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET
ASSETS)
12B-1
SERVICE/
TOTAL FUND
MANAGEMENT DISTRIBUTION
OTHER
OPERATING
FEES FEES
EXPENSES
EXPENSES
---------- ------------
--------
----------
IVY BOND FUND
Class
A................................................................
..... 0.75% 0.25% 0.54%
1.54%
Class
B................................................................
..... 0.75% 1.00%(2) 0.54%
2.29%
Class
C(1).............................................................
..... 0.75% 1.00%(2) 0.54%
2.29%
Class
I................................................................
..... 0.75% 0.00% 0.45%(3)
1.20%
IVY EMERGING GROWTH FUND
Class
A................................................................
..... 0.85% 0.25% 0.85%
1.95%
Class
B................................................................
..... 0.85% 1.00%(2) 0.85%
2.70%
Class
C(1).............................................................
..... 0.85% 1.00%(2) 0.85%
2.70%
IVY GROWTH FUND
Class
A................................................................
..... 0.85%(4) 0.04%(5) 0.71%
1.60%(6)
Class
B................................................................
..... 0.85%(4) 1.00%(2) 0.71%
2.56%(6)
Class
C(1).............................................................
..... 0.85% 1.00%(2) 0.71%
2.56%
IVY GROWTH WITH INCOME FUND
Class
A................................................................
..... 0.85% 0.21%(5) 0.90%
1.96%
Class
B................................................................
..... 0.85% 1.00%(2) 0.90%
2.75%
Class
C(1).............................................................
..... 0.85% 1.00%(2) 0.90%
2.75%
---------------
(1) The inception date for Class C shares
is April
30, 1996.
The expense ratios shown are estimates based
on amounts
incurred
by
the Fund during the year ended December
31, 1995.
Class C
shares of Ivy Growth with Income Fund
outstanding as of
April 29,
1996 have been redesignated Class D
shares. Class
D shares
are not available for sale.
(2) Long-term investors may, as a result of
the
Fund's 12b-1
fees, pay more than the economic equivalent
of the
maximum
front-end sales charge permitted by the
Rules of
Fair
Practice of the National Association of
Securities
Dealers, Inc.
("NASD").
(3) "Other Expenses" of Class I shares of
the Fund
are lower
than such expenses for the Fund's other
classes because
Class I
shares bear lower administrative
service fees and
transfer
agency and shareholder service fees than
Class A, Class
B and
Class C shares. See "Fund
Administration and
Accounting"
and "Transfer Agent."
(4) Management Fees for the year ended
December 31,
1995 have
been restated to reflect the termination of
the
voluntary expense
limitation on February 1, 1995 (see
Note (6)
below).
(5) Rule 12b-1 Service Fees paid by Class A
shares
may
increase, but are subject to a maximum of
0.25%. See
"Alternative
Purchase Arrangements."
(6) Ivy Management, Inc. ("IMI") agreed to
limit Ivy
Growth
Fund's Total Operating Expenses (excluding
taxes, 12b-1
fees,
brokerage commissions, interest,
litigation and
indemnification expenses and other
extraordinary
expenses) to an
annual rate
of 1.31% of the Fund's average net
assets through
January
31, 1995. On February 1, 1995, the voluntary
expense
limitation
was terminated. Total Fund Operating
Expenses
reflect what
expenses for the year ended December 31, 1995
would
have been
without expense reimbursements. With
expense
reimbursements, Total Fund Operating Expenses
for Class
A and
Class B were
1.59% and 2.55%, respectively.
3
<PAGE>
EXAMPLES
The following tables list the expenses an
investor
would pay
on a $1,000
investment, assuming (1) 5% annual return and
(2)
unless
otherwise noted,
redemption at the end of each time period.
These
examples further
assume
reinvestment of all dividends and
distributions, and
that the
percentage amounts
under "Total Fund Operating Expenses" (above)
remain
the same
each year. THE
EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF
PAST OR
FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN
THOSE
SHOWN.
1 YEAR 3 YEARS 5
YEARS
10 YEARS
------ -------
-------
--------
IVY BOND FUND
Class
A*...............................................................
........... $ 62 $ 94 $ 127
$222
Class
B................................................................
........... $ 73(1) $ 102(2) $ 143(3)
$244(4)
Class B (no
redemption)......................................................
..... $ 23 $ 72 $ 123
$244(4)
Class
C................................................................
........... $ 33(5) $ 72 $ 123
$263
Class C (no
redemption)......................................................
..... $ 23 $ 72 $ 123
$263
Class
I***.............................................................
........... $ 12 $ 38 $ 66
$145
IVY EMERGING GROWTH FUND
Class
A**..............................................................
........... $ 76 $ 115 $ 157
$272
Class
B................................................................
........... $ 77(1) $ 114(2) $ 163(3)
$285(4)
Class B (no
redemption)......................................................
..... $ 27 $ 84 $ 143
$285(4)
Class
C................................................................
........... $ 37(5) $ 84 $ 143
$303
Class C (no
redemption)......................................................
..... $ 27 $ 84 $ 143
$303
IVY GROWTH FUND
Class
A**..............................................................
........... $ 73 $ 105 $ 140
$237
Class
B................................................................
........... $ 76(1) $ 110(2) $ 156(3)
$266(4)
Class B (no
redemption)......................................................
..... $ 26 $ 80 $ 136
$266(4)
Class
C................................................................
........... $ 36(5) $ 80 $ 136
$290
Class C (no
redemption)......................................................
..... $ 26 $ 80 $ 136
$290
IVY GROWTH WITH INCOME FUND
Class
A**..............................................................
........... $ 76 $ 115 $ 157
$273
Class
B................................................................
........... $ 78(1) $ 115(2) $ 165(3)
$289(4)
Class B (no
redemption)......................................................
..... $ 28 $ 85 $ 145
$289(4)
Class
C................................................................
........... $ 38(5) $ 85 $ 145
$308
Class C (no
redemption)......................................................
..... $ 28 $ 85 $ 145
$308
---------------
* Assumes deduction of the maximum 4.75%
initial
sales charge
at the time of purchase and no deduction of a
CDSC at
the time
of redemption.
** Assumes deduction of the maximum 5.75%
initial
sales charge
at the time of purchase and no deduction of a
CDSC at
the time
of redemption.
*** Class I shares are not subject to an
initial
sales charge
at the time of purchase, nor are they subject
to the
deduction of
a CDSC at the time of redemption.
(1) Assumes deduction of a 5% CDSC at the
time of
redemption.
(2) Assumes deduction of a 3% CDSC at the
time of
redemption.
(3) Assumes deduction of a 2% CDSC at the
time of
redemption.
(4) Assumes conversion to Class A shares at
the end
of the
eighth year, and therefore reflects Class A
expenses
for years
nine
and ten.
(5) Assumes deduction of a 1% CDSC at the
time of
redemption.
The purpose of the foregoing tables is to
assist
you in
understanding the
various costs and expenses that an investor
in each
Fund will
bear directly or
indirectly. The information presented in the
tables
does not
reflect the charge
of $10 per transaction that would apply if a
shareholder elects
to have
redemption proceeds wired to his or her bank
account.
For a more
detailed
discussion of the Funds' fees and expenses,
see the
following
sections of this
Prospectus: "Organization and Management of
the Funds,"
"Initial
Sales Charge
Alternative -- Class A Shares," and
"Contingent
Deferred Sales
Charge
Alternative -- Class B and Class C Shares,"
and the
following
section of the
SAI: "Investment Advisory and Other
Services."
4
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS
Unless otherwise noted, the tables that
follow are
for fiscal
periods ending
December 31 of each year. The accounting firm
of
Coopers &
Lybrand L.L.P. has
audited Ivy Bond Fund and Ivy Emerging Growth
Fund
since
inception, and Ivy
Growth Fund and Ivy Growth with Income Fund
since
December 31,
1992. For periods
prior to December 31, 1994, Ivy Bond Fund was
known as
Mackenzie
Fixed Income
Trust (d/b/a Ivy Bond Fund). Their report is
included
in the
Funds' Annual
Reports, which are incorporated by reference
into the
SAI. The
information for
Ivy Growth Fund and Ivy Growth with Income
Fund for
fiscal
periods prior to
December 31, 1992 was audited by other
independent
accountants.
The Funds'
Annual Reports contain additional information
about
each Fund's
performance,
including a comparison to an appropriate
securities
index. For a
copy of your
Fund's Annual Report, call 1-800-777-6472.
Expense and income ratios and portfolio
turnover
rates have
been annualized
for periods of less than one year. Total
returns do not
reflect
sales charges,
and are not annualized for periods of less
than one
year.
The inception date for Class C shares of
the Funds
is April
30, 1996, and as
of December 31, 1995, no Class I shares of
Ivy Bond
Fund had been
issued.
Accordingly, no financial information for
these shares
is
presented below.
IVY BOND FUND
CLASS A
-----------------------------------------------------------------
-----------------
SELECTED PER SHARE DATA 1995
1994(A)
1994(B) 1993(B) 1992(B)
1991(B)
--------
--------
-------- -------- --------
-------
Net asset value, beginning of
period............................ $
9.01 $
9.38
$ 10.34 $ 9.95 $ 9.61
$ 9.84
--------
--------
-------- -------- --------
-------
Income from investment operations:
Net investment income...........
.67(e)
.33(e)
.63 .55 .63(e)
.62(e)
Net gain (loss) on investments
(both realized and
unrealized)....................
.84
(.29)
(.60) 1.00 .73
.10
--------
--------
-------- -------- --------
-------
Total from investment
operations..................
1.51
.04
.03 1.55 1.36
.72
--------
--------
-------- -------- --------
-------
Less distributions:
From net investment income......
.63
.32
.61 .64 .63
.62
From net realized gain..........
--
--
.38 .52 .25
.13
In excess of net realized
gain...........................
--
.09
-- -- --
--
From capital paid-in............
.11
--
-- -- .14
.20
--------
--------
-------- -------- --------
-------
Total distributions..........
.74
.41
.99 1.16 1.02
.95
--------
--------
-------- -------- --------
-------
Net asset value, end of period..... $
9.78 $
9.01
$ 9.38 $ 10.34 $ 9.95
$ 9.61
========
========
======== ======== ========
=======
Total return(%)....................
17.41
.43
0.00 16.29 14.77
7.58
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................
$108,840
$110,232
$120,073 $132,721 $102,328
$92,687
Ratio of expenses to average net
assets:
With expense reimbursement(%).....
1.54
1.50
-- -- 1.50
1.50
Without expense reimbursement(%)..
1.54
1.52
1.45 1.49 1.55
1.65
Ratio of net investment income to
average net assets(%).............
7.09(e)
6.92(e)
6.19 6.42 6.92(e)
6.77(e)
Portfolio turnover rate(%).........
93
44
78 134 129
118
CLASS A
--------------------------------------------------------------
SELECTED PER SHARE DATA 1990(B)
1989(B)
1988(B) 1987(B) 1986(D)
-------
-------
------- ------- -------
Net asset value, beginning of
period............................ $10.59
$
9.99
$ 9.39 $ 9.35 $ 9.33
-------
-------
------- ------- -------
Income from investment operations:
Net investment income...........
.65(e)
.77(e)
.58(e) .36(e) .36(e)
Net gain (loss) on investments
(both realized and
unrealized).................... (.40)
.75
.81 -- --
-------
-------
------- ------- -------
Total from investment
operations.................. .25
1.52
1.39 .36 .36
-------
-------
------- ------- -------
Less distributions:
From net investment income...... .65
.79
.60 .32 .34
From net realized gain.......... --
--
.19 -- --
In excess of net realized
gain........................... --
--
-- -- --
From capital paid-in............ .35
.13
-- -- --
-------
-------
------- ------- -------
Total distributions.......... 1.00
.92
.79 .32 .34
-------
-------
------- ------- -------
Net asset value, end of period..... $ 9.84
$10.59
$ 9.99 $ 9.39 $ 9.35
=======
=======
======= ======= =======
Total return(%).................... 2.54
16.12
16.31 2.92 4.00
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $70,670
$20,753
$5,075 $ 217 $ 165
Ratio of expenses to average net
assets:
With expense reimbursement(%)..... 1.36
.20
1.37 1.00 1.19
Without expense reimbursement(%).. 1.73
2.04
4.61 32.89 59.04
Ratio of net investment income to
average net assets(%).............
6.64(e)
8.08(e)
5.15(e) 3.80(e) 4.58(e)
Portfolio turnover rate(%)......... 0
0
145 0 0
CLASS B
--------------------------------------
SELECTED PER SHARE DATA
1995
1994(A) 1994(C)
------
------- -------
Net asset value, beginning of
period.......... $
9.01
$ 9.38 $ 9.82
------
------- -------
Income (loss) from investment operations:
Net investment
income......................
.60(e)
.30(e) .10
Net gain (loss) on investments (both
realized and
unrealized)..................
.84
(.29) (.32)
------
------- -------
Total from investment
operations........
1.44
.01 (.22)
------
------- -------
Less distributions:
From net investment
income.................
.56
.29 .14
From net realized
gain.....................
--
-- .08
In excess of net realized
gain.............
--
.09 --
From capital
paid-in.......................
.11
-- --
------
------- -------
Total
distributions.....................
.67
.38 .22
------
------- -------
Net asset value, end of
period................ $
9.78
$ 9.01 $ 9.38
======
======= =======
Total
return(%)...............................
16.54
.06 (2.24)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)......
$5,184
$2,420 $ 761
Ratio of expenses to average net assets:
With expense
reimbursement(%)................
2.29
2.25 --
Without expense
reimbursement(%).............
2.29
2.27 2.20
Ratio of net investment income to average
net
assets(%)....................................
6.34(e)
6.17(e) 5.44
Portfolio turnover
rate(%)....................
93
44 78
---------------
(a) For the six months ended December 31,
1994.
(b) For the year ended June 30.
(c) From April 1, 1994 (commencement of
operations)
to June 30,
1994.
(d) From September 6, 1985 (commencement of
operations) to June
30, 1986.
(e) Net investment income is net of
expenses
reimbursed by IMI.
5
<PAGE>
IVY EMERGING GROWTH FUND
CLASS A
---------------------------------------
SELECTED PER SHARE DATA
1995
1994 1993(A)
-------
------- -------
Net asset value, beginning of
period........... $
18.38
$ 17.93 $10.00
-------
------- -------
Income from investment operations:
Net investment
loss.........................
(.24)
(.24)(b) (.07)(b)
Net gain on investments (both realized
and
unrealized)................................
7.90
.82 8.29
-------
------- -------
Total from investment
operations...........
7.66
.58 8.22
-------
------- -------
Less distributions:
From net realized
gain......................
1.92
-- .29
From capital
paid-in........................
--
.13 --
-------
------- -------
Total
distributions........................
1.92
.13 .29
-------
------- -------
Net asset value, end of
period................. $
24.12
$ 18.38 $17.93
=======
======= =======
Total
return(%)................................
42.07
3.29 45.33(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).......
$39,456
$21,493 $14,212
Ratio of expenses to average net assets:
With expense
reimbursement(%).................
--
2.20 1.93
Without expense
reimbursement(%)..............
1.95
2.22 2.33
Ratio of net investment loss to average
net
assets(%).....................................
(1.39)
(1.72)(b) (1.30)(b)
Portfolio turnover
rate(%).....................
86
67 41
CLASS B
--------------------------------------
SELECTED PER SHARE DATA
1995
1994 1993(D)
-------
------ -------
Net asset value, beginning of
period........... $
18.38
$17.93 $18.21
-------
------ -------
Income (loss) from investment operations:
Net investment
loss.........................
(.35)
(.29)(b) (.04)(b)
Net gain on investments (both realized
and
unrealized)................................
7.85
.74 .03
-------
------ -------
Total from investment
operations...........
7.50
.45 (.01)
-------
------ -------
Less distributions:
From net realized
gain......................
1.76
-- .27
-------
------ -------
Total
distributions........................
1.76
-- .27
-------
------ -------
Net asset value, end of
period................. $
24.12
$18.38 $17.93
=======
====== =======
Total
return(%)................................
41.03
2.51 .05
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).......
$13,985
$5,015 $1,216
Ratio of expenses to average net assets:
With expense
reimbursement(%).................
--
2.95 2.68
Without expense
reimbursement(%)..............
2.70
2.97 3.08
Ratio of net investment loss to average
net
assets(%).....................................
(2.14)
(2.47)(b) (2.05)(b)
Portfolio turnover
rate(%).....................
86
67 41
---------------
(a) From March 3, 1993 (commencement of
operations)
to December
31, 1993.
(b) Net investment loss is net of expenses
reimbursed
by IMI.
(c) Total return from April 30, 1993 (when
first
offered for
public sale) to December 31, 1993.
(d) From October 23, 1993 (commencement of
operations) to
December 31, 1993.
6
<PAGE>
IVY GROWTH FUND*
CLASS A
-----------------------------------------------------------------
---
SELECTED PER SHARE DATA
1995
1994 1993 1992
1991
--------
-------- -------- --------
--------
Net asset value, beginning of
period............... $
13.91
$ 15.14 $ 14.98 $ 16.91
$ 14.41
--------
-------- -------- --------
--------
Income (loss) from investment operations:
Net investment
income...........................
.05(a)
.05(a) .10(a) .17(a)
.27
Net gain (loss) on investment transactions
and
put options (both realized and
unrealized).....
3.73
(.49) 1.74 .70
4.12
--------
-------- -------- --------
--------
Total from investment
operations...............
3.78
(.44) 1.84 .87
4.39
--------
-------- -------- --------
--------
Less distributions:
From net investment
income......................
.02
.05 .10 .15
.27
From net realized
gain..........................
.89
.74 1.58 2.65
1.62
In excess of net realized
gain..................
.03
-- -- --
--
From capital
paid-in............................
--
-- -- --
--
--------
-------- -------- --------
--------
Total
distributions............................
.94
.79 1.68 2.80
1.89
--------
-------- -------- --------
--------
Net asset value, end of
period..................... $
16.75
$ 13.91 $ 15.14 $ 14.98
$ 16.91
========
======== ======== ========
========
Total
return(%)....................................
27.33
(2.97) 12.29 5.21
30.76
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)...........
$289,954
$231,446 $268,533 $226.068
$231,706
Ratio of expenses to average net assets:
With expense
reimbursement(%).....................
1.59
1.38 1.33 1.32
--
Without expense
reimbursement(%)..................
1.60
1.49 1.43 1.40
1.29
Ratio of net investment income to average net
assets(%).........................................
.32(a)
.32(a) .64(a) .98(a)
1.60
Portfolio turnover
rate(%).........................
41
39 77 138
79
CLASS A
-----------------------------------------------------------------
---
SELECTED PER SHARE DATA
1990
1989 1988 1987
1986
--------
-------- -------- --------
--------
Net asset value, beginning of
period............... $
15.57
$ 13.21 $ 12.09 $ 13.44
$ 15.90
--------
-------- -------- --------
--------
Income (loss) from investment operations:
Net investment
income...........................
.31
.44 .40 .32
.61
Net gain (loss) on investment transactions
and
put options (both realized and
unrealized).....
(.90)
3.16 1.10 (.46)
1.87
--------
-------- -------- --------
--------
Total from investment
operations...............
(.59)
3.60 1.50 (.14)
2.48
--------
-------- -------- --------
--------
Less distributions:
From net investment
income......................
.33
.44 .38 .91
.46
From net realized
gain..........................
.23
.80 -- .30
4.48
In excess of net realized
gain..................
--
-- -- --
--
From capital
paid-in............................
.01
-- -- --
--
--------
-------- -------- --------
--------
Total
distributions............................
.57
1.24 .38 1.21
4.94
--------
-------- -------- --------
--------
Net asset value, end of
period..................... $
14.41
$ 15.57 $ 13.21 $ 12.09
$ 13.44
========
======== ======== ========
========
Total
return(%)....................................
(3.76)
27.24 12.40 (1.87)
17.30
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)...........
$185,511
$197,789 $172,163 $173,159
$158,133
Ratio of expenses to average net assets:
With expense
reimbursement(%).....................
--
-- -- --
--
Without expense
reimbursement(%)..................
1.29
1.33 1.35 1.27
1.29
Ratio of net investment income to average net
assets(%).........................................
2.10
2.70 2.80 2.40
4.50
Portfolio turnover
rate(%).........................
67
86 84 74
95
CLASS B
-------------------------------------
SELECTED PER SHARE DATA
1995
1994 1993(B)
------
------ -------
Net asset value, beginning of
period...........
$13.91
$15.14 $16.42
------
------ -------
Income (loss) from investment operations:
Net investment
loss(a)......................
(.08)
(.04) --
Net gain (loss) on investment
transactions
and put options (both realized and
unrealized)................................
3.71
(.54) .37
------
------ -------
Total from investment
operations...........
3.63
(.58) .37
------
------ -------
Less distributions:
From net investment
income..................
--
-- .07
From net realized
gain......................
.73
.52 1.58
In excess of net realized
gain..............
.06
.13 --
------
------ -------
Total
distributions........................
.79
.65 1.65
------
------ -------
Net asset value, end of
period.................
$16.75
$13.91 $15.14
======
====== =======
Total
return(%)................................
26.13
(3.90) 2.34
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).......
$2,669
$1,399 $ 65
Ratio of expenses to average net assets:
With expense
reimbursement(%).................
2.55
2.34 2.31
Without expense
reimbursement(%)..............
2.56
2.45 2.44
Ratio of net investment loss to average
net
assets(%)(a)..................................
(.64)
(.64) (.33)
Portfolio turnover
rate(%).....................
41
39 77
---------------
* Marsh and Cunningham Inc. ("Marsh and
Cunningham") was
subadviser to Ivy Growth Fund from April 27,
1985
through
November
30, 1986.
(a) Net investment income (loss) is net of
expenses
reimbursed
by IMI.
(b) From October 23, 1993 (commencement of
operations) to
December 31, 1993.
7
<PAGE>
IVY GROWTH WITH INCOME FUND *
CLASS A
---------------------------------------------------------------
SELECTED PER SHARE DATA
1995 1994 1993
1992
1991
------- ------- -------
-------
-------
Net asset value, beginning of
period..........................
$ 9.08 $ 9.70 $ 9.21 $
9.74
$ 7.79
------- ------- -------
-------
-------
Income (loss) from investment operations:
Net investment
income......................................
.11 .17 .08
.07
.09(c)
Net gain (loss) on investment transactions
(both
realized
and
unrealized)...........................................
2.13 (.36) 1.30
.18
2.72
------- ------- -------
-------
-------
Total from investment
operations..........................
2.24 (.19) 1.38
.25
2.81
------- ------- -------
-------
-------
Less distributions:
From net investment
income.................................
.08 .17 .06
.07
.09
In excess of net investment
income.........................
-- .01 --
--
--
From net realized
gain.....................................
.26 .25 .83
.71
.77
------- ------- -------
-------
-------
Total
distributions.......................................
.34 .43 .89
.78
.86
------- ------- -------
-------
-------
Net asset value, end of
period................................
$ 10.98 $ 9.08 $ 9.70 $
9.21
$ 9.74
========= ========= =========
=========
=========
Total
return(%)...............................................
24.93 (2.03) 15.07
2.61
36.33
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)......................
$59,054 $26,017 $22,669
$19,045
$17,063
Ratio of expenses to average net
assets(%)....................
1.96 1.84 2.14
1.94
1.50(d)
Ratio of net investment income to average net
assets(%).......
1.06 1.83 .88
.73
1.10(c)
Portfolio turnover
rate(%)....................................
81 36 85
163
113
CLASS A
-----------------------------------------------------------------
SELECTED PER SHARE DATA
1990 1989(A) 1988
1987
1986
------ ------- --------
--------
--------
Net asset value, beginning of
period........................ $
8.13 $10.32 $ 9.05 $
12.56
$ 14.63
------ ------- --------
--------
--------
Income (loss) from investment operations:
Net investment
income....................................
.16 .45 .55
.49
.45
Net gain (loss) on investment transactions
(both
realized
and
unrealized).........................................
(.18) 1.42 1.44
(.28)
2.17
------ ------- --------
--------
--------
Total from investment
operations........................
(.02) 1.87 1.99
.21
2.62
------ ------- --------
--------
--------
Less distributions:
From net investment
income...............................
.18 1.08 .55
.92
.62
In excess of net investment
income.......................
-- -- --
--
--
From net realized
gain...................................
.14 2.98 .17
2.80
4.07
------ ------- --------
--------
--------
Total
distributions.....................................
.32 4.06 .72
3.72
4.69
------ ------- --------
--------
--------
Net asset value, end of
period.............................. $
7.79 $ 8.13 $ 10.32 $
9.05
$ 12.56
======== ========= ==========
==========
==========
Total
return(%).............................................
(.18) 18.06 21.96
.78
19.09
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)....................
$9,989 $21,258 $109,507
$100,080
$138,026
Ratio of expenses to average net
assets(%)..................
1.48 1.36 1.26
1.22
1.22
Ratio of net investment income to average net
assets(%).....
1.70 4.00 4.80
3.00
3.60
Portfolio turnover
rate(%)..................................
68 73 58
69
104
CLASS
B
-------------------------------------
SELECTED PER SHARE DATA
1995 1994
1993(B)
------
------
-------
Net asset value, beginning of
period.................................................... $
9.08 $ 9.70 $10.43
------
------
-------
Income (loss) from investment operations:
Net investment
income...........................................................
..... .03 .09 --
Net gain (loss) on investment transactions
(both
realized and
unrealized)............ 2.13
(.36)
.05
------
------
-------
Total from investment
operations....................................................
2.16 (.27) .05
------
------
-------
Less distributions:
From net investment
income...........................................................
.01 .09 .01
In excess of net investment
income...................................................
-- .01 --
From net realized
gain.............................................................
.. .25 .25 .77
------
------
-------
Total
distributions....................................................
............. .26 .35
.78
------
------
-------
Net asset value, end of
period..........................................................
$10.98 $ 9.08 $ 9.70
========
========
==========
Total
return(%)........................................................
................. 23.94 (2.88)
.61
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)................................................
$8,868 $5,849 $ 888
Ratio of expenses to average net
assets(%)..............................................
2.75
2.70 3.09
Ratio of net investment income (loss) to
average net
assets(%).......................... .27
.97
(.07 )
Portfolio turnover
rate(%)..........................................................
.... 81 36 85
---------------
* These figures are adjusted to reflect a
ten-for-one stock
split on June 30, 1989. Grantham, Mayo was
subadviser
to Ivy
Growth with Income Fund from 4/1/84
through
6/30/89. Ivy
Growth with Income Fund was formerly known as
"Ivy
Institutional
Investors Fund".
(a) Per share amounts have been computed
using
average monthly
shares.
(b) From October 23, 1993 (commencement of
operations) to
December 31, 1993.
(c) Net investment income is net of
expenses
reimbursed by IMI.
(d) The ratio of expenses to average net
assets is
net of the
expenses reimbursed by IMI. If the IMI had
not
reimbursed
expenses
during the year ended December 31,
1991, the
ratio of
expenses to average net assets would have
been 1.61%.
8
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment
objective and
policies,
which are described
below. Each Fund's investment objective is
fundamental
and may
not be changed
without the approval of a majority of the
outstanding
voting
shares of the Fund.
Except for a Fund's investment objective and
those
investment
restrictions
specifically identified as fundamental, all
investment
policies
and practices
described in this Prospectus and in the SAI
are
non-fundamental,
and may be
changed by the Trustees without shareholder
approval.
There can
be no assurance
that a Fund's objective will be met. The
different
types of
securities and
investment techniques used by the Funds
involve varying
degrees
of risk. For
information about the particular risks
associated with
each type
of investment,
see "Risk Factors and Investment Techniques,"
below,
and the SAI.
Whenever an investment objective, policy
or
restriction of a
Fund described
in this Prospectus or in the SAI states a
maximum
percentage of
assets that may
be invested in a security or other asset, or
describes
a policy
regarding
quality standards, that percentage limitation
or
standard will,
unless otherwise
indicated, apply to the Fund only at the time
a
transaction takes
place. Thus,
for example, if a percentage limitation is
adhered to
at the time
of investment,
a later increase or decrease in the
percentage that
results from
circumstances
not involving any affirmative action by the
Fund will
not be
considered a
violation.
IVY BOND FUND: Ivy Bond Fund seeks a
high level of
current
income by
investing primarily in (i) investment grade
corporate
bonds
(those rated Aaa,
Aa, A or Baa by Moody's Investors Services,
Inc.
("Moody's") or
AAA, AA, A or
BBB by Standard & Poor's Corporation ("S&P"),
or, if
unrated, are
considered by
IMI to be of comparable quality) and (ii)
U.S.
Government
securities (including
mortgage-backed securities issued by U.S.
Government
agencies or
instrumentalities) that mature in more than
13 months.
As a
fundamental policy,
the Fund normally invests at least 65% of its
total
assets in
these fixed income
securities. For temporary defensive purposes,
the Fund
may invest
without limit
in U.S. Government securities maturing in 13
months or
less,
certificates of
deposit, bankers' acceptances, commercial
paper and
repurchase
agreements. The
Fund may also invest up to 35% of its total
assets in
such money
market
securities in order to meet redemptions or to
maximize
income to
the Fund while
it is arranging longer-term investments.
The Fund may invest up to 35% of its net
assets in
corporate
debt securities
rated Ba or below by Moody's or BB or below
by S&P, or,
if
unrated, are
considered by IMI to be of comparable quality
(commonly
referred
to as "high
yield" or "junk" bonds). The Fund will not
invest in
debt
securities rated less
than C by either Moody's or S&P. During the
twelve
months ended
December 31,
1995, based upon the dollar-weighted average
ratings of
the
Fund's portfolio
holdings at the end of each month during that
period,
the Fund
had the following
percentages of its total assets invested in
debt
securities rated
in the
categories indicated (all ratings are by
either S&P or
Moody's,
whichever rating
is higher): 14.2% in securities rated
AAA/Aaa; 0% in
securities
rated AA/Aa;
0.3% in securities rated A/A; 48.3% in
securities rated
BBB/Baa;
15.4% in
securities rated BB/Ba; 18.1% in securities
rated B/B;
0.7% in
securities rated
CCC/Caa; and 0% in securities that were
unrated. The
asset
composition of the
Fund subsequent to the period indicated may
or may not
approximate these
figures. See Appendix A in the SAI for a
description of
Moody's
and S&P's
corporate bond ratings.
The Fund may invest up to 5% of its
assets in
dividend paying
common and
preferred stocks (including adjustable rate
preferred
stocks and
securities
convertible into common stocks), municipal
bonds,
investment-grade zero coupon
bonds, and securities sold on a "when-issued"
or firm
commitment
basis. The Fund
may also lend its portfolio securities to
increase
current income
(so long as
the aggregate value of all outstanding
securities
loaned does not
exceed 30% of
the value of the Fund's total assets), and,
as a
temporary
measure for
extraordinary or emergency purposes, may
borrow from
banks up to
10% of the
value of its total assets.
The Fund may invest up to 20% of its net
assets in
debt
securities of
foreign issuers, including non-U.S.
dollar-denominated
debt
securities, American
Depository Receipts ("ADRs"), Eurodollar
securities and
debt
securities issued,
assumed or guaranteed by foreign governments
or
political
subdivisions or
instrumentalities thereof. The Fund may also
enter into
forward
foreign currency
contracts, but not for speculative purposes.
The Fund
may not
invest more than
10% of the value of its net assets in
illiquid
securities, such
as securities
subject to legal or contractual restrictions
on resale
("restricted
securities"), repurchase agreements maturing
in more
than seven
days and other
securities that are not readily marketable,
and in any
case may
not invest more
than 5% of its net assets in restricted
securities.
The Fund may purchase put and call
options,
provided the
premium paid for
such options does not exceed 10% of the
Fund's net
assets. The
Fund may also
sell covered put options with respect to up
to 50% of
the value
of its net
assets, and may write covered call options so
long as
not more
than 20% of the
Fund's net assets is subject to being
purchased upon
the exercise
of the calls.
For hedging purposes only, the Fund may
engage in
transactions in
interest rate
futures contracts, currency futures contracts
and
options on
interest rate
futures and currency futures contracts.
IVY EMERGING GROWTH FUND, IVY GROWTH FUND
AND IVY
GROWTH WITH
INCOME
FUND: Each Fund's principal investment
objective is
long-term
capital growth
primarily through investment in equity
securities, with
current
income being a
secondary consideration. Ivy Growth with
Income Fund
has tended
to emphasize
dividend-paying stocks more than the other
two Funds.
Under
normal conditions,
each Fund invests at least 65% of its total
assets in
common
stocks and
securities convertible into common stocks.
Ivy Growth
Fund and
Ivy Growth with
Income Fund invest primarily in common stocks
of
domestic
corporations with low
price-earnings ratios and rising earnings,
focusing on
established, financially
secure firms with capitalizations over $100
million and
more than
three years of
operating history. Ivy Emerging Growth Fund
invests
primarily in
common stocks
(or securities with similar characteristics)
of small
and
medium-sized
companies, both domestic and foreign, that
are in the
early
stages of their life
cycle and that IMI believes have the
potential to
become major
enterprises.
All of the Funds may invest up to 25% of
their
assets in
foreign equity
securities, primarily those traded in
European, Pacific
Basin and
Latin American
markets, some of which may be emerging
markets
involving special
risks, as
described below. Individual foreign
securities are
selected based
on value
indicators, such as a low price-earnings
ratio, and are
reviewed
for fundamental
financial strength.
When circumstances warrant, each Fund may
invest
without
limit in
investment-grade debt securities (e.g., U.S.
Government
securities or other
corporate debt securities rated at least Baa
by Moody's
or BBB by
S&P, or, if
unrated, are considered by IMI to be of
comparable
quality),
preferred stocks,
or cash or cash equivalents such as bank
obligations
(including
certificates of
deposit and bankers' acceptances), commercial
paper,
short-term
notes and
repurchase agreements.
Ivy Growth with Income Fund may invest
less than
35% of its
net assets in
debt securities rated Ba or below by Moody's
or BB or
below by
S&P, or if
unrated, are considered by IMI to be of
comparable
quality
(commonly referred to
as "high yield" or "junk" bonds). Ivy Growth
Fund may
invest up
to
9
<PAGE>
5% of its net assets in these low-rated debt
securities. Neither
Fund will
invest in debt securities rated less than C
by either
Moody's or
S&P. (As of
December 31, 1995, neither Fund invested in
low-rated
debt
securities).
As a fundamental policy, each Fund may
borrow up to
10% of
the value of its
total assets, but only for temporary purposes
when it
would be
advantageous to
do so from an investment standpoint. All of
the Funds
may invest
up to 5% of
their net assets in warrants. Each Fund may
not invest
more than
10% of its net
assets in illiquid securities, such as
securities
subject to
legal or
contractual restrictions on resale
("restricted
securities"),
repurchase
agreements maturing in more than seven days
and other
securities
that are not
readily marketable; and in any case may not
invest more
than 5%
of its net
assets in restricted securities. All of the
Funds may
enter into
forward foreign
currency contracts. Ivy Growth Fund and Ivy
Growth with
Income
Fund may also
invest in equity real estate investment
trusts.
Each of the Funds may write put options,
with
respect to not
more than 10% of the value of its net assets,
on securities and stock indices, and may
write covered
call options with respect to not more than
25% of the
value of
its net assets. Each Fund may
purchase
options, provided the aggregate premium paid
for all
options held
does not exceed 5% of its net assets. For
hedging
purposes only,
each Fund may enter into stock index futures
contracts
as a means
of regulating its exposure to equity markets.
A Fund's
equivalent exposure in stock index futures
contracts
does not
exceed 15% of its total assets.
RISK FACTORS AND INVESTMENT TECHNIQUES
BANK OBLIGATIONS: Bank obligations in
which the
Funds may
invest include
certificates of deposit, bankers' acceptances
and other
short-term debt
obligations. Investments in certificates of
deposit and
bankers'
acceptances are
limited to obligations of (i) banks having
total assets
in excess
of $1 billion,
and (ii) other banks if the principal amount
of the
obligation is
fully insured
by the Federal Deposit Insurance Corporation
("FDIC").
Investments in
certificates of deposit of savings
associations are
limited to
obligations of
Federal or state-chartered institutions whose
total
assets exceed
$1 billion and
whose deposits are insured by the FDIC.
BORROWING: Borrowing may subject a
Fund's share
price to
greater
fluctuation. Money borrowed will be subject
to interest
costs
(which may include
commitment fees and/or the cost of
maintaining minimum
average
balances).
COMMERCIAL PAPER: Commercial paper
represents
short-term
unsecured
promissory notes issued in bearer form by
bank holding
companies,
corporations,
and finance companies. Each Fund's
investments in
commercial
paper are limited
to obligations rated Prime-1 by Moody's or
A-1 by S&P,
or if not
rated, issued
by companies having an outstanding debt issue
currently
rated Aaa
or Aa by
Moody's or AAA or AA by S&P.
CONVERTIBLE SECURITIES: The convertible
securities
in which
the Funds may
invest include corporate bonds, notes,
debentures and
other
securities
convertible into common stocks. Because
convertible
securities
can be converted
into equity securities, their value will
normally vary
in some
proportion with
those of the underlying equity security.
Convertible
securities
usually provide
a higher yield than the underlying equity, so
the price
decline
of a convertible
security may sometimes be less substantial
than that of
the
underlying equity
security.
DEBT SECURITIES, IN GENERAL: Investment
in debt
securities,
including
municipal securities, involves both interest
rate and
credit
risk. Generally,
the value of debt instruments rises and falls
inversely
with
fluctuations in
interest rates. Bonds with longer maturities
generally
are more
volatile than
bonds with shorter maturities. The market
value of debt
securities also varies
according to the relative financial condition
of the
issuer. In
general,
lower-quality bonds offer higher yields due
to the
increased risk
that the
issuer will be unable to meet its obligations
on
interest or
principal payments
at the time called for by the debt
instrument.
U.S. GOVERNMENT SECURITIES: U.S.
Government
securities are
obligations of,
or guaranteed by, the U.S. Government, its
agencies or
instrumentalities. Such
securities include: (1) direct obligations of
the U.S.
Treasury
(such as
Treasury bills, notes, and bonds) and (2)
Federal
agency
obligations guaranteed
as to principal and interest by the U.S.
Treasury (such
as GNMA
certificates,
which are mortgage-backed securities). When
such
securities are
held to
maturity, the payment of principal and
interest is
unconditionally guaranteed by
the U.S. Government, and thus they are of the
highest
possible
credit quality.
U.S. Government securities that are not held
to
maturity are
subject to
variations in market value caused by
fluctuations in
interest
rates.
Mortgage-backed securities are securities
representing part
ownership of a
pool of mortgage loans. Although the mortgage
loans in
the pool
will have
maturities of up to 30 years, the actual
average life
of the
loans typically
will be substantially less because the
mortgages will
be subject
to principal
amortization and may be prepaid prior to
maturity. In
periods of
falling
interest rates, the rate of prepayment tends
to
increase, thereby
shortening the
actual average life of the security.
Conversely, rising
interest
rates tend to
decrease the rate of prepayment, thereby
lengthening
the
security's actual
average life. Since it is not possible to
predict
accurately the
average life of
a particular pool, and because prepayments
are
reinvested at
current rates, the
market value of mortgage-backed securities
may decline
during
periods of
declining interest rates.
INVESTMENT GRADE DEBT SECURITIES: Bonds
rated Aaa
by Moody's
and AAA by S&P
are judged to be of the best quality (i.e.,
capacity to
pay
interest and repay
principal is extremely strong). Bonds rated
Aa/AA are
considered
to be of high
quality (i.e., capacity to pay interest and
repay
principal is
very strong and
differs from the highest rated issues only to
a small
degree).
Bonds rated A are
viewed as having many favorable investment
attributes,
but
elements may be
present that suggest a susceptibility to the
adverse
effects of
changes in
circumstances and economic conditions than
debt in
higher rated
categories.
Bonds rated Baa/BBB (considered "medium
grade"
obligations)
generally have an
adequate capacity to pay interest and repay
principal,
but lack
outstanding
investment characteristics and have some
speculative
characteristics.
LOW-RATED DEBT SECURITIES: Securities
rated lower
than Baa
by Moody's or
BBB by S&P, and comparable unrated securities
(commonly
referred
to as "high
yield" or "junk" bonds), are considered to
have
predominately
speculative
characteristics with respect to the issuer's
capacity
to pay
interest and repay
principal. Investors in those funds that
invest in
these
securities should be
aware of the special risks associated with
these
securities.
While high yield debt securities are
likely to have
some
quality and
protective characteristics, these are largely
outweighed by the
risk of exposure
to adverse conditions and other
uncertainties.
Accordingly,
investments in such
securities, while generally providing for
greater
income and
potential
opportunity for gain than investments in
higher-rated
securities,
also entail
greater risk (including the possibility of
default or
bankruptcy
of the issuer
of such securities) and generally involve
greater price
volatility than
securities in higher rating categories. IMI
seeks to
reduce risk
through
diversification (including investments in
foreign
securities),
credit analysis
and attention to current developments and
trends in
both the
economy and
financial markets. Should
10
<PAGE>
the rating of a portfolio security be
downgraded, IMI
will
determine whether it
is in the affected Fund's best interest to
retain or
dispose of
the security
(unless the security is downgraded below the
rating of
C, in
which case IMI most
likely would dispose of the security based on
then
existing
market conditions).
For additional information regarding the
risks
associated with
investing in high
yield bonds, see the SAI (in particular,
Appendix A,
which
contains a more
complete description of the ratings assigned
by Moody's
and S&P).
FOREIGN CURRENCY EXCHANGE TRANSACTIONS:
The Funds
usually
effect their
currency exchange transactions on a spot
(i.e., cash)
basis at
the spot rate
prevailing in the foreign exchange market.
However,
some price
spread on
currency exchange (e.g., to cover service
charges) is
usually
incurred when a
Fund converts assets from one currency to
another. A
Fund may
also be affected
unfavorably by the relative rates of exchange
between
the
currencies of
different nations.
FOREIGN SECURITIES: Foreign securities
in which
the Funds
may invest
include non-U.S. dollar-denominated
securities,
Eurodollar
securities, sponsored
or unsponsored ADRs and debt securities
issued, assumed
or
guaranteed by foreign
governments (or political subdivisions or
instrumentalities
thereof). Investors
should consider carefully the special risks
that arise
in
connection with
investing in securities issued by companies
and
governments of
foreign nations,
which are in addition to those risks that are
generally
associated with the
Funds' investments.
In many foreign countries (especially
emerging
market
countries), there is
less regulation of business and industry
practices,
stock
exchanges, brokers and
listed companies than in the United States.
For
example, foreign
companies are
not generally subject to uniform accounting,
auditing
and
financial reporting
standards. Foreign securities transactions
may be
subject to
higher brokerage
costs. There tends to be less publicly
available
information
about issuers in
foreign countries. Foreign securities markets
of many
of the
countries in which
the Funds may invest may be smaller, less
liquid and
subject to
greater price
volatility than those in the United States.
Securities
issued in
emerging market
countries, including the developing countries
of Latin
America
and Eastern
Europe, may be even less liquid and more
volatile than
securities
of issuers
operating in more developed economies (e.g.,
countries
in other
parts of
Europe). Generally, price fluctuations in the
Funds'
foreign
security holdings
are likely to be high relative to those of
securities
issued in
the United
States.
Other risks include the possibility of
expropriation,
nationalization or
confiscatory taxation, foreign exchange
controls (which
may
include suspension
of the ability to transfer currency from a
given
country),
difficulties in
pricing, default in foreign government
securities, high
rates of
inflation
(especially in emerging market countries),
difficulties
in
enforcing foreign
judgments, political or social instability,
or other
developments
that could
adversely affect the Funds' foreign
investments.
FORWARD FOREIGN CURRENCY CONTRACTS: A
forward
foreign
currency contract
involves an obligation to purchase or sell a
specific
currency at
a future date
at a predetermined price. Although these
contracts are
intended
to minimize the
risk of loss due to a decline in the value of
the
hedged
currencies, they also
tend to limit any potential gain that might
result
should the
value of the
currencies increase. In addition, there may
be an
imperfect
correlation between
a Fund's portfolio holdings of securities
denominated
in a
particular currency
and forward contracts entered into by the
Fund, which
may prevent
the Fund from
achieving the intended hedge or expose the
Fund to the
risk of
currency exchange
loss.
LENDING OF PORTFOLIO SECURITIES: Loans
of
securities by a
Fund are
collateralized by cash, letters of credit or
securities
issued or
guaranteed by
the U.S. Government or its agencies or
instrumentalities. There
may be risks of
delay in receiving additional collateral, or
risks of
delay in
recovery of the
securities or even loss of rights in the
collateral,
should the
borrower of the
securities fail financially.
OPTIONS AND FUTURES TRANSACTIONS: The
Funds may
use various
techniques to
increase or decrease their exposure to
changing
security prices,
interest rates,
currency exchange rates, commodity prices, or
other
factors that
affect the
value of their securities. These techniques
may involve
derivative transactions
such as purchasing put and call options,
selling put
and call
options, and
engaging in transactions in foreign currency
futures,
stock index
futures and
related options.
Each Fund may invest in options on
securities in
accordance
with its stated
investment objective and policies. A put
option is a
short-term
contract that
gives the purchaser of the option, in return
for a
premium, the
right to sell
the underlying security or currency to the
seller of
the option
at a specified
price during the term of the option. A call
option is a
short-term contract that
gives the purchaser the right to buy the
underlying
security or
currency from
the seller of the option at a specified price
during
the term of
the option. An
option on a stock index gives the purchaser
the right
to receive
from the seller
cash equal to the difference between the
closing price
of the
index and the
exercise price of the option.
Each Fund may also enter into futures
transactions
in
accordance with its
stated investment objective and policies. An
interest
rate
futures contract is
an agreement between two parties to buy or
sell a
specified debt
security at a
set price on a future date. A foreign
currency futures
contract
is an agreement
to buy or sell a specified amount of a
foreign currency
for a set
price on a
future date. A stock index futures contract
is an
agreement to
take or make
delivery of an amount of cash based on the
difference
between the
value of the
index at the beginning and at the end of the
contract
period.
Investors should be aware that the risks
associated
with the
use of options
and futures are considerable. Options and
futures
transactions
generally involve
a small investment of cash relative to the
magnitude of
the risk
assumed, and
therefore could result in a significant loss
to a Fund
if IMI
judges market
conditions incorrectly or employs a strategy
that does
not
correlate well with
the Fund's investments. A Fund may also
experience a
significant
loss if it is
unable to close a particular position due to
the lack
of a liquid
secondary
market. For further information regarding the
use of
options and
futures
transactions and any associated risks, see
the SAI.
REAL ESTATE INVESTMENT TRUSTS: Equity
real estate
investment
trusts
("REITs") are dependent upon management
skill, may not
be
diversified and are
subject to the risks of financing projects.
Equity
REITs are also
subject to
heavy cash flow dependency, defaults by
borrowers,
self-liquidation and the
possibility of failing to qualify for
tax-free
pass-through of
income under the
Internal Revenue Code of 1986, as amended
(the "Code")
and to
maintain exemption
under the Investment Company Act of 1940, as
amended
(the "1940
Act"). By
investing in REITs indirectly through a Fund,
a
shareholder will
bear not only
his/her proportionate share of the expenses
of the
Fund, but
also, indirectly,
similar expenses of the REITs.
REPURCHASE AGREEMENTS: Repurchase
agreements are
agreements
under which a
Fund buys a money market instrument and
obtains a
simultaneous
commitment from
the seller to repurchase the instrument at a
specified
time and
agreed-upon
yield. Each Fund may enter into repurchase
agreements
with banks
or
broker-dealers deemed to be creditworthy by
IMI under
guidelines
approved by the
Board of Trustees. A Fund could experience a
delay in
11
<PAGE>
obtaining direct ownership of the underlying
collateral, and
might incur a loss
if the value of the security should decline.
RESTRICTED AND ILLIQUID SECURITIES:
Restricted and
other
illiquid
securities may be difficult to sell promptly
at an
acceptable
price. Difficulty
in selling these securities may be costly or
result in
a loss to
the Fund. In
addition, issuers of restricted and other
illiquid
securities may
not be subject
to the disclosure and other investor
protection
requirements that
would apply if
their securities were publicly traded.
SMALLER COMPANIES: Investing in smaller
company
stocks
involves certain
special considerations and risks that are not
usually
associated
with investing
in larger, more established companies. For
example,
securities of
smaller or
newer companies may have limited trading
markets, and
may be
subject to wider
price fluctuations. Transaction costs
associated with
trading in
smaller company
stocks may be higher than those of larger
companies.
Investments
in such
companies tend to be more volatile and
somewhat more
speculative.
"WHEN-ISSUED" SECURITIES AND FIRM
COMMITMENTS:
Purchasing
securities on a
"when-issued" or firm commitment basis
involves a risk
of loss if
the value of
the security to be purchased declines prior
to the
settlement
date.
ZERO COUPON BONDS: Zero coupon bonds are
debt
obligations
issued without
any requirement for the periodic payment of
interest,
and are
issued at a
significant discount from face value. Since
the
interest on such
bonds is, in
effect, compounded, they are subject to
greater market
value
fluctuations in
response to changing interest rates than debt
securities that
distribute income
regularly. In addition, for Federal income
tax
purposes, a Fund
generally
recognizes and is required to distribute
income
generated by zero
coupon bonds
currently in the amount of the unpaid accrued
interest,
even
though the actual
income will not yet have been received by the
Fund.
ORGANIZATION AND MANAGEMENT OF THE FUNDS
Each Fund is organized as a separate,
diversified
portfolio
of the Trust, an
open-end management investment company
organized as a
Massachusetts business
trust on December 21, 1983. The business and
affairs of
each Fund
are managed
under the direction of the Trustees.
Information about
the
Trustees, as well as
the Trust's executive officers, may be found
in the
SAI. The
Trust has an
unlimited number of authorized shares of
beneficial
interest, and
currently has
13 separate portfolios. For periods prior to
December
31, 1994,
Ivy Bond Fund
was known as Mackenzie Fixed Income Trust
(d/b/a Ivy
Bond Fund).
Each Fund has
three classes of shares, designated as Class
A, Class B
and Class
C. Ivy Bond
Fund has a fourth class of shares designated
as Class
I; and Ivy
Growth with
Income Fund has a fourth class of shares
designated as
Class D
(which are not
available for sale). Shares of each Fund
entitle their
holders to
one vote per
share (with proportionate voting for
fractional
shares). The
shares of each
class represent an interest in the same
portfolio of
Fund
investments. Each
class of shares, except for Class I, has a
different
Rule 12b-1
distribution
plan and bears different distribution fees.
In
addition, Class I
shares of Ivy
Bond Fund bear lower administrative service
and
transfer agency
fees than the
Fund's Class A, Class B and Class C shares.
Shares of
each class
have equal
rights as to voting, redemption, dividends
and
liquidation but
have exclusive
voting rights with respect to their Rule
12b-1
distribution
plans.
The Trust employs IMI to provide business
management and
investment advisory
services, Mackenzie Investment Management
Inc. ("MIMI")
to
provide
administrative and accounting services, Ivy
Mackenzie
Distributors, Inc.
("IMDI") to distribute the Funds' shares and
Ivy
Mackenzie
Services Corp.
("IMSC") to provide transfer agent and
shareholder-related
services for the
Funds. IMI, IMDI and IMSC are wholly-owned
subsidiaries
of MIMI.
Until December
31, 1994, MIMI served as investment adviser
to Ivy Bond
Fund. As
of March 29,
1996, IMI and MIMI had approximately $1.39
billion and
$186
million,
respectively, in assets under management.
MIMI is a
subsidiary of
Mackenzie
Financial Corporation ("MFC"), which has been
an
investment
counsel and mutual
fund manager in Toronto, Ontario, Canada for
more than
25 years.
INVESTMENT MANAGER
For IMI's business management and
investment
advisory
services, each Fund
pays IMI a fee, which is accrued daily and
paid
monthly, based on
the Fund's
daily net assets. Ivy Bond Fund pays a fee
that is
equal, on an
annual basis, to
0.75% of the first $500 million in average
net assets,
reduced to
0.60% on the
next $500 million and 0.40% on average net
assets over
$1
billion. For the year
ended December 31, 1995, Ivy Bond Fund paid
IMI an
investment
management fee of
0.75% of the Fund's average net assets. Ivy
Emerging
Growth Fund,
Ivy Growth
Fund and Ivy Growth with Income Fund each pay
a fee
that is
equal, on an annual
basis, to 0.85% of its average net assets.
IMI pays all expenses that it incurs in
rendering
management
services to the
Funds. Each Fund bears its own operational
costs.
General
expenses of the Trust
that are not readily identifiable as
belonging to a
particular
series of the
Trust (or a particular class thereof) are
allocated
among and
charged to each
series based on its relative net asset size.
Expenses
that are
attributable to a
particular Fund (or class thereof) will be
borne solely
by that
Fund (or class.)
IMI will reimburse the Funds to the extent
total
expenses exceed
required limits
imposed by state securities regulators. In
addition,
IMI may
voluntarily
reimburse a Fund's expenses.
PORTFOLIO MANAGEMENT: The following
individuals
have
responsibilities for
management of the Funds:
- James W. Broadfoot, an Executive Vice
President
and Chief
Investment
Officer of IMI, has been a portfolio
manager for
Ivy
Emerging Growth Fund
since the Fund's inception in 1993 and
Ivy Growth
Fund
since 1994. Prior
to joining the organization in 1990,
Mr.
Broadfoot was the
principal in an
investment counsel firm specializing in
small
capitalization companies.
Mr. Broadfoot has 24 years of
professional
investment
experience. He
earned an MBA from The Wharton School
of The
University of
Pennsylvania
and is a Chartered Financial Analyst.
- Leslie A. Ferris, a Senior Vice
President of IMI,
has been
a portfolio
manager for Ivy Bond Fund since 1993,
Ivy Growth
Fund since
1994 and Ivy
Growth with Income Fund since 1996. Ms.
Ferris
joined the
organization in
1988 and has 14 years of professional
investment
experience. She is a
Chartered Financial Analyst and holds
an MBA
degree from
the University of
Chicago. From 1982 to 1988 she was a
portfolio
manager at
Kemper Financial
Services Inc.
- Barbara Trebbi, a Senior Vice President
of IMI,
joined the
organization in
1988 and has eight years of
professional
investment
experience. She has
been a portfolio manager for Ivy Growth
Fund
since 1994.
She is a
Chartered Financial Analyst and holds a
Graduate
Diploma
from the London
School of Economics.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative
services for
the Funds,
such as
maintaining the registration of Fund shares
under state
"Blue
Sky" laws, and
assisting with the preparation of Federal and
state
income tax
returns,
financial
12
<PAGE>
statements and periodic reports to
shareholders. MIMI
also
assists the Trust's
legal counsel with the filing of registration
statements, proxies
and other
required filings under Federal and state law.
Under
this
arrangement, the
average net assets attributable to each
Fund's Class A,
Class B
and Class C
shares are subject to a fee accrued daily and
paid
monthly at the
annual rate of
0.10%. The net assets attributable to Ivy
Bond Fund's
Class I
shares are subject
to a fee at the annual rate of 0.01%.
MIMI also provides certain accounting and
pricing
services
for the Funds
(see "Fund Accounting Services" in the SAI
for more
information).
TRANSFER AGENT
IMSC is the transfer and dividend-paying
agent for
the Funds,
and also
provides certain shareholder-related
services. Certain
broker-dealers that
maintain shareholder accounts with the Funds
through an
omnibus
account provide
transfer agent and other shareholder-related
services
that would
otherwise be
provided by IMSC if the individual accounts
that
comprise the
omnibus account
were opened by their beneficial owners
directly (see
"Investment
Advisory and
Other Services" in the SAI).
ALTERNATIVE PURCHASE ARRANGEMENTS
CLASS A SHARES: Class A shares are
subject to an
initial
sales charge
unless the amount you purchase is $500,000 or
more (see
"Contingent Deferred
Sales Charge -- Class A Shares"). Certain
purchases
qualify for a
reduced
initial sales charge (see "Qualifying for a
Reduced
Sales
Charge"). Class A
shares are subject to ongoing service fees at
an annual
rate of
0.25% of a
Fund's average net assets attributable to its
Class A
shares. If
you do not
specify on your Account Application which
class of
shares you are
purchasing, it
will be assumed that you are investing in
Class A
shares.
CLASS B AND CLASS C SHARES: Class B and
Class C
shares are
not subject to
an initial sales charge, but are subject to a
CDSC if
redeemed
within six years
of purchase, in the case of Class B shares,
or within
one year of
purchase, in
the case of Class C shares. Both classes of
shares are
subject to
ongoing
service and distribution fees at a combined
annual rate
of up to
1.00% of a
Fund's average net assets attributable to its
Class B
or Class C
shares. The
ongoing distribution fee will cause these
shares to
have a higher
expense ratio
than that of Class A shares. Also, to the
extent that a
Fund pays
any dividends,
these higher expenses will result in lower
dividends
than those
paid on Class A
shares.
CLASS I SHARES: Class I shares are
offered by Ivy
Bond Fund
only to
institutions and certain individuals, and are
not
subject to an
initial sales
charge or a CDSC, nor to ongoing service or
distribution fees.
Class I shares
also bear lower administrative services fees
and
transfer agency
fees than Class
A, Class B and Class C shares.
FACTORS TO CONSIDER IN CHOOSING AN
ALTERNATIVE:
The
multi-class structure
of the Funds allows you to choose the most
beneficial
way to buy
shares given
the size of your purchase and the length of
time you
expect to
hold your shares.
You should consider whether, during the
anticipated
life of your
Fund
investment, the accumulated service and
distribution
fees on
Class B and Class C
shares would be less than the initial sales
charge and
accumulated service fees
on Class A shares purchased at the same time,
and to
what extent
this
differential would be offset by the Class A
shares'
potentially
higher yield.
Also, sales personnel may receive different
compensation
depending on which
class of shares they are selling. The tables
under the
caption
"Annual Fund
Operating Expenses" at the beginning of this
Prospectus
contain
additional
information that is designed to assist you in
making
this
determination.
DIVIDENDS AND TAXES
Distributions you receive from a Fund are
reinvested in
additional shares of
the same class of a Fund unless you elect to
receive
them in
cash. Because of
the higher expenses associated with Class B
and Class C
shares,
any dividend on
these shares will be lower than on Class A
and Class I
shares.
Ivy Growth with Income Fund intends
normally to
declare a
daily dividend,
and pay accumulated dividends quarterly. If a
shareholder of the
Fund redeems
all of his/her shares at any time prior to
payment of a
distribution, all
declarations accrued to the date of
redemption are paid
in
addition to the
redemption proceeds. Ivy Emerging Growth Fund
and Ivy
Growth Fund
intend to make
a distribution for each fiscal year of any
net
investment income
and net
realized short-term capital gain, as well as
any net
long-term
capital gain
realized during the year. In order to provide
steady
cash flow to
shareholders,
Ivy Bond Fund intends normally to make
monthly
distributions of
the Fund's net
investment income. The Fund intends to make a
distribution for
each fiscal year
of any remaining net investment income and
net realized
short-term capital gain,
as well as net long-term capital gain
realized during
the year.
Any Fund may
make an additional distribution of net
investment
income, net
realized
short-term capital gains and net realized
long-term
capital gains
to comply with
the calendar year distribution requirement
under the
excise tax
provisions of
Section 4982 of the Code.
TAXATION: The following discussion is
intended for
general
information
only. You should consult with your tax
adviser as to
the tax
consequences of an
investment in a particular Fund, including
the status
of
distributions from the
Fund under applicable state or local law.
Each Fund intends to qualify annually as
a
regulated
investment company
under the Code. To qualify, each Fund must
meet certain
income,
distribution and
diversification requirements. In any year in
which a
Fund
qualifies as a
regulated investment company and timely
distributes all
of its
taxable income,
the Fund generally will not pay any Federal
income or
excise tax.
Dividends paid out of a Fund's investment
company
taxable
income (including
dividends, interest and net short-term
capital gains)
will be
taxable to a
shareholder as ordinary income. If a portion
of a
Fund's income
consists of
dividends paid by U.S. corporations, a
portion of the
dividends
paid by the Fund
may be eligible for the corporate
dividends-received
deduction.
Distributions of
net capital gains (the excess of net
long-term capital
gains over
net short-term
capital losses), if any, are taxable as
long-term
capital gains,
regardless of
how long the shareholder has held a Fund's
shares.
Dividends are
taxable to
shareholders in the same manner whether
received in
cash or
reinvested in
additional Fund shares.
If, for any year, a Fund's total
distributions
exceed its
earnings and
profits, the excess will generally be treated
as a
return of
capital. The amount
treated as a return of capital will reduce a
shareholder's
adjusted basis in
his/her shares (thereby increasing potential
gain or
reducing
potential loss on
the sale of shares) and, to the extent that
the amount
exceeds
this basis, will
be treated as a taxable gain.
A distribution will be treated as paid on
December
31 of the
current
calendar year if it is declared by a Fund in
October,
November or
December with
a record date in such a month and paid by the
Fund
during January
of the
following calendar year. Such distributions
will be
taxable to
shareholders in
the calendar year in which the distributions
are
declared, rather
than the
calendar year in which the distributions are
received.
Investments in securities that are issued
at a
discount will
result each
year in income to a Fund equal to a portion
of the
excess of the
face value of
the
13
<PAGE>
securities over their issue price, even
though the Fund
receives
no cash
interest payments from the securities.
Income and gains received by a Fund from
sources
within
foreign countries
may be subject to foreign withholding and
other taxes.
Unless a
Fund is eligible
to and elects to "pass through" to its
shareholders the
amount of
foreign income
and similar taxes paid by the Fund, these
taxes will
reduce the
Fund's
investment company taxable income, and
distributions of
investment company
taxable income received from the Fund will be
treated
as U.S.
source income.
Any gain or loss realized by a
shareholder upon the
sale or
other
disposition of shares of a Fund, or upon
receipt of a
distribution in complete
liquidation of the Fund, generally will be a
capital
gain or loss
which will be
long-term or short-term, generally depending
upon the
shareholder's holding
period for the shares.
A Fund may be required to withhold U.S.
Federal
income tax at
the rate of
31% of all taxable distributions payable to
shareholders who fail
to provide the
Fund with their correct taxpayer
identification number
or to make
required
certifications, or who have been notified by
the
Internal Revenue
Service
("IRS") that they are subject to backup
withholding.
Backup
withholding is not
an additional tax. Any amounts withheld may
be credited
against
the
shareholder's U.S. Federal income tax
liability.
Fund distributions may be subject to
state, local
and foreign
taxes.
Distributions of a Fund which are derived
from interest
on
obligations of the
U.S. Government and certain of its agencies,
authorities and
instrumentalities
may be exempt from state and local taxes in
certain
states.
Further information
relating to tax consequences is contained in
the SAI.
PERFORMANCE DATA
Performance information (e.g., "total
return" and
"yield") is
computed
separately for each class of Fund shares in
accordance
with
formulas prescribed
by the SEC. Performance information for each
class may
be
compared in reports
and promotional literature to indices such as
the
Standard and
Poor's 500 Stock
Index, Dow Jones Industrial Average, and
Morgan Stanley
Capital
International
World Index. Advertisements, sales literature
and
communications
to shareholders
may also contain statements of a Fund's
current yield,
various
expressions of
total return and current distribution rate.
Performance
figures
will vary in
part because of the different expense
structures of the
Funds'
different
classes. ALL PERFORMANCE INFORMATION IS
HISTORICAL AND
IS NOT
INTENDED TO
SUGGEST FUTURE RESULTS.
"Total return" is the change in value of
an
investment in a
Fund for a
specified period, and assumes the
reinvestment of all
distributions and
imposition of the maximum applicable sales
charge.
"Average
annual total return"
represents the average annual compound rate
of return
of an
investment in a
particular class of Fund shares assuming the
investment
is held
for one year,
five years and ten years as of the end of the
most
recent
calendar quarter.
Where a Fund provides total return quotations
for other
periods,
or based on
investments at various sales charge levels or
at net
asset value,
"total return"
is based on the total of all income and
capital gains
paid to
(and reinvested
by) shareholders, plus (or minus) the change
in the
value of the
original
investment expressed as a percentage of the
purchase
price.
"Current yield" reflects the income per
share
earned by a
Fund's portfolio
investments, and is calculated by dividing
the Fund's
net
investment income per
share during a recent 30-day period by the
maximum
public
offering price on the
last day of that period and then annualizing
the
result.
Dividends or
distributions that were paid to a Fund's
shareholders
are
reflected in the
"current distribution rate," which is
computed by
dividing the
total amount of
dividends per share paid by a Fund during the
preceding
12 months
by the Fund's
current maximum offering price (which
includes any
applicable
sales charge). The
"current distribution rate" will differ from
the
"current yield"
computation
because it may include distributions to
shareholders
from sources
other than
dividends and interest, short term capital
gain and net
equalization credits and
will be calculated over a different period of
time.
HOW TO BUY SHARES
OPENING AN ACCOUNT: Complete and sign
the Account
Application on the last
page of this Prospectus. Make your check
payable to the
Fund in
which you are
investing. No third party checks will be
accepted.
Deliver these
items to your
registered representative or selling broker,
or send
them to one
of the
addresses below:
Regular Mail:
IVY MACKENZIE
SERVICES CORP.
P.O. BOX
3022
BOCA RATON, FL
33431-0922
Courier:
IVY MACKENZIE
SERVICES CORP.
700 SOUTH FEDERAL
HIGHWAY, SUITE
300
BOCA RATON, FL
33432
The Funds reserve the right to reject,
for any
reason, any
purchase order.
MINIMUM INVESTMENT POLICIES: The minimum
initial
investment
is $1,000; the
minimum additional investment is $100.
Initial or
additional
amounts for
retirement accounts may be less (see
"Retirement
Plans").
Accounts in Class I of Ivy Bond Fund can
be opened
with a
minimum initial
investment of $5,000,000; the minimum
additional
investment is
$10,000. The
minimum initial investment in Class I of Ivy
Bond Fund
may be
spread over the
thirteen-month period following the opening
of the
account.
BUYING ADDITIONAL SHARES: You may add to
your
account at any
time through
any of the following options:
By Mail: Complete the investment slip
attached to
your
statement, or write
instructions including the account
registration, fund
number, and
account number
of the shares you wish to purchase. Send your
check
(payable to
the Fund in
which you are investing) and investment slip
or written
instructions to one of
the addresses above.
Through your Broker: Deliver the
investment slip
attached to
your
statement, or written instructions, along
with your
payment to
your registered
representative or selling broker.
By Wire: Purchases may also be made by
wiring
money from
your bank account
to your Ivy account. Your bank may charge a
fee for
wiring funds.
Before wiring
any funds, please call IMSC at
1-800-777-6472. Wiring
instructions are as
follows:
FIRST UNION NATIONAL
BANK OF
FLORIDA
JACKSONVILLE,
FL
ABA#063000021
ACCOUNT
#2090002063833
FOR FURTHER
CREDIT TO:
YOUR IVY ACCOUNT
REGISTRATION
YOUR FUND NUMBER AND
ACCOUNT
NUMBER
14
<PAGE>
By Automatic Investment Method: Complete
Sections
6A and 7B
on the Account
Application (See "Automatic Investment
Method" on page
21 for
more information).
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Class A shares of
a Fund is
the net
asset value
("NAV") per share plus a sales charge, which
may be
reduced or
eliminated in
certain circumstances. The purchase price per
share is
known as
the public
offering price. Your purchase price for Class
B and
Class C
shares (and Class I
shares, in the case of Ivy Bond Fund) is the
net asset
value per
share.
Share purchases will be made at the next
determined
price
after your
purchase order is received. The price is
effective for
orders
received by IMSC
or by your registered securities dealer prior
to the
time of the
determination
of the NAV. Any orders received after the
time of the
determination of the NAV
will be entered at the next calculated price.
Orders placed with a securities dealer
before the
NAV is
determined and that
are transmitted through the facilities of the
National
Securities
Clearing
Corporation on the same day are confirmed at
that day's
price.
Any loss
resulting from the dealer's failure to submit
an order
by the
deadline will be
borne by that dealer.
You will receive an account statement
after any
purchase,
exchange or full
liquidation. Statements related to
reinvestment of
dividends,
capital gains,
automatic investment plans (see the SAI for
further
explanation)
and/or
systematic withdrawal plans will be sent
quarterly.
HOW EACH FUND VALUES ITS SHARES
The NAV per share is the value of one
share. The
NAV is
determined for each
Class of shares as of the close of the New
York Stock
Exchange on
each day the
Exchange is open by dividing the value of a
Fund's net
assets
attributable to a
class by the number of shares of that class
that are
outstanding,
adjusted to
the nearest cent. These procedures are
described more
completely
in the SAI.
The Trust's Board of Trustees has
established
procedures to
value a Fund's
securities in order to determine the NAV. The
value of
a foreign
security is
determined as of the normal close of trading
on the
foreign
exchange on which it
is traded or as of the close of regular
trading on the
New York
Stock Exchange,
if that is earlier. If no sale is reported at
that
time, the
average between the
current bid and asked price is used. All
other
securities for
which OTC market
quotations are readily available are valued
at the
average
between the current
bid and asked price. Securities and other
assets for
which market
prices are not
readily available are valued at fair value,
as
determined by IMI
and approved in
good faith by the Board. Money market
instruments of a
Fund are
valued at
amortized cost, which approximates market
value.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A
SHARES
Shares are purchased at a public offering
price
equal to
their NAV per share
plus a sales charge, as set forth below.
SALES
CHARGE
-------------------------------- PORTION
OF
AS A
PUBLIC
IVY BOND FUND
PERCENTAGE
OF AS
A PERCENTAGE OFFERING PRICE
PUBLIC
OF
NET AMOUNT RETAINED BY
AMOUNT INVESTED
OFFERING
PRICE
INVESTED DEALER
-----------------------------------------
--------------
--------------- --------------
Less than $100,000.......................
4.75%
4.99% 4.00%
$100,000 but less than $250,000..........
3.75%
3.90% 3.00%
$250,000 but less than $500,000..........
2.50%
2.56% 2.00%
$500,000 or over*........................
0.00%
0.00% 0.00%
SALES
CHARGE
IVY EMERGING GROWTH FUND,
-------------------------------- PORTION
OF
IVY GROWTH FUND AND
AS A
PUBLIC
IVY GROWTH WITH INCOME FUND
PERCENTAGE
OF AS
A PERCENTAGE OFFERING PRICE
PUBLIC
OF
NET AMOUNT RETAINED BY
AMOUNT INVESTED
OFFERING
PRICE
INVESTED DEALER
-----------------------------------------
--------------
--------------- --------------
Less than $50,000........................
5.75%
6.10% 5.00%
$50,000 but less than $100,000...........
5.25%
5.54% 4.50%
$100,000 but less than $250,000..........
4.50%
4.71% 3.75%
$250,000 but less than $500,000..........
3.00%
3.09% 2.50%
$500,000 or over*........................
0.00%
0.00% 0.00%
* A CDSC may apply to the redemption of Class
A shares
that are
purchased
without an initial sales charge. See
"Contingent
Deferred Sales
Charge --
Class A Shares."
Sales charges are not applied to any
dividends or
capital
gains that are
reinvested in additional shares of the Fund.
An
investor may be
charged a
transaction fee for Class A and Class I
shares (in the
case of
Ivy Bond Fund)
purchased or redeemed at NAV through a broker
or agent
other than
IMDI.
With respect to purchases of $500,000 or
more
through dealers
or agents,
IMDI may, at the time of purchase, pay such
dealers or
agents
from its own
resources a commission to compensate such
dealers or
agents for
their
distribution assistance in connection with
such
purchases. The
commission would
be computed as set forth below:
NAV COMMISSION
TABLE
PURCHASE
AMOUNT
COMMISSION
-----------------------------------------------------------------
------------- ----------
First
$3,000,000.......................................................
..... 1.00%
Next
$2,000,000.......................................................
..... .50%
Over
$5,000,000.......................................................
..... .25%
Dealers who receive 90% or more of the
sales charge
may be
deemed to be
"underwriters" as that term is defined in the
1933 Act.
IMDI compensates participating brokers
who sell
Class A
shares through the
initial sales charge. IMDI retains that
portion of the
initial
sales charge that
is not reallowed to the dealers, which it may
use to
distribute a
Fund's Class A
shares. Pursuant to a separate distribution
plan for
the Funds'
Class A, Class B
and Class C shares, IMDI bears various
promotional and
sales
related expenses,
including the cost of printing and mailing
prospectuses
to
persons other than
shareholders. Pursuant to the Funds' Class A
distribution plans,
IMDI currently
pays a continuing service fee to qualified
dealers at
an annual
rate of 0.25% of
qualified investments.
IMDI may from time to time pay a bonus or
other
incentive to
dealers (other
than IMDI) which employ a registered
representative who
sells a
minimum dollar
amount of the shares of a Fund and/or other
funds
distributed by
IMDI during a
specified period of time. This bonus or other
incentive
may take
the form of
payment for travel expenses, including
lodging,
incurred in
connection with
trips taken by qualifying registered
representatives
and members
of their
families to places within or without the U.S.
or other
bonuses
such as gift
certificates or the cash equivalent of such
bonus or
incentive.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A
SHARES
Purchases of $500,000 or more of Class A
shares
will be made
at NAV with no
initial sales charge, but if the shares are
redeemed
within 24
months after the
end of the calendar month in which the
purchase was
made (the
CDSC period), a
CDSC of 1.00% will be imposed.
15
<PAGE>
In order to recover commissions paid to
dealers on
NAV
transfers (as defined
in "Purchases of Class A Shares at Net Asset
Value"),
Class A
shares of a Fund
are subject to a CDSC of 1.00% for certain
redemptions
within 24
months after
the date of purchase.
The charge will be assessed on an amount
equal to
the lesser
of the current
market value or the original purchase cost of
the Class
A shares
redeemed.
Accordingly, no CDSC will be imposed on
increases in
account
value above the
initial purchase price, including any
dividends or
capital gains
which have been
reinvested in additional Class A shares.
In determining whether a CDSC applies to
a
redemption, the
calculation will
be determined in a manner that results in the
lowest
possible
rate being
charged. Therefore, it will be assumed that
the
redemption is
first made from
any shares in your account not subject to the
CDSC. The
CDSC is
waived in
certain circumstances.
WAIVER OF CONTINGENT DEFERRED SALES
CHARGE: The
CDSC is
waived for (i)
redemptions in connection with distributions
not
exceeding 12%
annually of the
initial account balance (i.e., the value of
the
shareholder's
Class A Fund
account at the time of the initial
distribution) (ia)
following
retirement under
a tax qualified retirement plan, or (ib) upon
attaining
age 59
1/2 in the case
of an IRA, a custodial account pursuant to
section
403(b)(7) of
the Code or a
Keogh Plan; (ii) redemption resulting from
tax-free
return of an
excess
contribution to an IRA; or (iii) any partial
or
complete
redemption following
the death or disability (as defined in
Section 72(m)(7)
of the
Code) of a
shareholder from an account in which the
deceased or
disabled is
named, provided
that the redemption is requested within one
year of
death or
disability. IMDI
may require documentation prior to waiver of
the CDSC.
Class A shareholders may exchange their
Class A
shares
subject to a CDSC
("outstanding Class A shares") for Class A
shares of
another Ivy
or Mackenzie
Fund ("new Class A shares") on the basis of
the
relative NAV per
Class A share,
without the payment of any CDSC that would be
due upon
the
redemption of the
outstanding Class A shares. The original CDSC
rate that
would
have been charged
if the outstanding Class A shares were
redeemed will
carry over
to the new Class
A shares received in the exchange, and will
be charged
accordingly at the time
of redemption.
QUALIFYING FOR A REDUCED SALES CHARGE
RIGHTS OF ACCUMULATION (ROA): Rights of
Accumulation ("ROA")
is calculated
by determining the current market value of
all Class A
shares in
all Ivy or
Mackenzie fund accounts (except Ivy Money
Market Fund)
owned by
you, your
spouse, and your children under 21 years of
age. ROA is
also
applicable to
accounts under a trustee or other single
fiduciary
(including
retirement
accounts qualified under Section 401 of the
Code). The
current
market value of
each of your accounts as described above is
added
together and
then added to
your current purchase amount. If the combined
total is
equal or
greater than a
breakpoint amount for a Fund, then you
qualify for the
reduced
sales charge. To
reduce or eliminate the sales charge, you
must complete
Section
4B of the
Account Application.
LETTER OF INTENT (LOI): A Letter of
Intent ("LOI")
is a
non-binding
agreement that states your intention to
invest in
additional
Class A shares,
within a thirteen month period after the
initial
purchase, an
amount equal to a
breakpoint amount for a Fund. The LOI may be
backdated
up to 90
days. To sign an
LOI, please complete Section 4B of the
Account
Application.
Should the LOI not be fulfilled within
the thirteen
month
period, your
account will be debited for the difference
between the
full sales
charge that
applies for the amount actually invested and
the
reduced sales
charge actually
paid on purchases placed under the terms of
the LOI.
PURCHASES OF CLASS A SHARES AT NET ASSET
VALUE: An
investor
who was a
shareholder of any Ivy Fund on December 31,
1991 or a
shareholder
of American
Investors Income Fund, Inc. or American
Investors
Growth Fund,
Inc. on October
31, 1988 and who became a shareholder of Ivy
Bond Fund
(formerly
Mackenzie Fixed
Income Trust) or Ivy Growth Fund as a result
of the
respective
reorganizations
of the funds will be exempt from sales
charges on the
purchase of
Class A shares
of any Ivy or Mackenzie Fund. This privilege
is also
available to
immediate
family members of a shareholder (i.e., the
shareholder's
children, the
shareholder's spouse and the children of the
shareholder's
spouse). This no-load
privilege terminates for the investor if the
investor
redeems all
shares owned.
Shareholders and their relatives as described
above
should call
1-800-235-3322
for information about additional purchases or
to
inquire about
their account.
Class A shares of a Fund may be purchased
without
an initial
sales charge or
CDSC by (i) officers and Trustees of the
Trust (and
their
relatives), (ii)
officers, directors, employees, retired
employees,
legal counsel
and independent
accountants of IMI, MIMI, and MFC (and their
relatives), and
(iii) directors,
officers, partners, registered
representatives,
employees and
retired employees
(and their relatives) of dealers having a
sales
agreement with
IMDI (or trustees
or custodians of any qualified retirement
plan or IRA
established
for the
benefit of any such person). In addition,
certain
investment
advisors and
financial planners who charge a management,
consulting
or other
fee for their
services and who place trades for their own
accounts or
the
accounts of their
clients may purchase Class A shares of a Fund
without
an initial
sales charge or
a CDSC, provided such purchases are placed
through a
broker or
agent who
maintains an omnibus account with that Fund.
Also,
clients of
these advisors and
planners may make purchases under the same
conditions
if the
purchases are
through the master account of such advisor or
planner
on the
books of such
broker or agent. This provision applies to
assets of
retirement
and deferred
compensation plans and trusts used to fund
those plans
including,
but not
limited to, those defined in Section 401(a),
403(b) or
457 of the
Code and
"Rabbi Trusts" whose assets are used to
purchase shares
of a fund
through the
aforementioned channels.
Class A shares of a Fund may be purchased
at NAV by
retirement plans
qualified under section 401(a) or 403(b) of
the Code or
subject
to the Employee
Retirement Income Security Act of 1974, as
amended. A
CDSC of
1.00% will be
imposed on such purchases in the event of
certain
plan-level
redemption
transactions within 24 months following such
purchases.
If investments by retirement plans at NAV
are made
through a
dealer who has
executed a dealer agreement with respect to a
Fund,
IMDI may, at
the time of
purchase, pay the dealer out of IMDI's own
resources a
commission
to compensate
the dealer for its distribution assistance in
connection with the
retirement
plan's investment. Refer to the NAV
Commission Table on
page 15
of this
Prospectus. A CDSC of 1.00% will be imposed
on such
purchases in
the event of
certain redemption transactions within 24
months
following such
purchases.
Please contact IMDI for additional
information.
Class A shares can also be purchased
without an
initial sales
charge, but
subject to a CDSC of 1.00% during the first
24 months,
by: (a)
any state,
county, city (or any instrumentality,
department,
authority or
agency of such
entities) that is prohibited by applicable
investment
laws from
paying a sales
charge or commission when purchasing shares
of a
registered
investment
management company (an "eligible governmental
authority"), and
(b) trust
companies, bank trust departments, credit
unions,
savings and
loans and other
16
<PAGE>
similar organizations in their fiduciary
capacity or
for their
own accounts,
subject to any minimum requirements set by
IMDI
(currently, these
criteria
require that the amount invested or to be
invested in
the
subsequent 13-month
period totals at least $250,000). In either
case, IMDI
may pay
commissions to
dealers that provide distribution assistance
on the
same basis as
in the
preceding paragraph.
Class A shares of a Fund may also be
purchased
without a
sales charge in
connection with certain liquidation, merger
or
acquisition
transactions
involving other investment companies or
personal
holding
companies.
Each Fund may, from time to time, waive
the initial
sales
charge on its
Class A shares sold to clients of various
broker-dealers with
which IMDI has a
selling relationship. This privilege will
apply only to
Class A
Shares of a Fund
that are purchased using all or a portion of
the
proceeds
obtained by such
clients through redemptions of shares (on
which a
commission has
been paid) of
an investment company (other than Mackenzie
Series
Trust or the
Trust), unit
investment trust or limited partnership ("NAV
transfers"). Some
dealers may
elect not to participate in this program.
Those dealers
that do
elect to
participate in the program must complete
certain forms
required
by IMDI. The
normal service fee, as described in the
"Initial Sales
Charge
Alternative --
Class A Shares" and "Contingent Deferred
Sales Charge
Alternative
-- Class B and
Class C Shares" sections of this Prospectus,
will be
paid to
dealers in
connection with these purchases. Additional
information
on
reductions or waivers
may be obtained from IMDI at the address
listed on the
cover of
the Prospectus.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE
-- CLASS B
AND CLASS
C SHARES
Class B and Class C shares are offered at
NAV per
share
without a front end
sales charge. Class C shares redeemed within
one year
of purchase
will be
subject to a CDSC of 1%, and Class B shares
redeemed
within six
years of
purchase will be subject to a CDSC at the
rates set
forth below.
This charge
will be assessed on an amount equal to the
lesser of
the current
market value or
the original purchase cost of the shares
being
redeemed.
Accordingly, you will
not be assessed a CDSC on increases in
account value
above the
initial purchase
price, including shares derived from
dividends or
capital gains
reinvested. In
determining whether a CDSC applies to a
redemption, the
calculation will be
determined in a manner that results in the
lowest
possible rate
being charged.
It will be assumed that your redemption comes
first
from shares
you have held
beyond the requisite maximum holding period
or those
you acquire
through
reinvestment of dividends or capital gain,
and next
from the
shares you have
held the longest during the requisite holding
period.
Proceeds from the CDSC are paid to IMDI.
The
proceeds are
used, in whole or
in part, to defray its expenses related to
providing
each Fund
with distribution
services in connection with the sale of Class
B and
Class C
shares, such as
compensating selected dealers and agents for
selling
these
shares. The
combination of the CDSC and the distribution
and
service fees
makes it possible
for a Fund to sell Class B or Class C shares
without
deducting a
sales charge at
the time of the purchase.
The amount of the CDSC, if any, will vary
depending
on the
number of months
from the time you purchase your shares until
the time
you redeem
them. In the
case of Class B shares, solely for purposes
of
determining this
holding period,
any purchases you make during the quarter
will be
aggregated and
deemed to have
been made on the last day of the quarter. In
the case
of Class C
shares, solely
for purposes of determining this holding
period, any
purchases
you make during a
month will be deemed to have been made on the
last day
of the
month.
CONTINGENT
DEFERRED
SALES
CHARGE AS A
PERCENTAGE OF
CLASS B SHARES:
DOLLAR AMOUNT
SUBJECT TO
YEAR SINCE PURCHASE
CHARGE
-------------------------------------------------
----------------
First............................................
5%
Second...........................................
4%
Third............................................
3%
Fourth...........................................
3%
Fifth............................................
2%
Sixth............................................
1%
Seventh and
thereafter...........................
0%
IMDI currently intends to pay to dealers
a sales
commission
of 4% of the
sale price of Class B shares they have sold,
and will
receive the
entire amount
of the CDSC paid by shareholders on the
redemption of
Class B
shares to finance
the 4% commission and related marketing
expenses.
With respect to Class C shares, IMDI
currently
intends to pay
to dealers a
sales commission of 1% of the sale price of
Class C
shares that
they have sold,
a portion of which is to compensate the
dealers for
Class C
shareholder account
services during the first year of investment.
IMDI will
receive
the entire
amount of the CDSC paid by shareholders on
the
redemption of
Class C shares to
finance the 1% commission and related
marketing
expenses.
Pursuant to separate distribution plans
for the
Funds' Class
B and Class C
shares, IMDI bears various promotional and
sales
related
expenses, including the
cost of printing and mailing prospectuses to
persons
other than
shareholders.
Under the Funds' Class B Plan, IMDI retains
0.75% of
the
continuing 1.00%
service/distribution fee assessed to Class B
shareholders, and
pays a continuing
service fee to qualified dealers at an annual
rate of
0.25% of
qualified
investments. Under the Class C Plan, IMDI
pays
continuing
service/distribution
fees to qualified dealers at an annual rate
of 1.00% of
qualified
investments
after the first year of investment (0.25% of
which
represents a
service fee).
CONVERSION OF CLASS B SHARES: Your Class
B shares
and an
appropriate
portion of both reinvested dividends and
capital gains
on those
shares will be
converted into Class A shares automatically
no later
than the
month following
eight years after the shares were purchased,
resulting
in lower
annual
distribution fees. If you exchanged Class B
shares into
a Fund
from Class B
shares of another Ivy or Mackenzie fund, the
calculation will be
based on the
time the shares in the original fund were
purchased.
WAIVER OF CONTINGENT DEFERRED SALES
CHARGE: The
CDSC is
waived for (i)
redemptions in connection with distributions
not
exceeding 12%
annually of the
initial account balance (i.e., the value of
the
shareholder's
Class B or Class C
Fund account at the time of the initial
distribution)
(ia)
following retirement
under a tax qualified retirement plan, or
(ib) upon
attaining age
59 1/2 in the
case of an IRA, a custodial account pursuant
to section
403(b)(7)
of the Code or
a Keogh Plan; (ii) redemption resulting from
tax-free
return of
an excess
contribution to an IRA; or (iii) any partial
or
complete
redemption following
the death or disability (as defined in
Section 72(m)(7)
of the
Code) of a
shareholder from an account in which the
deceased or
disabled is
named, provided
that the redemption is requested within one
year of
death or
disability. IMDI
may require documentation prior to waiver of
the CDSC.
ARRANGEMENTS WITH BROKER-DEALERS AND
OTHERS: IMDI
may, at
its own expense,
pay concessions in addition to those
described above to
dealers
that satisfy
certain criteria established from time to
time by IMDI.
These
conditions relate
to increasing sales of shares of the Funds
over
specified periods
and to
17
<PAGE>
certain other factors. These payments may,
depending on
the
dealer's
satisfaction of the required conditions, be
periodic
and may be
up to (i) 0.25%
of the value of Fund shares sold by the
dealer during a
particular period, and
(ii) 0.10% of the value of Fund shares held
by the
dealer's
customers for more
than one year, calculated on an annual basis.
HOW TO REDEEM SHARES
You may redeem your Fund shares through
your
registered
securities
representative, by mail, or by telephone. A
CDSC may
apply to
certain Class A
share redemptions, to Class B share
redemptions prior
to
conversion and to Class
C shares that are redeemed within one year of
purchase.
All
redemptions are made
at the NAV next determined after a redemption
request
has been
received in good
order. Requests for redemptions must be
received by
4:00 p.m.
Eastern time to be
processed at the NAV for that day. Any
redemption
request in good
order that is
received after 4:00 p.m. Eastern time will be
processed
at the
price determined
on the following business day. IF SHARES TO
BE REDEEMED
WERE
PURCHASED BY CHECK,
PAYMENT OF THE REDEMPTION MAY BE DELAYED
UNTIL THE
CHECK HAS
CLEARED OR FOR UP
TO 15 DAYS AFTER THE DATE OF PURCHASE. If you
own
shares of more
than one class
of a Fund, the Fund will redeem first the
shares having
the
highest 12b-1 fees;
any shares subject to a CDSC will be redeemed
last
unless you
specifically elect
otherwise.
When shares are redeemed, a Fund
generally sends
you payment
on the next
business day. Under unusual circumstances, a
Fund may
suspend
redemptions or
postpone payment to the extent permitted by
Federal
securities
laws. The
proceeds of the redemption may be more or
less than the
purchase
price of your
shares, depending upon, among other factors,
the market
value of
the Fund's
securities at the time of the redemption. If
the
redemption is
for over $50,000,
or the proceeds are to be sent to an address
other than
the
address of record,
or an address change has occurred in the last
30 days,
it must be
requested in
writing with a signature guarantee. See
"Signature
Guarantees,"
below.
If you are not certain of the
requirements for a
redemption,
please contact
IMSC at 1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES
DEALER: The
Dealer is
responsible for
promptly transmitting redemption orders.
Redemptions
requested by
dealers will
be made at the NAV (less any applicable CDSC)
determined at the
close of regular
trading (4:00 p.m. Eastern time) on the day
that a
redemption
request is
received in good order by IMSC.
BY MAIL: Requests for redemption in
writing are
considered
to be in "proper
or good order" if they contain the following:
- Any outstanding certificate(s) for
shares being
redeemed.
- A letter of instruction, including the
account
registration, fund number,
account number, and dollar amount or
number of
shares to be
redeemed.
- Signatures of all registered owners
whose names
appear on
the account.
- Any required signature guarantees.
- Other supporting legal documentation,
if required
(in the
case of estates,
trusts, guardianships, corporations,
unincorporated
associations
retirement plan trustees or others
acting in
representative
capacities).
The dollar amount or number of shares
indicated for
redemption must not
exceed the available shares or NAV of your
account at
the
next-determined
prices. If your request exceeds these limits,
then the
trade will
be rejected in
its entirety.
Mail your request to IMSC at one of the
addresses
on page 13
of this
Prospectus.
BY TELEPHONE: Individual and joint
accounts may
redeem up to
$50,000 per
day over the telephone by contacting IMSC at
1-800-777-6472. In
times of unusual
economic or market changes, the telephone
redemption
privilege
may be difficult
to implement. If you are unable to execute
your
transaction by
telephone, you
may want to consider placing the order in
writing and
sending it
by mail or
overnight courier.
Checks will be made payable to the
current account
registration and sent to
the address of record. If there has been a
change of
address in
the last 30
days, please use the instructions for
redemption
requests by mail
described
above. A signature guarantee would be
required.
Requests for telephone redemptions will
be accepted
from the
registered
owner of the account, the designated
registered
representative or
the registered
representative's assistant.
Shares held in certificate form cannot be
redeemed
by
telephone.
If Section 6E of the Account Application
is not
completed,
telephone
redemption privileges will be provided
automatically.
Although
telephone
redemptions may be a convenient feature, you
should
realize that
you may be
giving up a measure of security that you may
otherwise
have if
you terminated
the privilege and redeemed your shares in
writing. If
you do not
wish to make
telephone redemptions or let your registered
representative do so
on your
behalf, you must notify IMSC in writing.
Each Fund employs reasonable procedures
that
require personal
identification
prior to acting on redemption instructions
communicated
by
telephone to confirm
that such instructions are genuine. In the
absence of
such
procedures, a Fund
may be liable for any losses due to
unauthorized or
fraudulent
telephone
instructions.
Receiving Your Proceeds by Federal Funds
Wire: For
shareholders who
established this feature at the time they
opened their
account,
telephone
instructions will be accepted for redemption
of amounts
up to
$50,000 ($1,000
minimum) and proceeds will be wired on the
next
business day to a
predesignated
bank account.
In order to add this feature to an
existing account
or to
change existing
bank account information, please submit a
letter of
instructions
including your
bank information to IMSC at the address
provided above.
The
letter must be
signed by all registered owners, and their
signatures
must be
guaranteed.
Your account will be charged a fee of $10
each time
redemption proceeds are
wired to your bank. Your bank may also charge
you a fee
for
receiving a Federal
Funds wire.
Neither IMSC nor any of the Funds can be
responsible for the
efficiency of
the Federal Funds wire system or the
shareholder's
bank.
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small
accounts
and
subject to state law
requirements, a Fund may redeem the accounts
of
shareholders
whose investment,
including sales charges paid, has been less
than $1,000
for more
than 12 months.
A Fund will not redeem an account unless the
shareholder has been
given at least
60 days' advance notice of the Fund's
intention to do
so. No
redemption will be
made if a shareholder's account falls below
the minimum
18
<PAGE>
due to a reduction in the value of the Fund's
portfolio
securities. This
provision does not apply to IRAs, other
retirement
accounts and
UGMA/UTMA
accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent
fraudulent
redemptions,
we require a
signature guarantee in order to accommodate
the
following
requests:
- Redemption requests over $50,000.
- Requests for redemption proceeds to be
sent to
someone
other than the
registered shareholder.
- Requests for redemption proceeds to be
sent to an
address
other than the
address of record.
- Registration transfer requests.
- Requests for redemption proceeds to be
wired to
your bank
account (if this
option was not selected on your
original
application, or if
you are
changing the bank wire information).
A signature guarantee may be obtained
only from an
eligible
guarantor
institution as defined in Rule 17Ad-15 of the
Securities Exchange
Act of 1934,
as amended. An eligible guarantor institution
includes
banks,
brokers, dealers,
municipal securities dealers, government
securities
dealers,
government
securities brokers, credit unions, national
securities
exchanges,
registered
securities associations, clearing agencies
and savings
associations. The
signature guarantee must not be qualified in
any way.
Notarizations from notary
publics are not the same as signature
guarantees, and
are not
accepted.
Circumstances other than those described
above may
require a
signature
guarantee. Please contact IMSC at
1-800-777-6472 for
more
information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the
distribution
option that
best suits
your needs:
AUTOMATIC REINVESTMENT OPTION -- Both
dividends and
capital
gains are
automatically reinvested at NAV in additional
shares of
the same
class of a Fund
unless you specify one of the other options.
INVESTMENT IN ANOTHER IVY OR MACKENZIE
FUND -- Both
dividends
and capital
gains are automatically invested at NAV in
another Ivy
or
Mackenzie Fund of the
same class.
DIVIDENDS IN CASH/CAPITAL GAINS
REINVESTED --
Dividends will
be paid in
cash. Capital gains will be reinvested at NAV
in
additional
shares of the same
class of a Fund or another Ivy or Mackenzie
Fund of the
same
class.
DIVIDENDS AND CAPITAL GAINS IN CASH --
Both
dividends and
capital gains will
be paid in cash.
If you wish to have your cash
distributions
deposited
directly to your bank
account via electronic funds transfer,
("EFT") or if
you wish to
change your
distribution option, please contact IMSC at
1-800-777-6472.
If you wish to have your cash
distributions go to
an address
other than the
address of record you must provide IMSC with
a letter
of
instruction signed by
all registered owners with signatures
guaranteed.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a
31% U.S.
Federal
backup withholding
tax on dividends, capital gains distributions
and
redemption
proceeds, you must
furnish a Fund with your certified tax
identification
number
("TIN") and certify
that you are not subject to backup
withholding due to
prior
underreporting of
interest and dividends to the IRS. If you
fail to
provide a
certified TIN, or
such other tax-related certifications as a
Fund may
require,
within 30 days of
opening your new account, each Fund reserves
the right
to
involuntarily redeem
your account and send the proceeds to your
address of
record.
You can avoid the above withholding
and/or
redemption by
correctly
furnishing your TIN, and making certain
certifications,
in
Section 2 of the
Account Application at the time you open your
new
account, unless
the IRS
requires that backup withholding be applied
to your
account.
Certain payees, such as corporations,
generally are
exempt
from backup
withholding. Please complete IRS Form W-9
with the
Account
Application to claim
this exemption. If the registration is for an
UGMA/UTMA
account,
please provide
the social security number of the minor.
Non-U.S.
investors who
do not have a
TIN must provide, with their Account
Application, a
completed IRS
Form W-8.
CERTIFICATES
In order to facilitate transfers,
exchanges and
redemptions,
most
shareholders elect not to receive
certificates. Should
you wish
to have a
certificate issued, please contact IMSC at
1-800-777-6472 and
request that one
be sent to you. (Retirement plan accounts are
not
eligible for
this service.)
Please note that if you were to lose your
certificate,
you would
incur an
expense to replace it.
Certificates requested by telephone for
shares
valued up to
$50,000 will be
issued to the current registration and mailed
to the
address of
record. Should
you wish to have your certificates mailed to
a
different address,
or registered
differently from the current registration,
contact IMSC
at
1-800-777-6472.
EXCHANGE PRIVILEGE
Shareholders of a Fund have an exchange
privilege
with other
Ivy and
Mackenzie funds. The Funds reserve the right
to reject,
for any
reason, any
exchange requests.
Class A shareholders may exchange their
outstanding
Class A
shares for Class
A shares of another Ivy or Mackenzie fund on
the basis
of the
relative NAV per
Class A share, plus an amount equal to the
difference
between the
sales charge
previously paid on the outstanding Class A
shares and
the sales
charge payable
at the time of the exchange on the new Class
A shares.
Incremental sales charges
are waived for outstanding Class A shares
that have
been invested
for 12 months
or longer.
Class B (and Class C) shareholders may
exchange
their
outstanding Class B
(or Class C) shares for Class B (or Class C)
shares of
another
Ivy or Mackenzie
fund on the basis of the relative NAV per
Class B (or
Class C)
share, without
the payment of any CDSC that would otherwise
be due
upon the
redemption of Class
B (or Class C) shares. Class B shareholders
who
exercise the
exchange privilege
would continue to be subject to the original
Fund's
CDSC schedule
(or period)
following an exchange if such schedule is
higher (or
longer) than
the CDSC for
the new Class B shares.
19
<PAGE>
Class I shareholders may exchange their
outstanding
Class I
shares for Class
I shares of another Ivy or Mackenzie fund on
the basis
of the
relative NAV per
Class I share.
Shares resulting from the reinvestment of
dividends
and other
distributions
will not be charged an initial sales charge
or a CDSC
when
exchanged into
another Ivy or Mackenzie fund.
Exchanges are considered to be taxable
events, and
may result
in a capital
gain or a capital loss for tax purposes.
Before
executing an
exchange, you
should obtain and read the prospectus and
consider the
investment
objective of
the fund to be purchased. Shares must be
uncertificated
in order
to execute an
exchange. Exchanges are available only in
states where
they can
be legally made.
This privilege is not intended to provide
shareholders
a means by
which to
speculate on short-term movements in the
market. The
Funds
reserve the right to
limit the frequency of exchanges. Exchanges
are
accepted only if
the
registrations of the two accounts are
identical.
Amounts to be
exchanged must
meet minimum investment requirements for the
Ivy or
Mackenzie
fund into which
the exchange is made.
With respect to shares subject to a CDSC,
if less
than all of
an investment
is exchanged out of a Fund, the shares
exchanged will
reflect,
pro rata, the
cost, capital appreciation and/or
reinvestment of
distributions
of the original
investment as well as the original purchase
date, for
purposes of
calculating
any CDSC for future redemptions of the
exchanged
shares.
An investor who was a shareholder of
American
Investors
Income Fund, Inc. or
American Investors Growth Fund, Inc. prior to
October
31, 1988,
or a shareholder
of the Ivy Funds prior to December 31, 1991,
who became
a
shareholder of the
Fund as a result of a reorganization or
merger between
the Funds
may exchange
between funds without paying a sales charge.
An
investor who was
a shareholder
of American Investors Income Fund, Inc. or
American
Investors
Growth Fund, Inc.
on or after October 31, 1988, who became a
shareholder
of the
Fund as a result
of the reorganization between the Funds will
receive
credit
toward any
applicable sales charge imposed by any Ivy or
Mackenzie
fund into
which an
exchange is made.
In calculating the sales charge assessed
on an
exchange,
shareholders will
be allowed to use the Rights of Accumulation
privilege.
EXCHANGES BY TELEPHONE: If Section 6D of
the
Account
Application is not
completed, telephone exchange privileges will
be
provided
automatically.
Although telephone exchanges may be a
convenient
feature, you
should realize
that you may be giving up a measure of
security that
you may
otherwise have if
you terminated the privilege and exchanged
your shares
in
writing. If you do not
wish to make telephone exchanges or let your
registered
representative do so on
your behalf, you must notify IMSC in writing.
In order to execute an exchange, please
contact
IMSC at
1-800-777-6472. Have
the account number of your current fund and
the exact
name in
which it is
registered available to give to the telephone
representative.
Each Fund employs reasonable procedures
that
require personal
identification
prior to acting on exchange instructions
communicated
by
telephone to confirm
that such instructions are genuine. In the
absence of
such
procedures, a Fund
may be liable for any losses due to
unauthorized or
fraudulent
telephone
instructions.
EXCHANGES IN WRITING: In a letter,
request an
exchange and
provide the
following information:
- The name and class of the fund whose
shares you
currently
own.
- Your account number.
- The name(s) in which the account is
registered.
- The name of the fund in which you wish
your
exchange to be
invested.
- The number of shares or the dollar
amount you
wish to
exchange.
The request must be signed by all
registered
owners.
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A
shares of a
Fund have a
one-time
privilege of reinvesting all or a part of the
proceeds
of the
redemption back
into Class A shares of that Fund at NAV
(without a
sales charge)
within 60 days
after the date of redemption. IN ORDER TO
REINVEST
WITHOUT A
SALES CHARGE,
SHAREHOLDERS OR THEIR BROKERS MUST INFORM
IMSC THAT
THEY ARE
EXERCISING THE
REINVESTMENT PRIVILEGE AT THE TIME OF
REINVESTMENT. The
tax
status of a gain
realized on a redemption generally will not
be affected
by the
exercise of the
reinvestment privilege, but a loss realized
on a
redemption
generally may be
disallowed by the IRS if the reinvestment
privilege is
exercised
within 30 days
after the redemption. In addition, upon a
reinvestment,
the
shareholder may not
be permitted to take into account sales
charges
incurred on the
original
purchase of shares in computing their taxable
gain or
loss.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal
Plan at any
time by
completing the
Account Application, which is attached to
this
Prospectus. You
can also obtain
this application by contacting your
registered
representative or
IMSC at
1-800-777-6472. To be eligible, you must have
at least
$5,000 in
your account.
Payments (minimum distribution amount -- $50)
from your
account
can be made
monthly, quarterly, semi-annually, annually
or on a
selected
monthly basis, to
yourself or any other designated payee. You
may elect
to have
your systematic
withdrawal paid directly to your bank account
via EFT,
at no
charge. Share
certificates must be unissued (i.e., held by
a Fund)
while the
plan is in
effect. A Systematic Withdrawal Plan may not
be
established if
you are currently
participating in the Automatic Investment
Method. For
more
information, please
contact IMSC at 1-800-777-6472.
If payments you receive through the
Systematic
Withdrawal
Plan exceed the
dividends and capital appreciation of your
account, you
will be
reducing the
value of your account. Additional investments
made by
shareholders participating
in the Systematic Withdrawal Plan must equal
at least
$1,000
while the plan is
in effect. However, it may not be
advantageous to
purchase
additional Class A,
Class B or Class C shares when you have a
Systematic
Withdrawal
Plan, because
you may be subject to an initial sales charge
on your
purchase of
Class A shares
or to a CDSC imposed on your redemptions of
Class B or
Class C
shares. In
addition, redemptions are taxable events.
Amounts paid to you through the
Systematic
Withdrawal Plan
are derived from
the redemption of shares in your account. Any
applicable CDSC
will be assessed
upon the redemptions. A CDSC will not be
assessed on
withdrawals
not exceeding
12% annually of the initial account balance
when the
Systematic
Withdrawal Plan
was started.
Should you wish at any time to add a
Systematic
Withdrawal
Plan to an
existing account or change payee
instructions, you will
need to
submit a written
request, signed by all registered owners,
with
signatures
guaranteed.
Retirement accounts are eligible for
Systematic
Withdrawal
Plans. Please
contact IMSC at 1-800-777-6472 to obtain the
necessary
paperwork
to establish a
plan.
20
<PAGE>
If the U.S. Postal Service cannot deliver
your
checks, or if
deposits to a
bank account are returned for any reason,
your
redemptions will
be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be
automatically
drawn
each month from
your bank for investment in Fund shares by
completing
Sections 6A
and 7B of the
Account Application. Attach a "voided" check
to your
Account
Application. At
pre-specified intervals, your bank account
will be
debited and
the proceeds will
be credited to your Ivy account. The minimum
investment
under
this plan is $50
per month ($25 per month for retirement
plans). There
is no
charge to you for
this program.
You may terminate or suspend your
Automatic
Investment Method
by telephone
at any time by contacting IMSC at
1-800-777-6472.
If you have investments being withdrawn
from a bank
account
and we are
notified that the account has been closed,
your
Automatic
Investment Method will
be discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy or
Mackenzie fund
accounts
having the same
taxpayer I.D. number will receive a single
quarterly
account
statement, unless
otherwise specified. This feature
consolidates the
activity for
each account
onto one statement. Requests for quarterly
consolidated
statements for all other
accounts must be submitted in writing and
must be
signed by all
registered
owners.
RETIREMENT PLANS
The Ivy and Mackenzie family of funds
offer several
tax-sheltered retirement
plans that may fit your needs:
- IRA (Individual Retirement Account)
- 401(k), Money Purchase Pension and
Profit
Sharing Plans
- SEP-IRA (Simplified Employee
Pension Plan)
- 403(b)(7) Plan
Minimum initial and subsequent
investments for
retirement
plans are $25.
Investors Bank & Trust, which serves as
custodian
or trustee
under the
retirement plan prototypes available from
each Fund,
charges
certain nominal
fees for annual maintenance. A portion of
these fees is
remitted
to IMSC, as
compensation for its services to the
retirement plan
accounts
maintained with
each Fund.
Certain documentation, including IRS Form
W4-P,
must be
provided to IMSC
prior to taking any distribution. Please
contact IMSC
for
details. The Ivy and
Mackenzie family of funds and IMSC assume no
responsibility to
determine whether
a distribution satisfies the conditions of
applicable
tax laws,
and will not be
responsible for any penalties assessed. For
additional
information, please
contact your broker, tax adviser or IMSC.
Please call IMSC at 1-800-777-6472 for
complete
information
kits describing
the plans, their benefits, restrictions,
provisions and
fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Funds should be
directed to
IMSC at
1-800-777-6472.
21
<PAGE>
[THIS PAGE
INTENTIONALLY LEFT
BLANK]
<PAGE>
ACCOUNT
APPLICATION
Ivy Bond
Fund
Ivy Emerging
Growth Fund
________________________
Ivy Growth
Fund
ACCOUNT NUMBER
Ivy Growth with
Income Fund
Please mail applications and checks to: Ivy
Mackenzie
Services
Corp.,
P.O. Box 3022, Boca
Raton, FL
33431-0922.
(This application should not be used for
retirement
accounts for
which Ivy is
custodian.)
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
FUND
USE
101/
1 / 2 1 / 2 0
/ 1 0
/ X
ONLY ----------------------- ---------
---------
------------ -------- ----------
---------
---------
------------
Dealer # Branch #
Rep #
Acct
Type Soc Cd Div Cd CG Cd
Exc Cd
Red Cd
-----------------------------------------------------------------
-----------------------------------------------------------------
--
REGISTRATION
1 [ ] Individual
_________________________________________________________________
_______________________
[ ] Joint Tenant
Owner,
Custodian or
Trustee
[ ] Estate
_________________________________________________________________
_______________________
[ ] UGMA/UTMA
Co-owner or
Minor
[ ] Corporation
_________________________________________________________________
_______________________
[ ] Partnership
Minor's
State of
Residence
[ ] Sole Proprietor
_________________________________________________________________
_______________________
[ ] Trust
Street
__________________
_________________________________________________________________
_______________________
Date of Trust
[ ] Other ____________
_________________________________________________________________
_______/__/__/__/__/__/
__________________
City
State
Zip
Code
/__/__/__/-/__/__/__/-/__/__/__/__/
/__/__/__/-/__/__/__/-/__/__/__/__/
Phone Number
-- Day
Phone Number --
Evening
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
TAX ID #
2 /__/__/__/-/__/__/-/__/__/__/__/ of
/__/__/-/__/__/__/__/__/__/__/ Citizenship [
] U.S. [
] Other
_______________
Social Security Number
Tax
Identification
Number
Under penalties of perjury, I
certify by
signing in
Section 8 below that: (1) the number shown in
this
section is my
correct taxpayer identification
number (TIN),
and (2) I
am not subject to backup withholding because:
(a) I
have not
been notified by the Internal
Revenue Service
(IRS)
that I am subject to backup withholding as a
result of
a failure
to report all interest or
dividends, or (b)
the IRS has
notified me that I am no longer subject to
backup
withholding. (Cross out item (2) if
you have
been
notified by the IRS that you are currently
subject to
backup
withholding because of
underreporting
interest or
dividends on your tax return.) Please see the
"Tax
Identification
Number" section of the Prospectus
for
additional
information on completing this section.
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
DEALER INFORMATION
3 The undersigned ("Dealer") agrees
to all
applicable
provisions in this Application, guarantees
the
signature and
legal
capacity of the Shareholder, and
agrees to
notify MIISC
of any purchases made under a Letter of
Intent or
Rights
of Accumulation.
__________________________________________________________
__________________________________________________________
Dealer Name
Representative's Name and Number
__________________________________________________________
__________________________________________________________
Branch Office Address
Representative's Phone Number
__________________________________________________________
__________________________________________________________
City State
Zip
Code
Authorized Signature of Dealer
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
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--
INVESTMENTS
4 A. Enclosed is my check ($1,000
minimum)
made payable
to the appropriate Fund.* Please invest it
as follows:
$_____________________ Ivy Bond
Fund
[ ] Class A [ ] Class B or [ ] Class C or [ ]
Class I
shares
$_____________________ Ivy
Emerging
Growth Fund
[ ] Class A [ ] Class B or [ ] Class C shares
$_____________________ Ivy
Growth Fund
[ ] Class A [ ] Class B or [ ] Class C shares
$_____________________ Ivy
Growth with
Income Fund
[ ] Class A [ ] Class B or [ ] Class C shares
*If investing in more than one
Fund, make
your
check payable to "Ivy Funds."
B. I qualify for a reduced sales
charge due
to the
following privilege (applies only to Class A
shares):
[ ] New Letter of Intent (if
ROA or
90-day backdate
privilege is applicable, provide account(s)
information
below.)
[ ] ROA with the account(s)
listed below.
[ ] Existing Letter of Intent
with
account(s)
listed below.
________________________________
/__/__/__/__/__/__/__/__/__/__/ [ ]
or New
Fund Name
Account Number
________________________________
/__/__/__/__/__/__/__/__/__/__/ [ ]
or New
Fund Name
Account
Number
If establishing a Letter of
Intent, you
will need
to purchase Class A shares over a
thirteen-month period
in
accordance with the provisions
in the
Prospectus.
The aggregate amount of these purchases will
be at
least equal
to the amount indicated below
(see
Prospectus for
minimum amount required for reduced sales
charges).
[ ] $50,000 (Except Ivy Bond
Fund) [
] $100,000
[ ] $250,000 [ ] $500,000
C. FOR DEALER USE ONLY
Confirmed trade orders
/__/__/__/__/__/__/ /__/__/__/__/__/__/ *
/__/__/__/
/__/__/__/__/__/__/
Confirm
Number Number of Shares
Trade
Date
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
DISTRIBUTION OPTIONS
5 A. I would like to reinvest
dividends and
capital
gains into additional shares in this account
at net
asset value
unless
a different option is checked
below.
B. [ ] Reinvest all dividends and
capital
gains into
additional shares of the same class in an
account in a
different
Ivy or Mackenzie fund.
_____________________________________
/__/__/__/__/__/__/__/__/__/__/ [ ]
New Account
Fund Name
Account
Number
C. [ ] Pay all dividends in cash
and
reinvest capital
gains into additional shares in this account
or
an account in a different Ivy
or
MacKenzie fund.
_____________________________________
/__/__/__/__/__/__/__/__/__/__/ [ ]
New Account
Fund Name
Account
Number
D. [ ] Pay all dividends and
capital gains
in cash.
I REQUEST THE
ABOVE CASH
DISTRIBUTION, SELECTED IN C OR D ABOVE, BE:
[ ] Sent to the address listed
in the
registration.
[ ] Sent to the special payee listed in
Section 7A [ ]
(By Mail)
7B [ ]
(By E.F.T.)
-----------------------------------------------------------------
-----------------------------------------------------------------
--
<PAGE>
-----------------------------------------------------------------
-----------------------------------------------------------------
--
OPTIONAL SPECIAL FEATURES
6 A. [ ] AUTOMATIC INVESTMENT METHOD (AIM)
I wish to invest [ ] once per
month.
My bank account will be debited on or
about the
[ ] twice
_______________________ day of the
month(*)
[ ] 3 times
_______________________ day of the
month
[ ] 4 times
_______________________ day of the
month
_______________________ day of the
month
Please invest $_____________ each
period
starting in
the month of _______ in Class A [ ] or Class
B [ ] or
Class C [ ]
Dollar Amount
Month
of
________________________________
Fund Name
[ ] I have attached a voided
check to
ensure my
correct bank account will be debited.
B. [ ] SYSTEMATIC WITHDRAWAL PLANS(**)
I wish to automatically withdraw
funds from
my
account in Class A [ ] or Class B [ ] or
Class C [ ]
___________________
Fund
Name
[ ] Once [ ] Twice [ ] 3 times
[ ] 4
times per
month
[ ] Monthly [ ] Quarterly [ ]
Semi-Annually [ ]
Annually
I request the distribution be:
[ ] Sent to the address listed in
the
registration
[ ] Sent to the special payee
listed in
Section 7.
[ ] Invested into additional of
the same
class of a
different Ivy or Mackenzie
fund:
_____________________________________
Fund
Name
/__/__/__/__/__/__/__/__/__/
Account
Number
Amount $
__________________________,
starting on or
about the_______________day of
the________________________
Minimum $50
month(*)
_______________day of
the________________________
month
_______________day of
the________________________
month
_______________day of
the________________________
month
NOTE: Account minimum: $5,000 in
shares at
current
offering price.
C. [ ] FEDERAL FUNDS WIRE FOR REDEMPTION
PROCEEDS(**)
I authorize the Agent to honor
telephone
instructions
for the redemption of Fund shares up to
$50,000.
Proceeds may be
wire transferred to the bank
account
designated ($1,000
minimum). (COMPLETE SECTION 7B)
D. [ ] TELEPHONIC EXCHANGES(**) [ ] Yes [
] No
I authorize exchanges by telephone
among the
Ivy and
Mackenzie family of funds, upon instructions
from any
authorized
person as more fully described in
the
Prospectus. To
change this option once established, written
instructions must be
received from the shareholder of
record or
the current
registered representative.
If neither box is checked, the
telephone
exchange
privilege will be provided automatically.
E. [ ] TELEPHONIC REDEMPTIONS(**) [ ] Yes
[ ] No
The Fund or its agents are
authorized to
honor
telephone instructions from any authorized
person as
more fully
described
in the Prospectus for the
redemption of Fund
shares.
The amount of the redemption shall not exceed
$50,000
and the
proceeds are to be payable to the
shareholder
of record
and mailed to the address of record. To
change this
option once
established, written instructions
must be
received from
the shareholder of record or the current
registered
representative.
If neither box is checked, the
telephone
exchange
privilege will be provided automatically.
(*) There must be a period of at least
seven
calendar days
between each investment/withdrawal period.
(**) This option may not be selected if
shares are
in
certificate form.
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
SPECIAL PAYEE
7 A. MAILING
ADDRESS
B. FED WIRE / E.F.T.
INFORMATION
-----------------------------------------------------------------
-----------------------------------------------------------------
--
Please send all disbursements to
this
special payee
-------------------------------------------------------
----------------------------------------------------
Name of Bank or Individual
Financial
Institution
-------------------------------------------------------
----------------------------
---------------------
Account Number (If Applicable)
ABA #
Account #
-------------------------------------------------------
----------------------------------------------------
Street
Street
-------------------------------------------------------
----------------------------------------------------
City/State/Zip
City/State/Zip
(Please attach a
voided check)
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
SIGNATURES
8 Investors should be aware that the
failure to
check the
"No" under Section 6D and 6E above means that
the
Telephone
Exchange/Redemptions Privileges will
be
provided. The
Funds employ reasonable procedures that
require
personal
identification prior to acting on
exchange/redemption
instructions communicated by telephone to
confirm that
such
instructions are genuine. In the
absence of such
procedures, a Fund may be liable for any
losses due to
unauthorized or
fraudulent telephone instructions.
Please see
"Exchange
Privilege" and "How to Redeem Shares" in the
Prospectus
for more
information on these privileges.
I certify to my legal capacity to
purchase or
redeem
shares of the Fund for my own account or for
the
account of the
organization named in Section 1. I
have received
a current
Prospectus and understand its terms are
incorporated in
this
application by reference. I am
certifying my
taxpayer
information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT
REQUIRE
YOUR CONSENT
TO ANY PROVISION OF THIS DOCUMENT OTHER THAN
THE
CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
-----------------------------------------------------------------
---------- ------------------
Signature of Owner, Custodian, Trustee
or
Corporate
Officer Date
-----------------------------------------------------------------
---------- ------------------
Signature of Joint Owner, Co-Trustee
or
Corporate Officer
Date
-----------------------------------------------------------------
-----------------------------------------------------------------
--
(REMEMBER TO SIGN
SECTION 8)
IUS-1-496
April 30, 1996
Ivy
International
Equity
Funds
PROSPECTUS
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
[PHOTO]
Throughout the
centuries,
the castle keep has
been a source
of long-range vision
and strategic
advantage.
Ivy Fund (the "Trust") is a
registered
investment
company currently
consisting of thirteen separate portfolios.
Six of
these
portfolios, as
identified below (the "Funds"), are described
in this
Prospectus.
Each Fund has
its own investment objective and policies,
and your
interest is
limited to the
Fund in which you own shares.
The six Ivy International Equity
Funds are:
Ivy Canada Fund
Ivy China Region Fund
Ivy Global Fund
Ivy International Fund
Ivy Latin America Strategy Fund
Ivy New Century Fund
This Prospectus sets forth concisely
the
information
about the Funds
that a prospective investor should know
before
investing. Please
read it
carefully and retain it for future reference.
Additional
information about the
Funds is contained in the Statement of
Additional
Information for
the Funds
dated April 30, 1996 (the "SAI"), which has
been filed
with the
Securities and
Exchange Commission ("SEC") and is
incorporated by
reference into
this
Prospectus. The SAI is available upon request
and
without charge
from the Trust
at the Distributor's address and telephone
number
below.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED
BY THE
SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
NOR HAS
THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES
COMMISSION PASSED
UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS
A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Expense Information
.......................................... 2
The Funds' Financial
Highlights............................... 4
Investment Objectives and
Policies............................ 10
Risk Factors and Investment
Techniques........................ 13
Organization and Management of the
Funds...................... 16
Investment
Manager............................................ 16
Fund Administration and
Accounting............................ 17
Transfer
Agent................................................
17
Alternative Purchase
Arrangements............................. 17
Dividends and
Taxes........................................... 17
Performance
Data.............................................. 18
How to Buy
Shares............................................. 18
How Your Purchase Price is
Determined......................... 19
How Each Fund Values its
Shares............................... 19
Initial Sales Charge Alternative-Class A
Shares............... 19
Contingent Deferred Sales Charge-Class A
Shares............... 20
Qualifying for a Reduced Sales
Charge......................... 20
Contingent Deferred Sales Charge Alternative-
Class B and Class C
Shares........................... 21
How to Redeem
Shares.......................................... 22
Minimum Account Balance
Requirements.......................... 23
Signature
Guarantees.......................................... 23
Choosing a Distribution
Option................................ 23
Tax Identification
Number..................................... 23
Certificates.................................................. 24
Exchange
Privilege............................................
24
Reinvestment
Privilege........................................ 25
Systematic Withdrawal
Plan.................................... 25
Automatic Investment
Method................................... 25
Consolidated Account
Statements............................... 25
Retirement
Plans.............................................. 25
Shareholder
Inquiries......................................... 25
-----------------------------------------------------------------
---------------
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Michael R. Peers
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, President
Keith J. Carlson, Vice President
C. William Ferris,
Secretary/Treasurer
Michael R. Peers, Chairman
Legal Counsel
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Ft. Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie
Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
1
<PAGE>
EXPENSE INFORMATION
The tables and examples below are
designed to
assist you in
understanding
the various costs and expenses that you will
bear
directly or
indirectly as an
investor in the Funds. The information is
based on each
Fund's
expenses during
fiscal year 1995.
SHAREHOLDER
TRANSACTION
EXPENSES
MAXIMUM SALES LOAD
MAXIMUM
CONTINGENT
IMPOSED ON PURCHASES
DEFERRED SALES
CHARGE
(AS A % OF (AS
A % OF
ORIGINAL
OFFERING PRICE)
PURCHASE
PRICE)
--------------------
---------------------
ALL FUNDS
Class
A................................................................
.......... 5.75%(1)
None(2)
Class
B................................................................
.......... None
5.00%(3)
Class
C................................................................
.......... None
1.00%(4)
IVY INTERNATIONAL FUND
Class
I................................................................
.......... None
None
None of the Funds charge a redemption fee, an
exchange
fee, or a
sales load on
reinvested dividends.
---------------
(1) Class A shares may be purchased
under a
variety of
plans
that provide for the reduction or
elimination
of the
sales
charge.
(2) A contingent deferred sales charge
("CDSC")
may apply
to the
redemption of Class A shares that
are
purchased without
an
initial sales charge. See
"Purchases of Class
A Shares
at
Net Asset Value" and "Contingent
Deferred
Sales
Charge -- Class A Shares."
(3) The maximum CDSC on Class B shares
applies to
redemptions
during the first year after
purchase. The
charge
declines to
4% during the second year; 3%
during the
third and
fourth
years; 2% during the fifth year; 1%
during
the sixth
year;
and 0% in the seventh year and
thereafter.
(4) The CDSC on Class C shares applies
to
redemptions
during the
first year after purchase.
ANNUAL FUND
OPERATING EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET
ASSETS)
TOTAL
FUND
MANAGEMENT 12B-1 OTHER
OPERATING
FEES SERVICE/ EXPENSES
EXPENSES
(AFTER EXPENSE DISTRIBUTION (AFTER
EXPENSE
(AFTER
EXPENSE
REIMBURSEMENTS)* FEES
REIMBURSEMENTS)*
REIMBURSEMENTS)*
---------------- ------------
----------------
----------------
IVY CANADA FUND
Class
A.................................................
0.52% 0.40% 1.98%
2.90%
Class
B.................................................
0.52% 1.00%(2) 1.98%
3.50%
Class
C(1)..............................................
0.52% 1.00%(2) 1.98%
3.50%
IVY CHINA REGION FUND
Class
A.................................................
0.47% 0.25% 1.48%
2.20%
Class
B.................................................
0.47% 1.00%(2) 1.48%
2.95%
Class
C(1)..............................................
0.47% 1.00%(2) 1.48%
2.95%
IVY GLOBAL FUND
Class
A.................................................
0.74% 0.25% 1.21%
2.20%
Class
B.................................................
0.74% 1.00%(2) 1.21%
2.95%
Class
C(1)..............................................
0.74% 1.00%(2) 1.21%
2.95%
IVY INTERNATIONAL FUND
Class
A.................................................
1.00% 0.08%(4) 0.44%
1.52%
Class
B.................................................
1.00% 1.00%(2) 0.44%
2.44%
Class
C(1)..............................................
1.00% 1.00%(2) 0.44%
2.44%
Class
I.................................................
1.00% 0.00% 0.35%(3)
1.35%
IVY LATIN AMERICA STRATEGY FUND & IVY NEW
CENTURY FUND
Class
A.................................................
0.00% 0.25% 1.95%
2.20%
Class
B.................................................
0.00% 1.00%(2) 1.95%
2.95%
Class
C(1)..............................................
0.00% 1.00%(2) 1.95%
2.95%
---------------
* Ivy Management, Inc. ("IMI")
currently limits
Total
Fund
Operating Expenses (excluding Rule
12b-1
fees) for Ivy
China
Region Fund, Ivy Global Fund, Ivy
Latin
America
Strategy
Fund and Ivy New Century Fund to an
annual
rate of
1.95% of
each Fund's average net assets.
Without
expense
reimbursements, Management Fees
would be
1.00% (0.85%
in the
case of Ivy Canada Fund) and Total
Fund
Operating
Expenses
(excluding Rule 12b-1 fees) would
be 2.48%
for Ivy
China
Region Fund; 2.21% for Ivy Global
Fund; and
2.50% for
Ivy
Canada Fund, Ivy Latin America
Strategy Fund
and Ivy
New
Century Fund, respctively (the
highest
expense ratio
currently allowed under state
securities
law).
(1) The inception date for Class C
shares is
April 30,
1996. The
expense ratios shown are estimates
based on
amounts
incurred
by the Fund during the year ended
December
31, 1995.
(2) Long-term investors may, as a
result of the
Fund's
12b-1
fees, pay more than the economic
equivalent
of the
maximum
front-end sales charge permitted by
the Rules
of Fair
Practice of the National
Association of
Securities
Dealers,
Inc. ("NASD").
(3) The "Other Expenses" of Class I of
the Fund
are lower
than
such expenses for the Fund's other
classes
because
Class I
shares bear lower fees than Class
A, Class B
and Class
C
shares. See "Fund Administration
and
Accounting".
(4) Rule 12b-1 Service Fees paid by
Class A
shares may
increase,
but are subject to a maximum of
0.25%. See
"Alternative
Purchase Arrangements."
2
<PAGE>
EXAMPLES
The following tables list the expenses
that an
investor would
pay on a
$1,000 investment, assuming (1) 5% annual
return and
(2) unless
otherwise noted,
redemption at the end of each time period.
These
examples further
assume
reinvestment of all dividends and
distributions, and
that the
percentage amounts
under "Total Fund Operating Expenses" (above)
remain
the same
each year. THE
EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF
PAST OR
FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN
THOSE
SHOWN.
IVY CANADA FUND***
1 YEAR 3 YEARS 5
YEARS
10 YEARS
------ -------
-------
--------
Class A
Shares*..........................................................
........... $ 85 $ 142 $ 202
$361
Class B
Shares...........................................................
........... $ 85(1) $ 137(2) $ 202(3)
$364(4)
Class B Shares (no
redemption)......................................................
$ 35 $ 107 $ 182 $364(4)
Class C
Shares...........................................................
........... $ 45(5) $ 107 $ 182
$377
Class C Shares (no
redemption)......................................................
$ 35 $ 107 $ 182 $377
IVY CHINA REGION FUND, IVY GLOBAL FUND, IVY
LATIN
AMERICA
STRATEGY FUND AND IVY
NEW CENTURY FUND***
1 YEAR 3 YEARS 5
YEARS
10 YEARS
------ -------
-------
--------
Class A
Shares*..........................................................
........... $ 79 $ 122 $ 169
$296
Class B
Shares...........................................................
........... $ 80(1) $ 121(2) $ 175(3)
$309(4)
Class B Shares (no
redemption)......................................................
$ 30 $ 91 $ 155 $309(4)
Class C
Shares...........................................................
........... $ 40(5) $ 91 $ 155
$327
Class C Shares (no
redemption)......................................................
$ 30 $ 91 $ 155 $327
IVY INTERNATIONAL FUND
1 YEAR 3 YEARS 5
YEARS
10 YEARS
------ -------
-------
--------
Class A
Shares*..........................................................
........... $ 72 $ 103 $ 136
$228
Class B
Shares...........................................................
........... $ 75(1) $ 106(2) $ 150(3)
$255(4)
Class B Shares (no
redemption)......................................................
$ 25 $ 76 $ 130 $255(4)
Class C
Shares...........................................................
........... $ 35(5) $ 76 $ 130
$278
Class C Shares (no
redemption)......................................................
$ 25 $ 76 $ 130 $278
Class I
Shares**.........................................................
........... $ 14 $ 43 $ 74
$162
---------------
* Assumes deduction of the maximum
5.75%
initial sales
charge
at the time of purchase and no
deduction of a
CDSC at
the
time of redemption.
** Class I Shares are not subject to
an initial
sales
charge at
the time of purchase, nor are they
subject to
the
deduction
of a CDSC at the time of
redemption.
*** Based on Total Fund Operating
Expenses net of
expense
reimbursements. See the Annual Fund
Operating
Expenses
table
above.
(1) Assumes deduction of a 5% CDSC at
the time of
redemption.
(2) Assumes deduction of a 3% CDSC at
the time of
redemption.
(3) Assumes deduction of a 2% CDSC at
the time of
redemption.
(4) Assumes conversion to Class A
shares at the
end of the
eighth year, and therefore reflects
Class A
expenses
for
years nine and ten.
(5) Assumes deduction of a 1% CDSC at
the time of
redemption.
The information presented in the tables
does not
reflect the
charge of $10
per transaction that would apply if a
shareholder
elects to have
redemption
proceeds wired to his or her bank account.
For a more
detailed
discussion of the
Funds' fees and expenses, see the following
sections of
this
Prospectus:
"Organization and Management of the Funds,"
"Initial
Sales Charge
Alternative -- Class A Shares," and
"Contingent
Deferred Sales
Charge
Alternative -- Class B and Class C Shares,"
and
"Investment
Advisory and Other
Services" in the SAI.
3
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS
Unless otherwise noted, the tables that
follow are
for fiscal
periods ending
December 31 of each year. The accounting firm
of
Coopers &
Lybrand L.L.P. has
audited Ivy Canada Fund, Ivy China Region
Fund, Ivy
Global Fund,
Ivy Latin
America Strategy Fund and Ivy New Century
Fund since
inception,
and Ivy
International Fund since December 31, 1992.
Their
report is
included in the
Funds' Annual Reports, which are incorporated
by
reference into
the SAI. The
information for Ivy International Fund for
fiscal
periods prior
to December 31,
1992 was audited by other independent
accountants. The
Funds'
Annual Reports
contain additional information about each
Fund's
performance,
including a
comparison to an appropriate securities
index. For a
copy of your
Fund's Annual
Report, call 1-800-777-6472.
Expense and income ratios and portfolio
turnover
rates have
been annualized
for periods of less than one year. Total
returns do not
reflect
sales charges,
and are not annualized for periods of less
than one
year.
IVY CANADA FUND
CLASS A
-------------------------------------------
SELECTED PER SHARE DATA 1995
1994(A)
1994(B) 1993(B)
-------
-------
------- -------
Net asset value, beginning of
period............................ $
8.90 $
9.85
$10.04 $ 7.43
-------
-------
------- -------
Income (loss) from investment
operations:
Net investment income (loss)....
(.19)(g)
(.11)
(.11) (.01)
Net gain (loss) on investment
transactions
(both realized and
unrealized)....................
.75
(.81)
.24 3.35
-------
-------
------- -------
Total from investment
operations..................
.56
(.92)
.13 3.34
-------
-------
------- -------
Less distributions:
From net investment income......
--
--
-- --
From net realized gain..........
.25
--
.31 .73
From capital paid-in............
--
.03
.01 --
-------
-------
------- -------
Total distributions..........
.25
.03
.32 .73
-------
-------
------- -------
Net asset value, end of period..... $
9.21 $
8.90 $
9.85 $10.04
=======
=======
======= =======
Total return(%)....................
6.37
(9.38)
1.05 47.10
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)........................
$19,353
$23,296
$34,549 $30,971
Ratio of expenses to average net
assets:
With expense reimbursement(%).....
2.90
--
-- --
Without expense
reimbursement(%)................
3.23
2.44
2.05 2.63
Ratio of net investment income
(loss) to average net assets(%)...
(2.13)(g)
(1.85)
(1.09) (1.41)
Portfolio turnover rate(%).........
21
36
62 32
Class A
--------------------------------------------------------
SELECTED PER SHARE DATA
1992(B)
1991(C)
1990(D) 1989(D) 1988(E)
-------
-------
------- ------- -------
Net asset value, beginning of
period............................ $
8.89 $
8.55
$10.53 $10.15 $ 9.50
-------
-------
------- ------- -------
Income (loss) from investment
operations:
Net investment income (loss)....
(.12)
(.03)
.02 .15 (g) .17 (g)
Net gain (loss) on investment
transactions
(both realized and
unrealized)....................
(1.34)
.41
(1.98) .50 .57
-------
-------
------- ------- -------
Total from investment
operations..................
(1.46)
.38
(1.96) .65 .74
-------
-------
------- ------- -------
Less distributions:
From net investment income......
--
--
.02 .24 .07
From net realized gain..........
--
.04
-- .03 .02
From capital paid-in............
--
--
-- -- --
-------
-------
------- ------- -------
Total distributions..........
--
.04
.02 .27 .09
-------
-------
------- ------- -------
Net asset value, end of period..... $
7.43 $
8.89 $
8.55 $10.53 $10.15
=======
=======
======= ======= =======
Total return(%)....................
(16.42)
(6.59)
(18.69) 6.41 8.15
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)........................
$11,280
$14,369
$14,268 $16,807 $5,360
Ratio of expenses to average net
assets:
With expense reimbursement(%).....
--
--
-- 2.36 1.91
Without expense
reimbursement(%)................
2.70
2.78
2.89 3.14 5.05
Ratio of net investment income
(loss) to average net assets(%)...
(1.39)
(.52)
.16 1.57 (g) 1.86 (g)
Portfolio turnover rate(%).........
2
4
0 2 3
CLASS B
----------------------------------
SELECTED PER SHARE DATA 1995
1994(A)
1994(F)
------
-------
-------
Net asset value,
beginning of period..... $ 8.90 $
9.85
$10.16
------
-------
-------
Income (loss) from
investment operations:
Net investment loss... (.20)(g)
(.09)
(.02)
Net gain (loss) on
investment
transactions
(both realized and
unrealized).......... .71
(.86)
(.29)
------
-------
-------
Total from
investment
operations......... .51
(.95)
(.31)
------
-------
-------
Less distributions:
From net realized
gain................. .20
--
--
------
-------
-------
Total
distributions...... .20
--
--
------
-------
-------
Net asset value, end of
period.................. $ 9.21 $
8.90
$ 9.85
======
=======
=======
Total return(%).......... 5.74
(9.64)
(3.05)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).......... $1,142 $
741
$ 227
Ratio of expenses to
average net assets:
With expense
reimbursement(%)...... 3.50
--
--
Without expense
reimbursement(%)...... 3.83
3.03
2.68
Ratio of net investment
loss to average net
assets(%)............... (2.73)(g)
(2.44)
(1.72)
Portfolio turnover
rate(%)................. 21
36
62
---------------
(a) For the six months ended December
31, 1994.
(b) For the year ended June 30.
(c) For the eight months ended June 30,
1991.
(d) For the year ended October 31.
(e) From November 18, 1987
(commencement of
operations) to
October 31, 1988.
(f) From April 1, 1994 (commencement of
operations) to June
30,
1994.
(g) Net investment income (loss) is net
of
expenses
reimbursed
by IMI.
4
<PAGE>
IVY CHINA REGION FUND
CLASS
A
------------------------------------
SELECTED PER SHARE DATA
1995
1994
1993(A)
-------
------- --------
Net asset value, beginning of period....
$ 8.61
$
11.55 $10.00
-------
------- --------
Income (loss) from investment
operations:
Net investment income (loss)(b)......
.14
.05 (.01)
Net gain (loss) on investment
transactions
(both realized and unrealized)......
(.01)
(2.91) 1.57
-------
------- --------
Total from investment
operations........................
.13
(2.86) 1.56
-------
------- --------
Less distributions:
From net investment income...........
.14
.05 --
In excess of net investment income...
--
.03 --
In excess of net realized gain.......
.02
-- --
From capital paid-in.................
--
-- .01
-------
------- --------
Total distributions...............
.16
.08 .01
-------
------- --------
Net asset value, end of period..........
$ 8.58
$
8.61 $11.55
=======
======= ========
Total return(%).........................
1.59
(24.88) 15.65
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).............................
$12,855
$13,180 $8,371
Ratio of expenses to average net assets:
With expense reimbursement(%)..........
2.20
2.20 1.98
Without expense reimbursement(%).......
2.73
2.76 2.45
Ratio of net investment income (loss) to
average net assets(%)(b)...............
1.61
.55 (.91)
Portfolio turnover rate(%)..............
25
4 0
CLASS B
----------------------------------
SELECTED PER SHARE DATA
1995
1994 1993(A)
------
------ --------
Net asset value, beginning of
period......... $
8.61
$11.55 $10.00
------
------ --------
Income (loss) from investment operations:
Net investment income
(loss)(b)...........
.08
(.02) (.02)
Net gain (loss) on investment
transactions
(both realized and
unrealized)...........
(.02)
(2.92) 1.57
------
------ --------
Total from investment
operations.......
.06
(2.94) 1.55
------
------ --------
Less distributions:
From net investment
income................
.08
-- --
In excess of net realized
gain............
.01
-- --
------
------ --------
Total
distributions....................
.09
-- --
------
------ --------
Net asset value, end of
period............... $
8.58 $
8.61 $11.55
======
====== ========
Total
return(%)..............................
.83
(25.45) 15.50
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).....
$6,905
$7,336 $3,565
Ratio of expenses to average net assets:
With expense
reimbursement(%)...............
2.95
2.95 2.74
Without expense
reimbursement(%)............
3.48
3.51 3.20
Ratio of net investment income (loss) to
average net
assets(%)(b)....................
.86
(.20) (1.66)
Portfolio turnover
rate(%)...................
25
4 0
---------------
(a) From October 23, 1993 (commencement
of
operations) to
December 31, 1993.
(b) Net investment income (loss) is net
of
expenses
reimbursed
by IMI.
5
<PAGE>
IVY GLOBAL FUND
CLASS A
-----------------------------------------------------------------
-----------
SELECTED PER SHARE DATA
1995
1994(A)
1994(B) 1993(B) 1992(B)
1991(C)
-------
--------
-------- -------- --------
--------
Net asset value, beginning of period....
$ 11.23
$ 11.52
$ 10.62 $ 10.55 $ 9.40
$ 10.00
-------
--------
-------- -------- --------
--------
Income (loss) from investment
operations:
Net investment income (loss)(e)......
.09
--
-- .03 .06
.02
Net gain (loss) on investments
(both realized and unrealized)......
1.25
(.10)
1.79 .44 1.79
(.61)
-------
--------
-------- -------- --------
--------
Total from investment
operations.......................
1.34
(.10)
1.79 .47 1.85
(.59)
-------
--------
-------- -------- --------
--------
Less distributions:
From net investment income...........
.04
--
.01 .03 .06
.01
From net realized gain...............
.49
.09
.88 .37 .62
--
In excess of net realized gain.......
.07
--
-- -- --
--
From capital paid-in.................
--
.10
-- -- .02
--
-------
--------
-------- -------- --------
--------
Total distributions...............
.60
.19
.89 .40 .70
.01
-------
--------
-------- -------- --------
--------
Net asset value, end of period..........
$ 11.97
$ 11.23
$ 11.52 $ 10.62 $ 10.55
$ 9.40
=======
========
======== ======== ========
========
Total return(%).........................
12.08
(1.00)
16.71 4.54 19.91
(24.65)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).............................
$21,264
$19,327
$17,393 $12,391 $ 8,780
$ 1,667
Ratio of expenses to average net assets:
With expense reimbursement(%)..........
2.20
2.20
2.20 1.95 2.02
2.50
Without expense reimbursement(%).......
2.46
2.34
2.42 2.76 2.97
11.70
Ratio of net investment income (loss) to
average net assets(%)(e)...............
.71
(.06)
.01 .38 .82
.81
Portfolio turnover rate(%)..............
53
23
85 67 59
24
CLASS
B
------------------------------------
SELECTED PER SHARE DATA
1995
1994(A)
1994(D)
------
-------- --------
Net asset value, beginning of period....
$11.23
$11.52
$12.12
------
-------- --------
Income (loss) from investment
operations:
Net investment loss(e)...............
--
(.03) (.01)
Net gain (loss) on investments
(both realized and unrealized)......
1.25
(.12) (.04)
------
-------- --------
Total from investment
operations........................
1.25
(.15) (.05)
------
-------- --------
Less distributions:
From net realized gain...............
.45
.08
.55
In excess of net realized gain.......
.06
--
--
From capital paid-in.................
--
.06
--
------
-------- --------
Total distributions...............
.51
.14
.55
------
-------- --------
Net asset value, end of period..........
$11.97
$11.23
$11.52
======
======== ========
Total return(%).........................
11.25
(1.37) (.38)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).............................
$4,811
$2,956
$ 376
Ratio of expenses to average net assets:
With expense reimbursement(%)..........
2.95
2.95
2.95
Without expense reimbursement(%).......
3.21
3.09
3.17
Ratio of net investment loss to average
net assets(%)(e).......................
(.04)
(.81) (.74)
Portfolio turnover rate(%)..............
53
23
85
---------------
(a) For the six months ended December
31, 1994.
(b) For the year ended June 30.
(c) From April 18, 1991 (commencement
of
operations) to
June 30,
1991.
(d) From April 1, 1994 (commencement of
operations) to June
30,
1994.
(e) Net investment income (loss) is net
of
expenses
reimbursed
by IMI.
6
<PAGE>
IVY INTERNATIONAL FUND*
CLASS A
-----------------------------------------------------------------
--------------------
SELECTED PER SHARE DATA
1995
1994
1993 1992 1991
1990
1989
--------
-------- -------- --------
-------
-------
-------
Net asset value, beginning of period....
$ 27.60
$
27.71 $ 18.88 $ 19.37 $ 16.98
$
20.31 $
16.62
--------
-------- -------- --------
-------
-------
-------
Income (loss) from investment
operations:
Net investment income................
.25
.07 .12 .27(c) .26
.50
.27
Net gain (loss) on investment
transactions
(both realized and unrealized)......
3.22
1.01 9.01 (.26) 2.61
(3.13)
4.43
--------
-------- -------- --------
-------
-------
-------
Total from investment
operations.......................
3.47
1.08 9.13 .01 2.87
(2.63)
4.70
--------
-------- -------- --------
-------
-------
-------
Less distributions:
From net investment income...........
.25
.07 .08 .27 .26
.51
.17
From net realized gain...............
.12
1.11 .22 .23 .22
.19
.84
In excess of net realized gain.......
03
-- -- -- --
--
--
From capital paid-in.................
--
.01 -- -- --
--
--
--------
-------- -------- --------
-------
-------
-------
Total distributions...............
.40
1.19 .30 .50 .48
.70
1.01
--------
-------- -------- --------
-------
-------
-------
Net asset value, end of period..........
$ 30.67
$
27.60 $ 27.71 $ 18.88 $ 19.37
$
16.98 $
20.31
========
======== ======== ========
=======
=======
=======
Total return(%).........................
12.65
3.92 48.37 .07 16.93
(12.97)
28.26
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).............................
$475,989
$229,586 $172,539 $109,637
$97,486
$64,651
$58,469
Ratio of expenses to average net
assets(%)..............................
1.52
1.58 1.61 1.71(d) 1.64
1.66
1.80
Ratio of net investment income to
average net assets(%)..................
.97
.30 .56 1.36(c) 1.50
2.50
1.20
Portfolio turnover rate(%)..............
6
7 19 20 27
29
23
Class
A
---------------------------------
SELECTED PER SHARE DATA
1988
1987
1986
-------
-------
-------
Net asset value, beginning of period....
$ 12.90
$ 12.40
$10.07
-------
-------
-------
Income (loss) from investment
operations:
Net investment income................
.12
.04
.03
Net gain (loss) on investment
transactions
(both realized and unrealized)......
3.71
2.38
2.37
-------
-------
-------
Total from investment
operations.......................
3.83
2.42
2.40
-------
-------
-------
Less distributions:
From net investment income...........
.11
.05
.07
From net realized gain...............
--
1.87
--
In excess of net realized gain.......
--
--
--
From capital paid-in.................
--
--
--
-------
-------
-------
Total distributions...............
.11
1.92
.07
-------
-------
-------
Net asset value, end of period..........
$ 16.62
$ 12.90
$12.40
=======
=======
=======
Total return(%).........................
29.72
19.51
11.21 (e)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).............................
$23,637
$21,146
$9.587
Ratio of expenses to average net
assets(%)..............................
1.93
1.88
2.00
Ratio of net investment income to
average net assets(%)..................
.80
.40
.30
Portfolio turnover rate(%)..............
45
47
20
CLASS B CLASS I
-----------------------------------
---------------------
SELECTED PER SHARE DATA
1995
1994 1993(A) 1995
1994(B)
-------
------- ------- -------
-------
Net asset value, beginning of
period......... $
27.60 $
27.71 $25.86 $ 27.60
$29.06
-------
------- ------- -------
-------
Income (loss) from investment operations:
Net investment income
(loss)..............
.01
(.10) (.01) .30 .03
Net gain (loss) on investment
transactions
(both realized and
unrealized)...........
3.20
.91 2.12 3.22
(.49)
-------
------- ------- -------
-------
Total from investment
operations.......
3.21
.81 2.11 3.52
(.46)
-------
------- ------- -------
-------
Less distributions:
From net investment
income................
.01
-- .04 .30 .03
From net realized
gain....................
.10
.90 .22 .12 .92
In excess of net realized
gain............
.03
-- -- .03 --
From capital
paid-in......................
--
.02 -- -- .05
-------
------- ------- -------
-------
Total
distributions....................
.14
.92 .26 .45 1.00
-------
------- ------- -------
-------
Net asset value, end of
period............... $
30.67 $
27.60 $27.71 $ 30.67
$27.60
=======
======= ======= =======
=======
Total
return(%)..............................
11.62
2.96 7.65 12.85
(1.64)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).....
$74,650
$30,143 $2,846 $13,020
$4,921
Ratio of expenses to average net
assets(%)...
2.44
2.50 2.59 1.35 1.41
Ratio of net investment income (loss) to
average net
assets(%).......................
.05
(.62) (.42) 1.14 .47
Portfolio turnover
rate(%)...................
6
7 19 6 7
---------------
* Ivy International Fund's subadviser
is
Northern Cross
Investments Limited. In prior
periods, Ivy
International
Fund had the following subadvisers:
Boston
Overseas
Investors, Inc., from July 1, 1990
through
March 31,
1993;
and Marsh & Cunningham, from
November 15,
1985 through
June
30, 1990.
(a) From October 23, 1993 (commencement
of
operations) to
December 31, 1993.
(b) From October 6, 1994 (commencement
of
operations) to
December 31, 1994.
(c) Net investment income is net of
expenses
reimbursed by
IMI.
(d) The ratio of expenses to average
net assets
is net of
expenses reimbursed by IMI. If IMI
had not
reimbursed
expenses during the year ended
December 31,
1992, the
ratio
of expenses to average net assets
would have
been
1.80%.
(e) From May 1, 1986 (when first
offered for
public sale)
to
December 31, 1986.
7
<PAGE>
IVY LATIN AMERICA STRATEGY FUND
CLASS A
---------------------
SELECTED PER SHARE DATA
1995
1994(A)
-------
-------
Net asset value, beginning of
period......... $
8.37
$10.00
-------
-------
Loss from investment operations:
Net investment
income(b)..................
.01
--
Net loss on investment transactions
(both realized and
unrealized)...........
(1.45)
(1.63)
-------
-------
Total from investment
operations.......
(1.44)
(1.63)
-------
-------
Less distributions:
From capital
paid-in......................
.05
--
-------
-------
Total
distributions....................
.05
--
-------
-------
Net asset value, end of
period............... $
6.88 $
8.37
=======
=======
Total
return(%)..............................
(17.28)
(16.10)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)..... $
2,015 $
571
Ratio of expenses to average net assets
With expense reimbursement and fees paid
indirectly(%)(c)..........................
2.20
2.20
Without expense reimbursement and fees
paid
indirectly(%)(c)..........................
9.26
16.22
Ratio of net investment income to average
net
assets(%)(b)................................
.22
.21
Portfolio turnover
rate(%)...................
45
82
CLASS B
---------------------
SELECTED PER SHARE DATA
1995
1994(A)
-------
-------
Net asset value, beginning of
period......... $
8.37
$10.00
-------
-------
Loss from investment operations:
Net investment
loss(b)....................
(.02)
(.01)
Net loss on investment transactions
(both realized and
unrealized)...........
(1.47)
(1.62)
-------
-------
Total from investment
operations.......
(1.49)
(1.63)
-------
-------
Net asset value, end of
period............... $
6.88 $
8.37
=======
=======
Total
return(%)..............................
(17.90)
(16.20)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)..... $
684 $
122
Ratio of expenses to average net assets
With expense reimbursement and fees paid
indirectly(%)(c)..........................
2.95
2.95
Without expense reimbursement and fees
paid
indirectly(%)(c)..........................
10.01
16.97
Ratio of net investment loss to average
net
assets(%)(b)................................
(.53)
(.54)
Portfolio turnover
rate(%)...................
45
82
---------------
(a) From November 1, 1994 (commencement
of
operations) to
December 31, 1994.
(b) Net investment income (loss) is net
of
expenses
reimbursed
by IMI.
(c) Beginning in 1995, total expenses
include
fees paid
indirectly through an expense
offset
arrangement.
8
<PAGE>
IVY NEW CENTURY FUND
CLASS A
--------------------
SELECTED PER SHARE DATA
1995
1994(A)
------
-------
Net asset value, beginning of
period......... $
8.64
$10.00
------
-------
Income (loss) from investment operations:
Net investment
income(b)..................
.01
--
Net gain (loss) on investment
transactions
(both realized and
unrealized)...........
.54
(1.36)
------
-------
Total from investment
operations.......
.55
(1.36)
------
-------
Less distributions:
From net investment
income................
.01
--
From net realized
gain....................
.10
--
In excess of net realized
gain............
.03
--
------
-------
Total
distributions....................
.14
--
------
-------
Net asset value, end of
period............... $
9.05 $
8.64
======
=======
Total
return(%)..............................
6.40
(13.50)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).....
$3,435 $
611
Ratio of expenses to average net assets:
With expense
reimbursement(%)(c)............
2.20
2.20
Without expense
reimbursement(%)(c).........
7.18
20.74
Ratio of net investment income to average
net
assets(%)(b)................................
.24
.52
Portfolio turnover
rate(%)...................
14
0
CLASS B
-------------------
SELECTED PER SHARE DATA
1995
1994(A)
-----
-------
Net asset value, beginning of
period......... $8.64
$10.00
-----
-------
Income (loss) from investment operations:
Net investment
loss(b)....................
(.02)
--
Net gain (loss) on investment
transactions
(both realized and
unrealized)........... .51
(1.36)
-----
-------
Total from investment
operations....... .49
(1.36)
-----
-------
Less distributions:
From net realized
gain.................... .08
--
-----
-------
Total
distributions.................... .08
--
-----
-------
Net asset value, end of
period............... $9.05
$
8.64
=====
=======
Total
return(%).............................. 5.62
(13.60)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)..... $ 945
$
121
Ratio of expenses to average net assets:
With expense
reimbursement(%)(c)............ 2.95
2.95
Without expense
reimbursement(%)(c)......... 7.93
21.49
Ratio of net investment loss to average
net
assets(%)(b)................................
(.51)
(.23)
Portfolio turnover
rate(%)................... 14
0
---------------
(a) From November 1, 1994 (commencement
of
operations) to
December 31, 1994.
(b) Net investment income (loss) is net
of
expenses
reimbursed
by IMI.
(c) Beginning in 1995, total expenses
include
fees paid
indirectly through an expense
offset
arrangement.
9
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment
objective and
policies,
which are described
below. Each Fund's investment objective is
fundamental
and may
not be changed
without the approval of a majority of the
outstanding
voting
shares of the Fund.
Except for a Fund's investment objective and
those
investment
restrictions
specifically identified as fundamental, all
investment
policies
and practices
described in this Prospectus and in the SAI
are
non-fundamental,
and may be
changed by the Trustees without shareholder
approval.
There can
be no assurance
that a Fund's objective will be met. The
different
types of
securities and
investment techniques used by the Funds
involve varying
degrees
of risk. For
information about the particular risks
associated with
each type
of investment,
see "Risk Factors and Investment Techniques,"
below,
and the SAI.
Whenever an investment objective, policy
or
restriction of a
Fund described
in this Prospectus or in the SAI states a
maximum
percentage of
assets that may
be invested in a security or other asset or
describes a
policy
regarding quality
standards, that percentage limitation or
standard will,
unless
otherwise
indicated, apply to the Fund only at the time
a
transaction takes
place. Thus,
for example, if a percentage limitation is
adhered to
at the time
of investment,
a later increase or decrease in the
percentage that
results from
circumstances
not involving any affirmative action by the
Fund will
not be
considered a
violation.
IVY CANADA FUND: Ivy Canada Fund seeks
long-term
capital
appreciation by
investing primarily in equity securities of
Canadian
companies.
Canada is one of
the world's leading industrial countries and
a major
exporter of
agricultural
products. The country is rich in natural
resources such
as zinc,
uranium,
nickel, gold, silver, aluminum, iron and
copper, and
forest
covers over 44% of
land areas, making Canada a leading world
producer of
newsprint.
Canada is also
a major producer of hydroelectricity, oil and
gas.
As a fundamental policy, the Fund
normally invests
at least
65% of its total
assets in Canadian equity securities (i.e.,
common and
preferred
stock,
securities convertible into common stock and
common
stock
purchase warrants)
listed on Canadian stock exchanges or traded
over-the-counter in
Canada.
Canadian issuers are companies (i) organized
under the
laws of
Canada, (ii) for
which the principal securities trading market
is in
Canada, (iii)
which derive
at least 50% of their revenues or profits
from goods
produced or
sold,
investments made or services performed in
Canada, or
(iv) which
have at least
50% of their assets situated in Canada. The
balance of
the Fund's
assets
ordinarily are invested in (i) bills and
bonds of the
Canadian
Government and
the governments of the provinces or
municipalities of
Canada,
(ii) high quality
notes and debentures of Canadian companies
(i.e., those
rated Aaa
or Aa by
Moody's Investor Services, Inc. ("Moody's) or
AAA or AA
by
Standard and Poor's
Corporation ("S&P"), or if unrated, judged to
be of
comparable
quality by
Mackenzie Financial Corporation ("MFC"), the
Fund's
Adviser),
(iii) foreign
securities (including sponsored or
unsponsored American
Depository Receipts
("ADRs")), (iv) U.S. Government securities,
(v) equity
securities
and
investment-grade debt securities (i.e., those
rated Baa
or higher
by Moody's or
BBB or higher by S&P, or if unrated, are
considered by
MFC to be
of comparable
quality) of U.S. companies, and (vi) zero
coupon bonds
that meet
these credit
quality standards.
The Fund may purchase securities on a
"when-issued"
or firm
commitment
basis, engage in currency exchange
transactions and
enter into
forward foreign
currency contracts. The Fund may also invest
up to 10%
of its
assets in (i)
other investment companies and (ii)
restricted and
other illiquid
securities
(although the Fund may not invest more than
5% of its
assets in
restricted
securities).
For temporary defensive purposes, the
Fund may
invest without
limit in U.S.
or Canadian dollar-denominated money market
securities
issued by
entities
organized in the U.S. or Canada, such as (i)
obligations issued
or guaranteed by
the Canadian Government or the governments of
the
provinces or
municipalities of
Canada (or their agencies or
instrumentalities), (i)
finance
company and
corporate commercial paper (and other
short-term
corporate
obligations rated
Prime-1 by Moody's or A or better by S&P, or
if
unrated,
considered by MFC to be
of comparable quality), (iii) obligations of
banks
(i.e.,
certificates of
deposit, time deposits and bankers'
acceptances)
considered
creditworthy by MFC
under guidelines approved by the Trust's
Board of
Trustees, and
(iv) repurchase
agreements with broker-dealers and banks. For
temporary
or
emergency purposes,
the Fund may also borrow up to 10% of the
value of its
total
assets from banks.
IVY CHINA REGION FUND: Ivy China Region
Fund's
principal
investment
objective is long-term capital growth.
Consideration of
current
income is
secondary to this principal objective. The
Fund seeks
to meet its
objective
primarily by investing in the equity
securities of
companies that
are expected
to benefit from the economic development and
growth of
China,
Hong Kong and
Taiwan. A significant percentage of the
Fund's assets
may also be
invested in
the securities markets of South Korea,
Singapore,
Malaysia,
Thailand, Indonesia
and the Philippines (collectively, with
China, Hong
Kong and
Taiwan, the "China
Region").
The Fund normally invests at least 65% of
its total
assets in
"Greater China
growth companies," defined as companies (a)
that are
organized in
or for which
the principal securities trading markets are
the China
Region;
(b) that have at
least 50% of their assets in one or more
China Region
countries
or derive at
least 50% of their gross sales revenues or
profits from
providing
goods or
services to or from within one or more China
Region
countries; or
(c) that have
at least 35% of their assets in China, Hong
Kong or
Taiwan,
derive at least 35%
of their gross sales revenues or profits from
providing
goods or
services to or
from within these three countries, or have
significant
manufacturing or other
operations in these countries. IMI's
determination as
to whether
a company
qualifies as a Greater China growth company
is based
primarily on
information
contained in financial statements, reports,
analyses
and other
pertinent
information (some of which may be obtained
directly
from the
company). The Fund
may invest 25% or more of its total assets in
the
securities of
issuers located
in any one China Region country, and
currently expects
to invest
more than 50%
of its total assets in Hong Kong.
The balance of the Fund's assets
ordinarily are
invested in
(i) certain
investment-grade debt securities and (ii) the
equity
securities
of "China Region
associated companies," which are companies
that do not
meet the
definition of a
Greater China growth company, but whose
current or
expected
performance, based
on certain identified factors (such as the
growth
trends in the
location of a
company's assets and the sources of its
revenues and
profits), is
judged by IMI
to be strongly associated with the China
Region. The
investment-grade debt
securities in which the Fund may invest
include (a)
obligations
of the U.S.
Government or its agencies or
instrumentalities, (b)
obligations
of U.S. banks
and other banks organized and existing under
the laws
of Hong
Kong, Taiwan or
countries that are members of the
Organization for
Economic
Cooperation and
Development ("OECD"), and (c) obligations
denominated
in any
currency issued by
international development institutions and
Hong Kong,
Taiwan and
OECD member
governments and their agencies and
instrumentalities,
as well as
repurchase
agreements with respect to any of the
foregoing
instruments. The
Fund may also
invest in zero coupon bonds, and corporate
bonds rated
Baa or
higher by Moody's
or BBB or higher by S&P (or if unrated, are
considered
by IMI to
be of
comparable quality).
10
<PAGE>
The Fund may invest less than 35% of its
net assets
in debt
securities rated
Ba or below by Moody's or BB or below by S&P,
or, if
unrated,
considered by IMI
to be of comparable quality (commonly
referred to as
"high yield"
or "junk"
bonds). The Fund will not invest in debt
securities
rated less
than C by either
Moody's or S&P. As of the fiscal year ended
December
31, 1995,
the Fund did not
invest in low-rated debt securities.
The Fund may lend portfolio securities
valued at
not more
than 30% of the
Fund's total assets, invest in warrants,
purchase
securities on a
"when-issued"
or firm commitment basis, engage in currency
exchange
transactions and enter
into forward foreign currency contracts. The
Fund may
also invest
up to 10% of
its assets in (i) other investment companies
that
invest in
equity securities of
Greater China growth companies or China
Region
associated
companies, and (ii)
restricted and other illiquid securities
(although the
Fund may
not invest more
than 5% of its assets in restricted
securities).
For temporary defensive purposes and
during periods
when IMI
believes that
circumstances warrant, the Fund may reduce
its position
in
Greater China growth
companies and Greater China associated
companies and
increase its
investment in
cash and liquid debt securities, such as U.S.
Government
securities, bank
obligations, commercial paper, short-term
notes and
repurchase
agreements. For
temporary or emergency purposes, the Fund may
also
borrow up to
10% of the value
of its total assets from banks.
The Fund may purchase put and call
options on
securities and
stock indices,
provided the premium paid for such options
does not
exceed 5% of
the Fund's net
assets. The Fund may also sell covered put
options with
respect
to up to 10% of
the value of its net assets, and may write
covered call
options
so long as not
more than 25% of the Fund's net assets is
subject to
being
purchased upon the
exercise of the calls. For hedging purposes
only, the
Fund may
engage in
transactions in stock index futures
contracts, provided
that the
Fund's
aggregate investment in such contracts does
not exceed
15% of its
total assets.
IVY GLOBAL FUND: The Fund seeks
long-term capital
growth
through a flexible
policy of investing in stocks and debt
obligations of
companies
and governments
of any nation. Any income realized will be
incidental.
Under
normal conditions,
the Fund invests at least 65% of its total
assets in
issuers
domiciled in at
least three different nations (including the
United
States).
Although the Fund
generally invests in common stock, it may
also invest
in
preferred stocks,
sponsored or unsponsored ADRs and
investment-grade debt
securities (i.e., those
rated Baa or higher by Moody's or BBB or
higher by S&P,
or if
unrated, are
considered by IMI to be of comparable
quality),
including
corporate bonds,
notes, debentures, convertible bonds and zero
coupon
bonds.
The Fund may invest less than 35% of its
net assets
in debt
securities rated
Ba or below by Moody's or BB or below by S&P,
or if
unrated,
considered by IMI
to be of comparable quality (commonly
referred to as
"high yield"
or "junk"
bonds). The Fund will not invest in debt
securities
rated less
than C by either
Moody's or S&P. As of December 31, 1995, the
Fund did
not invest
in low-rated
debt securities.
The Fund may lend portfolio securities
valued at
not more
than 30% of the
Fund's total assets, invest in warrants,
purchase
securities on a
"when-issued"
or firm commitment basis, engage in currency
exchange
transactions and enter
into forward foreign currency contracts. The
Fund may
also invest
up to 10% of
its assets in (i) other investment companies
and (ii)
restricted
and other
illiquid securities (although the Fund may
not invest
more than
5% of its assets
in restricted securities).
For temporary defensive purposes and
during periods
when IMI
believes that
circumstances warrant, the Fund may invest
without
limit in U.S.
Government
securities, obligations issued by domestic or
foreign
banks
(including
certificates of deposit, time deposits and
bankers'
acceptances),
and domestic
or foreign commercial paper (which, if issued
by a
corporation,
must be rated
Prime-1 by Moody's or A-1 by S&P, or if
unrated has
been issued
by a company
that at the time of investment has an
outstanding debt
issue
rated AAA or AA by
S&P or Aaa or Aa by Moody's). The Fund may
also enter
into
repurchase
agreements, and, for temporary or emergency
purposes,
may borrow
up to 10% of
the value of its total assets from banks.
The Fund may purchase put and call
options stock
indices,
provided the
premium paid for such options does not exceed
10% of
the Fund's
net assets. The
Fund may also sell covered put options with
respect to
up to 50%
of the value of
its net assets, and my write covered call
options so
long as not
more than 20%
of the Fund's net assets is subject to being
purchased
upon the
exercise of the
calls. For hedging purposes only, the Fund
may engage
in
transactions in (and
options on) stock index and foreign currency
futures
contracts,
provided that
the Fund's aggregate investment in such
contracts does
not exceed
20% of its
total assets.
IVY INTERNATIONAL FUND: The Fund's
principal
objective is
long-term capital
growth primarily through investment in equity
securities.
Consideration of
current income is secondary to this principal
objective. It is
anticipated that
at least 65% of the Fund's total assets will
be
invested in
common stocks (and
securities convertible into common stocks)
principally
traded in
European,
Pacific Basin and Latin American markets. For
temporary
defensive
purposes, the
Fund may also invest in equity securities
principally
traded in
U.S. markets.
The Fund's subadviser, Northern Cross
Investments
Limited
("Northern Cross"),
invests the Fund's assets in a variety of
economic
sectors,
industry segments
and individual securities in order to reduce
the
effects of price
volatility in
any one area and to enable shareholders to
participate
in markets
that do not
necessarily move in concert with U.S.
markets. Northern
Cross
seeks to identify
rapidly expanding foreign economies, and then
searches
out
growing industries
and corporations, focusing on companies with
established records.
Individual
securities are selected based on value
indicators, such
as a low
price-earnings
ratio, and are reviewed for fundamental
financial
strength.
Companies in which
investments are made will generally have at
least $1
billion in
capitalization
and a solid history of operations.
When economic or market conditions
warrant, the
Fund may
invest without
limit in U.S. Government securities,
investment-grade
debt
securities (i.e.,
those rated Baa or higher by Moody's or BBB
or higher
by S&P, or
if unrated, are
considered by the Subadviser to be of
comparable
quality),
preferred stocks,
warrants, or cash or cash equivalents such as
bank
obligations
(including
certificates of deposit and bankers'
acceptances),
commercial
paper, short-term
notes and repurchase agreements. For
temporary or
emergency
purposes, the Fund
may borrow up to 10% of the value of its
total assets
from banks.
The Fund may purchase securities on a
"when-issued"
or firm
commitment
basis.
The Fund may lend portfolio securities
valued at
not more
than 30% of its
total assets, engage in currency exchange
transactions
and enter
into forward
foreign currency contracts. The Fund may also
invest up
to 10% of
its assets in
(i) other investment companies and (ii)
restricted and
other
illiquid securities
(although the Fund may not invest more than
5% of its
assets in
restricted
securities).
The Fund may purchase put and call
options on
securities and
stock indices,
provided the premium paid for such options
does not
exceed 5% of
the Fund's net
assets. The Fund may also sell covered put
options with
respect
to up
11
<PAGE>
to 10% of the value of its net assets, and
may write
covered call
options so
long as not more than 25% of the Fund's net
assets is
subject to
being purchased
upon the exercise of the calls. For hedging
purposes
only, the
Fund may engage
in transactions in (and options on) stock
index and
foreign
currency futures
contracts, provided that the Fund's aggregate
investment in such
contracts does
not exceed 15% of its total assets.
IVY LATIN AMERICA STRATEGY FUND: The
Fund has a
principal
investment
objective of long-term capital growth.
Consideration of
current
income is
secondary to this principal objective. Under
normal
conditions
the Fund invests
at least 65% of its total assets in
securities issued
in Latin
America, which
for purposes of this Prospectus is defined as
Mexico,
Central
America, South
America and the Spanish-speaking islands of
the
Caribbean.
Securities of Latin
American issuers include (a) securities of
companies
organized
under the laws of
a Latin American country or for which the
principal
securities
trading market is
in Latin America; (b) securities that are
issued or
guaranteed by
the government
of a Latin American country, its agencies or
instrumentalities,
political
subdivisions or the country's central bank;
(c)
securities of a
company,
wherever organized, where at least 50% of the
company's
non-current assets,
capitalization, gross revenue or profit in
any one of
the two
most recent fiscal
years represents (directly or indirectly
through
subsidiaries)
assets or
activities located in Latin America; or (d)
any of the
preceding
types of
securities in the form of depository shares.
The Fund
may
participate in markets
throughout Latin America, and it is expected
that the
Fund will
be invested at
all times in at least three countries. Under
present
conditions,
the Fund
expects to focus its investments in
Argentina, Brazil,
Chile,
Mexico and
Venezuela, which IMI believes are the most
developed
capital
markets in Latin
America. The Fund does not expect to
concentrate its
investments
in any
particular industry.
The Fund's equity investments consist of
common
stock,
preferred stock
(either convertible or non-convertible),
sponsored or
unsponsored
depository
receipts (including ADRs, American Depository
Shares,
and Global
Depository
Shares) and warrants (any of which may be
purchased
through
rights). The Fund's
equity securities may be listed on securities
exchanges, traded
over-the-
counter, or have no organized market.
The Fund may invest in debt securities
(including
zero coupon
bonds) when
IMI anticipates that the potential for
capital
appreciation from
debt securities
is likely to equal or exceed that of equity
securities
(e.g., a
favorable change
in relative foreign exchange rates, interest
rate
levels or the
creditworthiness
of issuers). These include debt securities
issued by
Latin
American Governments
("Sovereign Debt"). Most of the debt
securities in
which the Fund
may invest are
not rated, and those that are rated are
expected to be
below
investment-grade
(i.e., rated Ba or below by Moody's or BB or
below by
S&P, or
considered by IMI
to be of comparable quality), and are
commonly referred
to as
"high yield" or
"junk" bonds. As of December 31, 1995, the
Fund did not
invest in
debt
securities.
To meet redemptions, or while the Fund is
anticipating
investments in Latin
American securities, the Fund may hold cash
or cash
equivalents
such as bank
obligations (including certificates of
deposit and
bankers'
acceptances),
commercial paper, short-term notes and
repurchase
agreements. For
temporary
defensive or emergency purposes, the Fund may
(i)
invest without
limit in such
instruments, and (ii) borrow up to one-third
of the
value of its
total assets
from banks (but may not purchase securities
at any time
during
which the value
of the Fund's outstanding loans exceeds 10%
of the
value of the
Fund's assets).
The Fund may lend portfolio securities
valued at
not more
than 30% of the
Fund's total assets, invest in warrants,
purchase
securities on a
"when-issued"
or firm commitment basis, engage in currency
exchange
transactions and enter
into forward foreign currency contracts. The
Fund may
also invest
up to 10% of
its assets in (i) other investment companies
that
invest in Latin
American
securities, and (ii) restricted and other
illiquid
securities
(although the Fund
may not invest more than 5% of its assets in
restricted
securities). The Fund
will treat any Latin American securities that
are
subject to
restrictions on
repatriation for more than seven days, as
well as any
securities
issued in
connection with Latin American debt
conversion programs
that are
restricted to
remittance of invested capital or profits, as
illiquid
securities
for purposes
of this limitation.
The Fund may purchase put and call
options on
securities and
stock indices,
provided the premium paid for such options
does not
exceed 5% of
the Fund's net
assets. The Fund may also sell covered put
options with
respect
to up to 10% of
the value of its net assets, and my write
covered call
options so
long as not
more than 25% of the Fund's net assets is
subject to
being
purchased upon the
exercise of the calls. For hedging purposes
only, the
Fund may
engage in
transactions in (and options on) stock index
and
foreign currency
futures
contracts, provided that the Fund's aggregate
investment in such
contracts does
not exceed 15% of its total assets.
IVY NEW CENTURY FUND: The Fund's
principal
objective is
long-term growth.
Consideration of current income is secondary
to this
principal
objective. In
pursuing its objective, the Fund invests
primarily in
the equity
securities of
companies that IMI believes will benefit from
the
economic
development and
growth of emerging markets. The Fund
considers
countries having
emerging markets
to be those that (i) are generally considered
to be
"developing"
or "emerging"
by the World Bank and the International
Finance
Corporation, or
(ii) are
classified by the United Nations (or
otherwise regarded
by their
authorities) as
"emerging." Under normal market conditions,
the Fund
invests at
least 65% of its
total assets in equity securities (including
common and
preferred
stocks,
convertible debt obligations, warrants,
options, rights
and
depository receipts
that are listed on stock exchanges or traded
over-the-counter) of
"Emerging
Market growth companies," which are defined
as
companies (a) for
which the
principal securities trading market is an
emerging
market (as
defined above),
(b) that (alone or on a consolidated basis)
derives 50%
or more
of its total
revenue either from goods, sales or services
in
emerging markets,
or (c) that
are organized under the laws of (and with a
principal
office in)
an emerging
market country.
The Fund normally invests its assets in
the
securities of
issuers located in
at least three emerging market countries, and
may
invest 25% or
more of its
total assets in the securities of issuers
located in
any one
country. IMI's
determination as to whether a company
qualifies as a
Emerging
Markets growth
company is based primarily on information
contained in
financial
statements,
reports, analyses and other pertinent
information (some
of which
may be obtained
directly from the company).
For purposes of capital appreciation, the
Fund may
invest up
to 35% of its
assets in (i) debt securities of government
or
corporate issuers
in emerging
market countries, (ii) equity and debt
securities of
issuers in
developed
countries (including the United States), and
(iii) cash
or cash
equivalents such
as bank obligations (including certificates
of deposit
and
bankers'
acceptances), commercial paper, short-term
notes and
repurchase
agreements. For
temporary defensive purposes, the Fund may
invest
without limit
in such
instruments. The Fund may also invest in zero
coupon
bonds and
purchase
securities on a "when-issued" or firm
commitment basis.
The Fund will not invest more than 20% of
its total
assets in
debt
securities rated Ba or lower by Moody's or BB
or lower
by S&P, or
if unrated,
are considered by IMI to be of comparable
quality
(commonly
referred to as "high
12
<PAGE>
yield" or "junk" bonds). As of December 31,
1995, the
Fund did
not invest in
low-rated debt securities.
For temporary or emergency purposes, the
Fund may
borrow up
to one-third of
the value of its total assets from banks, but
may not
purchase
securities at any
time during which the value of the Fund's
outstanding
loans
exceeds 10% of the
value of the Fund's assets. The Fund may lend
portfolio
securities valued at not
more than 30% of the Fund's total assets,
engage in
currency
exchange
transactions and enter into forward foreign
currency
contracts.
The Fund may
also invest in (i) other investment companies
that
invest in
Emerging Markets
growth companies, and (ii) up to 15% of its
assets in
restricted
and other
illiquid securities (although the Fund may
not invest
more than
5% of its assets
in restricted securities).
The Fund may purchase put and call
options on
securities and
stock indices,
provided the premium paid for such options
does not
exceed 5% of
the Fund's net
assets. The Fund may also sell covered put
options with
respect
to up to 10% of
the value of its net assets, and my write
covered call
options so
long as not
more than 25% of the Fund's net assets is
subject to
being
purchased upon the
exercise of the calls. For hedging purposes
only, the
Fund may
engage in
transactions in (and options on) stock index
and
foreign currency
futures
contracts, provided that the Fund's aggregate
investment in such
contracts does
not exceed 15% of its total assets.
RISK FACTORS AND INVESTMENT TECHNIQUES
SPECIAL CONSIDERATIONS RELATED TO IVY
CANADA FUND:
The
economy of Canada is
strongly influenced by the activities of
companies
involved in
the production
and processing of natural resources,
particularly those
involved
in the energy
industry, industrial materials (e.g.,
chemicals, base
metals,
timber and paper)
and agricultural materials (e.g., grain
cereals). The
securities
of companies in
the energy industry are subject to changes in
value and
dividend
yield, which
depend, to a large extent, on the price and
supply of
energy
fuels. Rapid price
and supply fluctuations may be caused by
events
relating to
international
politics, energy conservation and the success
of
exploration
projects.
SPECIAL CONSIDERATIONS RELATED TO IVY
CHINA REGION
FUND:
Investors should
realize that China Region countries may be
subject to a
greater
degree of
economic, political and social instability
than is the
case in
the United States
or other developed countries. Among the
factors causing
this
instability are (i)
authoritarian governments or military
involvement in
political
and economic
decision making, (ii) popular unrest
associated with
demands for
improved
political, economic and social conditions,
(iii)
internal
insurgencies, (iv)
hostile relations with neighboring countries,
(v)
ethnic,
religious and racial
disaffection, and (vi) changes in trading
status, any
one of
which could disrupt
the principal financial markets in which the
Fund
invests and
adversely affect
the value of its assets. In addition, several
China
Region
countries have had
hostile relations with neighboring nations.
For
example, China
continues to
claim sovereignty over Taiwan, and is
scheduled to
assume
sovereignty over Hong
Kong in 1997.
China Region countries tend to be heavily
dependent
on
international trade,
as a result of which their markets are highly
sensitive
to
protective trade
barriers and the economic conditions of their
principal
trading
partners (i.e.,
the United States, Japan and Western European
countries).
Protectionist trade
legislation, reduction of foreign investment
in China
Region
economies and
general declines in the international
securities
markets could
have a
significant adverse effect on the China
Region
securities
markets. In addition,
certain China Region countries have in the
past failed
to
recognize private
property rights and have at times
nationalized or
expropriated
the assets of
private companies. There is a heightened risk
in these
countries
that such
adverse actions might be repeated.
To take advantage of potential growth
opportunities, the Fund
might have
significant investments in companies with
relatively
small market
capitalization. Securities of smaller
companies may be
subject to
more abrupt or
erratic market movements than the securities
of larger
more
established
companies, both because they tend to be
traded in lower
volume
and because the
companies are subject to greater business
risk. In
addition, to
the extent that
any China Region country experiences rapid
increases in
its money
supply or
investment in equity securities for
speculative
purposes, the
equity securities
traded in such countries may trade at
price-earning
multiples
higher than those
of comparable companies trading on securities
markets
in the
United States,
which may not be sustainable. Finally,
restrictions on
foreign
investment exists
to varying degrees in some China Region
countries.
Where such
restrictions
apply, investments may be limited and may
increase the
Fund's
expenses. The SAI
contains additional information concerning
the risks
associated
with investing
in the China Region. "Selected Economic and
Market
Data" for
China Region
countries also appears in an Appendix to this
Prospectus.
SPECIAL CONSIDERATIONS RELATED TO IVY
GLOBAL FUND,
IVY
INTERNATIONAL FUND
AND IVY NEW CENTURY FUND: The risks of
investing in
foreign
securities
(described below) are likely to be
intensified in the
case of
investments in
issuers domiciled or doing substantial
business in
countries with
emerging or
developing economies ("emerging markets").
For example,
countries
with emerging
markets may have relatively unstable
governments and
therefore be
susceptible to
sudden adverse government action (such as
nationalization of
businesses,
restrictions on foreign ownership or
prohibitions
against
repatriation of
assets). Security prices in emerging markets
can also
be
significantly more
volatile than in the more developed nations
of the
world, and
communications
between the U.S. and emerging market
countries may be
unreliable,
increasing the
risk of delayed settlements of portfolio
transactions
or loss of
certificates
for portfolio securities. Delayed settlements
could
cause a Fund
to miss
attractive investment opportunities or impair
its
ability to
dispose of
portfolio securities, resulting in a loss if
the value
of the
securities
subsequently declines. Finally, many emerging
markets
have
experienced and
continue to experience high rates of
inflation. In
certain
countries, inflation
has at times accelerated rapidly to
hyperinflationary
levels,
creating a
negative interest rate environment and
sharply eroding
the value
of outstanding
financial assets in those countries. In light
of the
Ivy New
Century Fund's
concentration in equity securities of
Emerging Market
growth
companies (as
defined above), an investment in the Fund
should be
considered
speculative.
SPECIAL CONSIDERATIONS RELATED TO IVY
LATIN AMERICA
STRATEGY
FUND: The
securities markets of Latin American
countries are
substantially
smaller, less
developed, less liquid and more volatile than
the major
securities markets in
the United States. This could cause prices to
be
erratic for
reasons apart from
factors that affect the quality of the
securities. For
example,
limited market
size may cause prices to be unduly influenced
by
traders who
control large
positions. Adverse publicity and investor
perception,
whether or
not based on
fundamental analysis, may decrease the value
and
liquidity of
portfolio
securities, especially in these markets.
For many years, most Latin American
countries have
experienced substantial
(and in some periods extremely high) rates of
inflation, which
have had and may
continue to have very negative effects on the
economies
and
securities markets
of these countries. In addition, certain
Latin American
countries
are among the
largest debtors to commercial banks and
foreign
governments, and
some have
declared moratoria on the payment of
principal and/or
interest on
13
<PAGE>
external debt. Accordingly, the Sovereign
Debt
instruments in
which the Fund may
invest involve a high degree of risk and
should be
considered
equivalent in
quality to debt securities rated below
investment-grade
by
Moody's and S&P.
The Fund is classified as a
non-diversified
investment
company under the
1940 Act, and therefore may invest, with
respect to 50%
of its
assets, more than
5% its assets in the securities of any one
issuer.
Consequently,
the performance
of a single issuer in which the Fund has
invested may
have a more
significant
effect on the overall performance of the Fund
than if
the Fund
was a diversified
company.
BANK OBLIGATIONS: The bank obligations
in which
the Funds
may invest
include certificates of deposit, bankers'
acceptances,
and other
short-term debt
obligations. Investments in certificates of
deposit and
bankers'
acceptances are
limited to obligations of (i) banks having
total assets
in excess
of $1 billion,
and (ii) other banks if the principal amount
of the
obligation is
fully insured
by the Federal Deposit Insurance Corporation
("FDIC").
Investments in
certificates of deposit of savings
associations are
limited to
obligations of
Federal or state-chartered institutions whose
total
assets exceed
$1 billion and
whose deposits are insured by the FDIC.
BORROWING: Borrowing may exaggerate the
effect on
a Fund's
net asset value
of any increase or decrease in the value of
the Fund's
portfolio
securities.
Money borrowed will be subject to interest
costs (which
may
include commitment
fees and/or the cost of maintaining minimum
average
balances).
COMMERCIAL PAPER: Commercial paper
represents
short-term
unsecured
promissory notes issued in bearer form by
bank holding
companies,
corporations,
and finance companies. Each Fund's
investments in
commercial
paper are limited
to obligations rated Prime-1 by companies
having an
outstanding
debt issue
currently rated Aaa or Aa by Moody's or AAA
or AA by
S&P.
CONVERTIBLE SECURITIES: The convertible
securities
in which
the Funds may
invest include corporate bonds, notes,
debentures and
other
securities
convertible into common stocks. Because
convertible
securities
can be converted
into equity securities, their values will
normally vary
in some
proportion with
those of the underlying equity securities.
Convertible
securities
usually
provide a higher yield than the underlying
equity,
however, so
that the price
decline of a convertible security may
sometimes be less
substantial than that of
the underlying equity security.
DEBT SECURITIES, IN GENERAL: Investment
in debt
securities,
including
municipal securities, involves both interest
rate and
credit
risk. Generally,
the value of debt instruments rises and falls
inversely
with
fluctuations in
interest rates. As interest rates decline,
the value of
debt
securities
generally increases. Conversely, rising
interest rates
tend to
cause the value
of debt securities to decrease. Bonds with
longer
maturities
generally are more
volatile than bonds with shorter maturities.
The market
value of
debt securities
also varies according to the relative
financial
condition of the
issuer. In
general, lower-quality bonds offer higher
yields due to
the
increased risk that
the issuer will be unable to meet its
obligations on
interest or
principal
payments at the time called for by the debt
instrument.
U.S. GOVERNMENT SECURITIES: U.S.
Government
securities are
obligations of,
or guaranteed by, the U.S. Government, its
agencies or
instrumentalities. Such
securities include: (1) direct obligations of
the U.S.
Treasury
(such as
Treasury bills, notes, and bonds) and (2)
Federal
agency
obligations guaranteed
as to principal and interest by the U.S.
Treasury (such
as GNMA
certificates,
which are mortgage-backed securities). When
such
securities are
held to
maturity, the payment of principal and
interest is
unconditionally guaranteed by
the U.S. Government, and thus they are of the
highest
possible
credit quality.
U.S. Government securities that are not held
to
maturity are
subject to
variations in market value caused by
fluctuations in
interest
rates.
Mortgage-backed securities are securities
representing part
ownership of a
pool of mortgage loans. Although the mortgage
loans in
the pool
will have
maturities of up to 30 years, the actual
average life
of the
loans typically
will be substantially less because the
mortgages will
be subject
to principal
amortization and may be prepaid prior to
maturity. In
periods of
falling
interest rates, the rate of prepayment tends
to
increase, thereby
shortening the
actual average life of the security.
Conversely, rising
interest
rates tend to
decrease the rate of prepayment, thereby
lengthening
the
security's actual
average life. Since it is not possible to
predict
accurately the
average life of
a particular pool, and because prepayments
are
reinvested at
current rates, the
market value of mortgage-backed securities
may decline
during
periods of
declining interest rates.
INVESTMENT-GRADE DEBT SECURITIES: Bonds
rated Aaa
by Moody's
and AAA by S&P
are judged to be of the best quality (i.e.,
capacity to
pay
interest and repay
principal is extremely strong). Bonds rated
Aa/AA are
considered
to be of high
quality (i.e., capacity to pay interest and
repay
principal is
very strong and
differs from the highest rated issues only to
a small
degree).
Bonds rated A are
viewed as having many favorable investment
attributes,
but
elements may be
present that suggest a susceptibility to the
adverse
effects of
changes in
circumstances and economic conditions than
debt in
higher rated
categories.
Bonds rated Baa/BBB (considered by Moody's to
be
"medium grade"
obligations) are
considered to have an adequate capacity to
pay interest
and repay
principal, but
certain protective elements may be lacking
(i.e., such
bonds lack
outstanding
investment characteristics and have some
speculative
characteristics).
LOW-RATED DEBT SECURITIES: Securities
rated lower
than Baa
or BBB, and
comparable unrated securities (commonly
referred to as
"high
yield" or "junk"
bonds), are considered by major credit-rating
organizations to
have
predominately speculative characteristics
with respect
to the
issuer's capacity
to pay interest and repay principal.
Investors in those
Funds
that invest in
these securities, should be willing to accept
the
special risks
associated with
these securities.
While high yield debt securities are
likely to have
some
quality and
protective characteristics, these qualities
are largely
outweighed by the risk
of exposure to adverse conditions and other
uncertainties.
Accordingly,
investments in such securities, while
generally
providing for
greater income and
potential opportunity for gain than
investments in
higher-rated
securities, also
entail greater risk (including the
possibility of
default or
bankruptcy of the
issuer of such securities) and generally
involve
greater price
volatility than
securities in higher rating categories. IMI
seeks to
reduce risk
through
diversification (including investments in
foreign
securities),
credit analysis
and attention to current developments and
trends in
both the
economy and
financial markets. Should the rating of a
portfolio
security be
downgraded, IMI
will determine whether it is in the affected
Fund's
best interest
to retain or
dispose of the security (unless the security
is
downgraded below
the rating of
C, in which case IMI most likely would
dispose of the
security
based on then
existing market conditions). For additional
information
regarding
the risks
associated with investing in high yield
bonds, see the
SAI (and,
in particular,
Appendix A, which contains a more complete
description
of the
ratings assigned
by Moody's and S&P).
FOREIGN SECURITIES: The foreign
securities in
which the
Funds invest may
include non-U.S. dollar-denominated
securities,
Eurodollar
securities, sponsored
or unsponsored ADRs and debt securities
issued, assumed
or
guaranteed
14
<PAGE>
by foreign governments (or political
subdivisions or
instrumentalities thereof).
Investors should consider carefully the
special risks
that arise
in connection
with investing in securities issued by
companies and
governments
of foreign
nations, which are in addition to those risks
that are
associated
with the
Funds' investments, generally.
In many foreign countries (especially in
emerging
market
countries), there
is less regulation of business and industry
practices,
stock
exchanges, brokers
and listed companies than in the United
States. For
example,
foreign companies
are not generally subject to uniform
accounting and
financial
reporting
standards, and foreign securities
transactions may be
subject to
higher
brokerage costs. There also tends to be less
publicly
available
information
about issuers in foreign countries, and
foreign
securities
markets of many of
the countries in which the Funds may invest
may be
smaller, less
liquid and
subject to greater price volatility than
those in the
United
States. These risks
may be intensified in certain emerging
markets
countries (e.g.,
in Latin America
and parts of Europe). Generally, price
fluctuations in
the Funds'
foreign
security holdings are likely to be high
relative to
those of
securities issued
in the United States.
Other risks include the possibility of
expropriation,
nationalization or
confiscatory taxation, foreign exchange
controls (which
may
include suspension
of the ability to transfer currency from a
given
country),
difficulties in
pricing, default in foreign government
securities, high
rates of
inflation
(especially in emerging markets countries),
difficulties in
enforcing foreign
judgments, political or social instability,
or other
developments
that could
adversely affect the Funds' foreign
investments.
In recent years, many emerging market
countries
around the
world have
undergone political changes that have reduced
government's role
in economic and
personal affairs and have stimulated
investment and
growth. In
order for these
emerging economies to continue to expand and
develop
industry,
infrastructure
and currency reserves, continued influx of
capital is
essential.
Historically,
there is a strong direct correlation between
economic
growth and
stock market
returns. While this is no guarantee of future
performance, IMI
believes that
investment opportunities (particularly in the
energy,
environmental services,
natural resources, basic materials, power,
telecommunications and
transportation
industries) may result within the evolving
economies of
emerging
market
countries from which the Funds and their
shareholders
will
benefit. IMI believes
that similar investment opportunities will be
created
for
companies involved in
providing consumer goods and services (e.g.,
food,
beverages,
autos, housing,
tourism and leisure and merchandising.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS:
A Fund
usually
effects its currency
exchange transactions on a spot (i.e., cash)
basis at
the spot
rate prevailing
in the foreign exchange market. However, some
price
spread on
currency exchange
(e.g., to cover service charges) is usually
incurred
when a Fund
converts assets
from one currency to another. A Fund may also
be
affected
unfavorably by
fluctuations in the relative rates of
exchange between
the
currencies of
different nations.
FORWARD FOREIGN CURRENCY CONTRACTS: A
forward
foreign
currency contract
involves an obligation to purchase or sell a
specific
currency at
a future date
at a predetermined price. Although these
contracts are
intended
to minimize the
risk of loss due to a decline in the value of
the
hedged
currencies, they also
tend to limit any potential gain that might
result
should the
value of the
currencies increase. In addition, there may
be an
imperfect
correlation between
a Fund's portfolio holdings of securities
denominated
in a
particular currency
and forward contracts entered into by the
Fund, which
may prevent
the Fund from
achieving the intended hedge or expose the
Fund to the
risk of
currency exchange
loss.
LENDING OF PORTFOLIO SECURITIES: Loans
of
securities by a
Fund are
collateralized by cash, letters of credit or
securities
issued or
guaranteed by
the U.S. Government or its agencies or
instrumentalities. There
may be risks of
delay in receiving additional collateral, or
risks of
delay in
recovery of the
securities or even loss of rights in the
collateral,
should the
borrower of the
securities fail financially.
OPTIONS AND FUTURES TRANSACTIONS: The
Funds may
use various
techniques to
increase or decrease their exposure to
changing
security prices,
currency
exchange rates, commodity prices, or other
factors that
affect
the value of the
Funds' securities. These techniques may
involve
derivative
transactions such as
purchasing put and call options, selling put
and call
options,
and engaging in
transactions in currency rate futures, stock
index
futures and
related options.
A Fund may invest in options on
securities in
accordance with
its stated
investment objective and policies (see
above). A put
option is a
short-term
contract that gives the purchaser of the
option, in
return for a
premium, the
right to sell the underlying security or
currency to
the seller
of the option at
a specified price during the term of the
option. A call
option is
a short-term
contract that gives the purchaser the right
to buy the
underlying
security or
currency from the seller of the option at a
specified
price
during the term of
the option. An option on a stock index gives
the
purchaser the
right to receive
from the seller cash equal to the difference
between
the closing
price of the
index and the exercise price of the option.
A Fund may also enter into futures
transactions in
accordance
with its
stated investment objective and policies. An
interest
rate
futures contract is
an agreement between two parties to buy or
sell a
specified debt
security at a
set price on a future date. A stock index
futures
contract is an
agreement to
take or make delivery of an amount of cash
based on the
difference between the
value of the index at the beginning and at
the end of
the
contract period.
Investors should be aware that the risks
associated
with the
use of options
and futures are considerable. Options and
futures
transactions
generally involve
a small investment of cash relative to the
magnitude of
the risk
assumed, and
therefore could result in a significant loss
to a Fund
if IMI
judges market
conditions incorrectly or employs a strategy
that does
not
correlate well with
the Fund's investments. A Fund may also
experience a
significant
loss if it is
unable to close a particular position due to
the lack
of a liquid
secondary
market. For further information regarding the
use of
options and
futures
transactions and any associated risks, see
the SAI.
REPURCHASE AGREEMENTS: Repurchase
agreements are
agreements
under which a
Fund buys a money market instrument and
obtains a
simultaneous
commitment from
the seller to repurchase the instrument at a
specified
time and
agreed-upon
yield. Each Fund may enter into repurchase
agreements
with banks
or
broker-dealers deemed to be creditworthy by
IMI under
guidelines
approved by the
Board of Trustees. A Fund could experience a
delay in
obtaining
direct ownership
of the underlying collateral, and might incur
a loss if
the value
of the
security should decline.
RESTRICTED AND ILLIQUID SECURITIES:
There may be a
lapse of
time between a
Fund's decision to sell a restricted or
illiquid
security and the
point at which
the Fund is permitted or able to sell the
security. If
adverse
market conditions
were to develop during that period, the Fund
might
obtain a price
less favorable
than the price that prevailed when it decided
to sell.
In
addition, issuers of
restricted and other illiquid securities may
not be
subject to
the disclosure
and other investor protection requirements
that would
apply if
their securities
were publicly traded.
15
<PAGE>
SHARES OF OTHER INVESTMENT COMPANIES: As
a
shareholder of an
investment
company, a Fund will bear its ratable share
of the
investment
company's expenses
(including management fees, in the case of a
management
investment company).
"WHEN-ISSUED" SECURITIES AND FIRM
COMMITMENTS:
Purchasing
securities on a
"when-issued" or firm commitment basis
involves a risk
of loss if
the value of
the security to be purchased declines prior
to the
settlement
date.
ZERO COUPON BONDS: Zero coupon bonds are
debt
obligations
issued without
any requirement for the periodic payment of
interest,
and are
issued at a
significant discount from face value. Since
the
interest on such
bonds is, in
effect, compounded, they are subject to
greater market
value
fluctuations in
response to changing interest rates than debt
securities that
distribute income
regularly. In addition, for Federal income
tax purposes
a Fund
generally
recognizes and is required to distribute
income
generated by zero
coupon bonds
currently in the amount of the unpaid accrued
interest,
even
though the actual
income will not yet have been received by the
Fund.
ORGANIZATION AND MANAGEMENT OF THE FUNDS
Each Fund, other than Ivy Latin America
Strategy
Fund, is
organized as a
separate, diversified portfolio of the Trust,
an
open-end
management investment
company organized as a Massachusetts business
trust on
December
21, 1983. Ivy
Latin America Strategy Fund is organized as a
non-diversified
portfolio (see
"Special Considerations Related to Ivy Latin
America
Strategy
Fund"). The
business and affairs of each Fund are managed
under the
direction
of the
Trustees. Information about the Trustees, as
well as
the Trust's
executive
officers, may be found in the SAI. The Trust
has an
unlimited
number of
authorized shares of beneficial interest, and
currently
has 13
separate
portfolios. Each Fund has three classes of
shares,
designated as
Class A, Class
B and Class C. Ivy International Fund has a
fourth
class of
shares designated as
Class I. Shares of each Fund entitle their
holders to
one vote
per share (with
proportionate voting for fractional shares).
The shares
of each
class represent
an interest in the same portfolio of Fund
investments.
Each class
of shares,
except for Class I, has a different Rule
12b-1
distribution plan
and bears
different distribution fees. Shares of each
class have
equal
rights as to
voting, redemption, dividends and liquidation
but have
exclusive
voting rights
with respect to their Rule 12b-1 distribution
plans.
The Trust employs IMI to provide business
management services
to the Funds,
and investment advisory services to all of
the Funds
other than
Ivy Canada Fund
(which is advised by MFC). Mackenzie
Investment
Management Inc.
("MIMI")
provides administrative and accounting
services. Ivy
Mackenzie
Distributors,
Inc. ("IMDI") distributes the Funds' shares,
and Ivy
Mackenzie
Services Corp.
("IMSC") provides transfer agency and
shareholder-related
services for the
Funds. IMI, IMDI and IMSC are wholly-owned
subsidiaries
of MIMI.
Until January
31, 1995, MIMI served as investment adviser
to Ivy
Canada Fund
and Ivy Global
Fund. As of March 29, 1996, IMI and MIMI had
approximately $1.39
billion and
$186 million, respectively, in assets under
management.
MIMI is a
subsidiary of
MFC, which has been an investment counsel and
mutual
fund manager
in Toronto,
Ontario, Canada for more than 25 years.
INVESTMENT MANAGER
IVY CANADA FUND: For IMI's business
management
services, the
Fund pays IMI
a fee, which is accrued daily and paid
monthly, based
on the
Fund's daily net
assets at an annual rate of 0.50%. The Fund
pays MFC a
monthly
fee for advisory
services, which is accrued daily and paid
monthly,
based on the
Fund's daily net
assets at an annual rate of 0.35%. The fee is
higher
than that
charged by many
funds that invest primarily in U.S.
securities, but not
necessarily higher than
the fees charged to funds with investment
objectives
similar to
those of the
Fund.
IVY CHINA REGION FUND, IVY INTERNATIONAL
FUND, IVY
LATIN
AMERICA STRATEGY
FUND AND IVY NEW CENTURY FUND: For IMI's
business
management and
investment
advisory services, each Fund pays IMI a fee,
which is
accrued
daily and paid
monthly, based on each Fund's daily net
assets at an
annual rate
of 1.00%. The
fees paid by the Funds are higher than those
charged by
many
funds that invest
primarily in U.S. securities, but not
necessarily
higher than the
fees charged
to funds with investment objectives similar
to those of
the Fund.
IMI voluntarily limits the total
operating expenses
for Ivy
China Region
Fund, Ivy Latin America Strategy Fund and Ivy
New
Century Fund
(excluding Rule
12b-1 fees, interest taxes, brokerage
commissions,
litigation,
indemnification,
and extraordinary expenses) to an annual rate
of 1.95%
of the
Funds' average
daily net assets, which may lower each Fund's
expenses
and
increase its yield.
This voluntary expense limitation may be
terminated at
any time,
at which point
the affected Fund's expenses may increase and
its yield
may be
reduced
(depending on the value of the Fund's total
assets when
the
termination occurs).
Northern Cross currently serves as
subadviser for
Ivy
International Fund,
for which IMI pays a fee at the rate equal,
on an
annual basis,
to 0.60% of the
Fund's average net assets. From July 1, 1990
through
March 31,
1993 and from
November 18, 1985 through June 30, 1990,
Boston
Overseas
Investors, Inc. ("BOI")
and Marsh & Cunningham, Inc., respectively,
provided
subadvisory
services to the
Fund, based on the same investment strategy
and program
currently
employed by
Northern Cross.
IVY GLOBAL FUND: For IMI's business
management and
investment advisory
services, the Fund pays IMI a fee, which is
accrured
daily and
paid monthly,
based on the Fund's daily net assets at an
annual rate
of 1.00%
of the first
$500 million in net assets and 0.75% on net
assets over
$500
million. For the
fiscal year ended December 31, 1995, the Fund
paid IMI
an
investment management
fee of 1.00% of the Fund's average net
assets. The fee
is higher
than that
charged by many funds that invest primarily
in U.S.
securities,
but not
necessarily higher than the fees charged to
funds with
investment
objectives
similar to those of the Fund.
Currently, IMI voluntarily limits the
Fund's total
operating
expenses
(excluding Rule 12b-1 fees, interest taxes,
brokerage
commissions, litigation,
indemnification, and extraordinary expenses)
to an
annual rate of
1.95% of the
Fund's average daily net assets, which may
lower the
Fund's
expenses and
increase its total return. This voluntary
expense
limitation may
be terminated
at any time, at which point the Fund's
expenses may
increase and
its total
return may be reduced.
ALL FUNDS: IMI pays all expenses that it
incurs in
rendering
management
services to the Funds. Each Fund bears its
own
operational costs.
General
expenses of the Trust that are not readily
identifiable
as
belonging to a
particular series of the Trust (or a
particular class
thereof)
are allocated
among and charged to each series based on its
relative
net asset
size. Expenses
that are attributable to a particular Fund
(or class
thereof)
will be borne by
that Fund (or class) directly. The fees
payable to IMI
are
subject to any
reimbursement or fee waiver to which IMI may
agree (and
to any
applicable state
regulations that may require IMI to reimburse
a Fund if
its
aggregate operating
expenses exceed certain limitations).
16
<PAGE>
PORTFOLIO MANAGEMENT: The following
individuals
have
responsibilities for
management of the Funds:
- Frederick Sturm, a Senior Vice
President of MFC,
is the
portfolio manager
of Ivy Canada Fund. Mr. Sturm joined
MFC in 1983
and has 11
years of
professional investment experience. In
that time,
Mr. Sturm
has
established an excellent performance
record in
Canadian
equity investing,
including products that specialize in
the natural
resource
sector. Mr.
Sturm, a Chartered Financial Analyst,
is a
graduate of the
University of
Toronto where he earned a degree in
commerce and
finance.
- Michael G. Landry is the President and
a Director
of IMI
and MIMI and the
President and a Trustee of the Trust.
Mr. Landry
has headed
these
organizations since 1987. Previously he
was a
Senior Vice
President and
portfolio manager with the Templeton
organization. He has
over 20 years of
professional investment experience. He
has a
degree in
economics from
Carleton University. Mr. Landry is the
portfolio
manager
for the Ivy
Global Fund and manages the Ivy New
Century Fund
in
conjunction with the
Ivy emerging markets research team.
- Barbara Trebbi is a Senior Vice
President of IMI
and
managing director of
the Ivy emerging markets research team.
In
conjunction with
the Ivy
emerging markets research team she is
the
portfolio manager
for the Ivy
China Region Fund and the Ivy Latin
America
Strategy Fund.
Ms. Trebbi
joined the organization in 1988 and has
eight
years of
professional
investment experience. She is a
Chartered
Financial Analyst
and holds a
Graduate Diploma from the London School
of
Economics. In
addition to Ms.
Trebbi, the Ivy emerging markets
research team is
comprised
of Frank
DuMond, who has a Bachelor of Science
degree from
the
Massachusetts
Institute of Technology; Justin Lu,
located in
Shanghai,
who is a graduate
of Shanghai International University;
and Moira
McLachlan,
who earned her
degree in international business from
the
University of
South Carolina.
- Hakan Castegren, President of Northern
Cross, has
been the
portfolio
manager for Ivy International Fund
since its
inception in
1986 and has 36
years of professional investment
experience. He
earned his
MBA from the
Stockholm School of Economics.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative
services for
the Funds,
such as
maintaining the registration of Fund shares
under state
"Blue
Sky" laws, and
assisting with the preparation of Federal and
state
income tax
returns,
financial statements and periodic reports to
shareholders. MIMI
also assists the
Trust's legal counsel with the filing of
registration
statements,
proxies and
other required filings under Federal and
state law.
Under this
arrangement, the
average net assets attributable to each
Fund's Class A,
Class B
and Class C
shares are subject to a fee, accrued daily
and paid
monthly, at
an annual rate
of 0.10%. The net assets attributable to Ivy
International Fund's
Class I shares
are subject to a fee at the annual rate of
0.01%.
MIMI also provides certain accounting and
pricing
services
for the Funds
(see "Fund Accounting Services" in the SAI
for more
information).
TRANSFER AGENT
IMSC is the transfer and dividend-paying
agent for
the Funds,
and also
provides certain shareholder-related
services. Certain
broker-dealers that
maintain shareholder accounts with the Funds
through an
omnibus
account provide
transfer agent and other shareholder-related
services
that would
otherwise be
provided by IMSC if the individual accounts
that
comprise the
omnibus account
were opened by their beneficial owners
directly (see
"Investment
Advisory and
Other Services" in the SAI).
ALTERNATIVE PURCHASE ARRANGEMENTS
CLASS A SHARES: Class A shares are
subject to an
initial
sales charge,
unless the amount you purchase is $500,000 or
more (see
"Contingent Deferred
Sales Charge -- Class A Shares"). Certain
purchases
qualify for a
reduced
initial sales charge (see "Qualifying for a
Reduced
Sales
Charge"). Class A
shares are subject to ongoing service fees at
an annual
rate of
0.25% of a
Fund's average net assets attributable to its
Class A
shares. If
you do not
specify on your Account Application which
class of
shares you are
purchasing, it
will be assumed that you are investing in
Class A
shares.
CLASS B AND CLASS C SHARES: Class B and
Class C
shares are
not subject to
an initial sales charge, but are subject to a
CDSC if
redeemed
within six years
of purchase, in the case of Class B shares,
or within
one year of
purchase, in
the case of Class C shares. Both classes of
shares are
subject to
ongoing
service and distribution fees at a combined
annual rate
of up to
1.00% of a
Fund's average net assets attributable to its
Class B
or Class C
shares. The
ongoing distribution fee will cause these
shares to
have a higher
expense ratio
than that of Class A shares. Also, to the
extent that a
Fund pays
any dividends,
these higher expenses will result in lower
dividends
than those
paid on Class A
shares.
CLASS I SHARES: Class I shares are
offered by Ivy
International Fund only
to institutions and certain individuals, and
are not
subject to
an initial sales
charge or a CDSC, nor to ongoing service or
distribution fees.
Class I shares
also bear lower fees than Class A, Class B
and Class C
shares.
FACTORS TO CONSIDER IN CHOOSING AN
ALTERNATIVE:
The
multi-class structure
of the Funds allows you to choose the most
beneficial
way to buy
shares given
the size of your purchase and the length of
time you
expect to
hold your shares.
You should consider whether, during the
anticipated
life of your
Fund
investment, the accumulated service and
distribution
fees on
Class B and Class C
shares would be less than the initial sales
charge and
accumulated service fees
on Class A shares purchased at the same time,
and to
what extent
this
differential would be offset by the Class A
shares'
potentially
higher yield.
Also, sales personnel may receive different
compensation
depending on which
class of shares they are selling. The tables
under the
caption
"Annual Fund
Operating Expenses" at the beginning of this
Prospectus
contain
additional
information that is designed to assist you in
making
this
determination.
DIVIDENDS AND TAXES
Distributions you receive from a Fund are
reinvested in
additional shares of
the same class of a Fund unless you elect to
receive
them in
cash. Because of
the higher expenses associated with Class B
and Class C
shares,
any dividend on
these shares will be lower than on Class A
and Class I
shares.
Each Fund intends to make a distribution
for each
fiscal year
of any net
investment income and net realized short-term
capital
gain, as
well as any net
long-term capital gain realized during the
year. An
additional
distribution may
be made of net investment income, net
realized
short-term capital
gains and net
realized long-term capital gains to comply
with the
calendar year
distribution
requirement under the excise tax provisions
of Section
4982 of
the Code.
17
<PAGE>
TAXATION: The following discussion is
intended for
general
information
only. You should consult with your tax
adviser as to
the tax
consequences of an
investment in a particular Fund, including
the status
of
distributions from the
Fund under applicable state or local law.
Each Fund intends to qualify annually as
a
regulated
investment company
under the Code. To qualify, each Fund must
meet certain
income,
distribution and
diversification requirements. In any year in
which a
Fund
qualifies as a
regulated investment company and timely
distributes all
of its
taxable income,
the Fund generally will not pay any Federal
income or
excise tax.
Dividends paid out of a Fund's investment
company
taxable
income (including
dividends, interest and net short-term
capital gains)
will be
taxable to a
shareholder as ordinary income. If a portion
of a
Fund's income
consists of
dividends paid by U.S. corporations, a
portion of the
dividends
paid by the Fund
may be eligible for the corporate
dividends-received
deduction.
Distributions of
net capital gains (the excess of net
long-term capital
gains over
net short-term
capital losses), if any, are taxable as
long-term
capital gains,
regardless of
how long the shareholder has held a Fund's
shares.
Dividends are
taxable to
shareholders in the same manner whether
received in
cash or
reinvested in
additional Fund shares.
If, for any year, a Fund's total
distributions
exceed its
earnings and
profits, the excess will generally be treated
as a
return of
capital. The amount
treated as a return of capital will reduce a
shareholder's
adjusted basis in
his/her shares (thereby increasing potential
gain or
reducing
potential loss on
the sale of shares) and, to the extent that
the amount
exceeds
this basis, will
be treated as a taxable gain.
A distribution will be treated as paid on
December
31 of the
current
calendar year if it is declared by a Fund in
October,
November or
December with
a record date in such a month and paid by the
Fund
during January
of the
following calendar year. Such distributions
will be
taxable to
shareholders in
the calendar year in which the distributions
are
declared, rather
than the
calendar year in which the distributions are
received.
Investments in securities that are issued
at a
discount will
result each
year in income to a Fund equal to a portion
of the
excess of the
face value of
the securities over their issue price, even
though the
Fund
receives no cash
interest payments from the securities.
Income and gains received by a Fund from
sources
within
foreign countries
may be subject to foreign withholding and
other taxes.
Unless a
Fund is eligible
to and elects to "pass through" to its
shareholders the
amount of
foreign income
and similar taxes paid by the Fund, these
taxes will
reduce the
Fund's
investment company taxable income, and
distributions of
investment company
taxable income received from the Fund will be
treated
as U.S.
source income.
Any gain or loss realized by a
shareholder upon the
sale or
other
disposition of shares of a Fund, or upon
receipt of a
distribution in complete
liquidation of the Fund, generally will be a
capital
gain or loss
which will be
long-term or short-term, generally depending
upon the
shareholder's holding
period for the shares.
A Fund may be required to withhold U.S.
Federal
income tax at
the rate of
31% of all taxable distributions payable to
shareholders who fail
to provide the
Fund with their correct taxpayer
identification number
or to make
required
certifications, or who have been notified by
the
Internal Revenue
Service
("IRS") that they are subject to backup
withholding.
Backup
withholding is not
an additional tax. Any amounts withheld may
be credited
against
the
shareholder's U.S. Federal income tax
liability.
Fund distributions may be subject to
state, local
and foreign
taxes.
Distributions of a Fund which are derived
from interest
on
obligations of the
U.S. Government and certain of its agencies,
authorities and
instrumentalities
may be exempt from state and local taxes in
certain
states.
Further information
relating to tax consequences is contained in
the SAI.
PERFORMANCE DATA
Performance information (e.g., "total
return" and
"yield") is
computed
separately for each class of Fund shares in
accordance
with
formulas prescribed
by the SEC. Performance information for each
class may
be
compared in reports
and promotional literature to indices such as
the
Standard and
Poor's 500 Stock
Index, Dow Jones Industrial Average, and
Morgan Stanley
Capital
International
World Index. Advertisements, sales literature
and
communications
to shareholders
may also contain statements of a Fund's
current yield,
various
expressions of
total return and current distribution rate.
Performance
figures
will vary in
part because of the different expense
structures of the
Funds'
different
classes. ALL PERFORMANCE INFORMATION IS
HISTORICAL AND
IS NOT
INTENDED TO
SUGGEST FUTURE RESULTS.
"Total return" is the change in value of
an
investment in a
Fund for a
specified period, and assumes the
reinvestment of all
distributions and
imposition of the maximum applicable sales
charge.
"Average
annual total return"
represents the average annual compound rate
of return
of an
investment in a
particular class of Fund shares assuming the
investment
is held
for one year,
five years and ten years as of the end of the
most
recent
calendar quarter.
Where a Fund provides total return quotations
for other
periods,
or based on
investments at various sales charge levels or
at net
asset value,
"total return"
is based on the total of all income and
capital gains
paid to
(and reinvested
by) shareholders, plus (or minus) the change
in the
value of the
original
investment expressed as a percentage of the
purchase
price.
"Current yield" reflects the income per
share
earned by a
Fund's portfolio
investments, and is calculated by dividing
the Fund's
net
investment income per
share during a recent 30-day period by the
maximum
public
offering price on the
last day of that period and then annualizing
the
result.
Dividends or
distributions that were paid to a Fund's
shareholders
are
reflected in the
"current distribution rate," which is
computed by
dividing the
total amount of
dividends per share paid by a Fund during the
preceding
12 months
by the Fund's
current maximum offering price (which
includes any
applicable
sales charge). The
"current distribution rate" will differ from
the
"current yield"
computation
because it may include distributions to
shareholders
from sources
other than
dividends and interest, short term capital
gain and net
equalization credits and
will be calculated over a different period of
time.
HOW TO BUY SHARES
OPENING AN ACCOUNT: Complete and sign
the Account
Application on the last
page of this Prospectus. Make your check
payable to the
Fund in
which you are
investing. No third party checks will be
accepted.
Deliver these
items to your
registered representative or selling broker,
or send
them to one
of the
addresses below:
Regular Mail:
IVY MACKENZIE
SERVICES CORP.
P.O. BOX
3022
BOCA RATON, FL
33431-0922
18
<PAGE>
Courier:
IVY MACKENZIE
SERVICES CORP.
700 SOUTH FEDERAL
HIGHWAY, SUITE
300
BOCA RATON, FL
33432
The Funds reserve the right to reject,
for any
reason, any
purchase order.
MINIMUM INVESTMENT POLICIES: The minimum
initial
investment
is $1,000; the
minimum additional investment is $100.
Initial or
additional
amounts for
retirement accounts may be less (see
"Retirement
Plans").
Accounts in Class I of Ivy International
Fund can
be opened
with a minimum
initial investment of $5,000,000; the minimum
additional
investment is $10,000.
The minimum initial investment in Class I of
Ivy
International
Fund may be
spread over the thirteen-month period
following the
opening of
the account.
BUYING ADDITIONAL SHARES: You may add to
your
account at any
time through
any of the following options:
By Mail: Complete the investment slip
attached to
your
statement, or write
instructions including the account
registration, Fund
number and
account number
of the shares you wish to purchase. Send your
check
(payable to
the Fund in
which you are investing), along with your
investment
slip or
written
instructions, to one of the addresses above.
Through your Broker: Deliver the
investment slip
attached to
your
statement, or written instructions, along
with your
payment to
your registered
representative or selling broker.
By Wire: Purchases may also be made by
wiring
money from
your bank account
to your Ivy account. Your bank may charge a
fee for
wiring funds.
Before wiring
any funds, please call IMSC at
1-800-777-6472. Wiring
instructions are as
follows:
FIRST UNION NATIONAL
BANK OF
FLORIDA
JACKSONVILLE,
FL
ABA#063000021
ACCOUNT
#2090002063833
FOR FURTHER
CREDIT TO:
YOUR IVY ACCOUNT
REGISTRATION
YOUR FUND NUMBER AND
ACCOUNT
NUMBER
By Automatic Investment Method: Complete
Sections
6A and 7B
on the Account
Application (see "Automatic Investment
Method" on page
25 for
more information).
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Class A shares of
a Fund is
the net
asset value
("NAV") per share plus a sales charge, which
may be
reduced or
eliminated in
certain circumstances. The purchase price per
share is
known as
the public
offering price. Your purchase price for Class
B and
Class C
shares (and Class I
shares, in the case of Ivy International
Fund) is the
NAV per
share.
Share purchases will be made at the next
determined
price
after your
purchase order is received. The price is
effective for
orders
received by IMSC
or by your registered securities dealer prior
to the
time of the
determination
of the NAV. Any orders received after the
time of the
determination of the NAV
will be entered at the next calculated price.
Orders placed with a securities dealer
before the
NAV is
determined that are
transmitted through the facilities of the
National
Securities
Clearing
Corporation on the same day are confirmed at
that day's
price.
Any loss
resulting from the dealer's failure to submit
an order
by the
deadline will be
borne by that dealer.
You will receive an account statement
after any
purchase,
exchange or full
liquidation. Statements related to
reinvestment of
dividends,
capital gains,
automatic investment plans (see the SAI for
further
explanation)
and/or
systematic withdrawal plans will be sent
quarterly.
HOW EACH FUND VALUES ITS SHARES
The NAV per share is the value of one
share. The
NAV is
determined for each
Class of shares as of the close of the New
York Stock
Exchange on
each day the
Exchange is open by dividing the value of a
Fund's net
assets
attributable to a
class by the number of shares of that class
that are
outstanding,
adjusted to
the nearest cent. These procedures are
described more
completely
in the SAI.
The Trust's Board of Trustees has
established
procedures to
value a Fund's
securities in order to determine the NAV. The
value of
a foreign
security is
determined as of the normal close of trading
on the
foreign
exchange on which it
is traded or as of the close of regular
trading on the
New York
Stock Exchange,
if that is earlier. If no sale is reported at
that
time, the
average between the
current bid and asked price is used. All
other
securities for
which OTC market
quotations are readily available are valued
at the
average
between the current
bid and asked price. Securities and other
assets for
which market
prices are not
readily available are valued at fair value,
as
determined by IMI
and approved in
good faith by the Board. Money market
instruments of a
Fund are
valued at
amortized cost.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A
SHARES
Shares are purchased at a public offering
price
equal to
their NAV per share
plus a sales charge, as set forth below.
SALES CHAGE
----------------------- PORTION OF
AS A
AS A PUBLIC
PERCENTAGE PERCENTAGE OFFERING
OF
PUBLIC OF NET PRICE
OFFERING AMOUNT RETAINED
AMOUNT INVESTED
PRICE
INVESTED BY DEALER
-----------------------------------------------------
---------- ---------- ----------
Less than
$50,000....................................
5.75%
6.10% 5.00%
$50,000 but less than
$100,000.......................
5.25%
5.54% 4.50%
$100,000 but less than
$250,000......................
4.50%
4.71% 3.75%
$250,000 but less than
$500,000......................
3.00%
3.09% 2.50%
$500,000 or
over*....................................
0.00%
0.00% 0.00%
* A CDSC may apply to the redemption of Class
A shares
that are
purchased
without an initial sales charge. See
"Contingent
Deferred Sales
Charge --
Class A Shares."
Sales charges are not applied to any
dividends or
capital
gains that are
reinvested in additional shares of the Fund.
An
investor may be
charged a
transaction fee for Class A and Class I
shares (in the
case of
Ivy International
Fund) purchased or redeemed at NAV through a
broker or
agent
other than IMDI.
19
<PAGE>
With respect to purchases of $500,000 or
more
through dealers
or agents,
IMDI may, at the time of purchase, pay such
dealers or
agents
from its own
resources a commission to compensate such
dealers or
agents for
their
distribution assistance in connection with
such
purchases. The
commission would
be computed as set forth below:
NAV COMMISSION
TABLE
(FOR ALL IVY FUNDS EXCEPT IVY
INTERNATIONAL FUND)
PURCHASE
AMOUNT
COMMISSION
-----------------------------------------------------------------
------------- ----------
First
$3,000,000.......................................................
..... 1.00%
Next
$2,000,000.......................................................
..... .50%
Over
$5,000,000.......................................................
..... .25%
NAV COMMISSION
TABLE
(IVY
INTERNATIONAL FUND)
PURCHASE
AMOUNT
COMMISSION
-----------------------------------------------------------------
------------- ----------
First
$3,000,000.......................................................
..... .50%
Next
$2,000,000.......................................................
..... .25%
Over
$5,000,000.......................................................
..... .10%
Dealers who receive 90% or more of the
sales charge
may be
deemed to be
"underwriters" as that term is defined in the
1933 Act.
IMDI compensates participating brokers
who sell
Class A
shares through the
initial sales charge. IMDI retains that
portion of the
initial
sales charge that
is not reallowed to the dealers, which it may
use to
distribute a
Fund's Class A
shares. Pursuant to separate distribution
plans for the
Funds'
Class A, Class B
and Class C shares, IMDI bears various
promotional and
sales
related expenses,
including the cost of printing and mailing
prospectuses
to
persons other than
shareholders. Pursuant to the Funds' Class A
distribution plans,
IMDI currently
pays a continuing service fee to qualified
dealers at
an annual
rate of 0.25% of
qualified investments.
IMDI may from time to time pay a bonus or
other
incentive to
dealers (other
than IMDI) which employ a registered
representative who
sells a
minimum dollar
amount of the shares of a Fund and/or other
funds
distributed by
IMDI during a
specified period of time. This bonus or other
incentive
may take
the form of
payment for travel expenses, including
lodging,
incurred in
connection with
trips taken by qualifying registered
representatives
and members
of their
families to places within or without the U.S.
or other
bonuses
such as gift
certificates or the cash equivalent of such
bonus or
incentive.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A
SHARES
Purchases of $500,000 or more of Class A
shares
will be made
at NAV with no
initial sales charge, but if the shares are
redeemed
within 24
months (12
months, in the case of Ivy International
Fund) after
the end of
the calendar
month in which the purchase was made (the
CDSC period),
a CDSC of
1.00% will be
imposed (0.50%, in the case of Ivy
International Fund).
In order to recover commissions paid to
dealers on
NAV
transfers (as defined
in "Purchases of Class A Shares at Net Asset
Value"),
Class A
shares of a Fund
are subject to a CDSC of 1.00% (0.50%, in the
case of
Ivy
International Fund)
for certain redemptions within 24 months (12
months, in
the case
of Ivy
International Fund) after the date of
purchase.
The charge will be assessed on an amount
equal to
the lesser
of the current
market value or the original purchase cost of
the Class
A shares
redeemed.
Accordingly, no CDSC will be imposed on
increases in
account
value above the
initial purchase price, including any
dividends or
capital gains
which have been
reinvested in additional Class A shares.
In determining whether a CDSC applies to
a
redemption, the
calculation will
be determined in a manner that results in the
lowest
possible
rate being
charged. Therefore, it will be assumed that
the
redemption is
first made from
any shares in your account not subject to the
CDSC. The
CDSC is
waived in
certain circumstances. See the discussion
below under
the caption
"Waiver of
Contingent Deferred Sales Charge."
WAIVER OF CONTINGENT DEFERRED SALES
CHARGE: The
CDSC is
waived for (i)
redemptions in connection with distributions
not
exceeding 12%
annually of the
initial account balance (i.e., the value of
the
shareholder's
Class A Fund
account at the time of the initial
distribution) (ia)
following
retirement under
a tax qualified retirement plan, or (ib) upon
attaining
age 59
1/2 in the case
of an IRA, a custodial account pursuant to
section
403(b)(7) of
the Code or a
Keogh Plan; (ii) redemption resulting from
tax-free
return of an
excess
contribution to an IRA; or (iii) any partial
or
complete
redemption following
the death or disability (as defined in
Section 72(m)(7)
of the
Code) of a
shareholder from an account in which the
deceased or
disabled is
named, provided
that the redemption is requested within one
year of
death or
disability. IMDI
may require documentation prior to waiver of
the CDSC.
Class A shareholders may exchange their
Class A
shares
subject to a CDSC
("outstanding Class A shares") for Class A
shares of
another Ivy
or Mackenzie
Fund ("new Class A shares") on the basis of
the
relative NAV per
Class A share,
without the payment of any CDSC that would be
due upon
the
redemption of the
outstanding Class A shares. The original CDSC
rate that
would
have been charged
if the outstanding Class A shares were
redeemed will
carry over
to the new Class
A shares received in the exchange, and will
be charged
accordingly at the time
of redemption.
QUALIFYING FOR A REDUCED SALES CHARGE
RIGHTS OF ACCUMULATION (ROA): Rights of
Accumulation ("ROA")
is calculated
by determining the current market value of
all Class A
shares in
all Ivy or
Mackenzie fund accounts (except Ivy Money
Market Fund)
owned by
you, your
spouse, and your children under 21 years of
age. ROA is
also
applicable to
accounts under a trustee or other single
fiduciary
(including
retirement
accounts qualified under Section 401 of the
Code). The
current
market value of
each of your accounts as described above is
added
together and
then added to
your current purchase amount. If the combined
total is
equal or
greater than a
breakpoint amount for a Fund, then you
qualify for the
reduced
sales charge. To
reduce or eliminate the sales charge, you
must complete
Section
4B of the
Account Application.
LETTER OF INTENT (LOI): A Letter of
Intent ("LOI")
is a
non-binding
agreement that states your intention to
invest in
additional
Class A shares,
within a thirteen month period after the
initial
purchase, an
amount equal to a
breakpoint amount for a Fund. The LOI may be
backdated
up to 90
days. To sign an
LOI, please complete Section 4B of the
Account
Application.
Should the LOI not be fulfilled within
the thirteen
month
period, your
account will be debited for the difference
between the
full sales
charge that
applies for the amount actually invested and
the
reduced sales
charge actually
paid on purchases placed under the terms of
the LOI.
PURCHASES OF CLASS A SHARES AT NET ASSET
VALUE: An
investor
who was a
shareholder of any Ivy Fund on December 31,
1991 or a
shareholder
of American
Investors Income Fund, Inc. or American
Investors
Growth Fund,
Inc. on October
31, 1988 and who became a shareholder of Ivy
Bond Fund
20
<PAGE>
(formerly Mackenzie Fixed Income Trust) or
Ivy Growth
Fund as a
result of the
respective reorganizations of the funds will
be exempt
from sales
charges on the
purchase of Class A shares of any Ivy or
Mackenzie
fund. This
privilege is also
available to immediate family members of a
shareholder
(i.e., the
shareholder's
children, the shareholder's spouse and the
children of
the
shareholder's
spouse). This no-load privilege terminates
for the
investor if
the investor
redeems all shares owned. Shareholders and
their
relatives as
described above
should call 1-800-235-3322 for information
about
additional
purchases or to
inquire about their account.
Class A shares of a Fund may be purchased
without
an initial
sales charge or
CDSC by (i) officers and Trustees of the
Trust (and
their
relatives), (ii)
officers, directors, employees, retired
employees,
legal counsel
and independent
accountants of IMI, MIMI, and MFC (and their
relatives), and
(iii) directors,
officers, partners, registered
representatives,
employees and
retired employees
(and their relatives) of dealers having a
sales
agreement with
IMDI (or trustees
or custodians of any qualified retirement
plan or IRA
established
for the
benefit of any such person). In addition,
certain
investment
advisors and
financial planners who charge a management,
consulting
or other
fee for their
services and who place trades for their own
accounts or
the
accounts of their
clients may purchase Class A shares of a Fund
without
an initial
sales charge or
a CDSC, provided such purchases are placed
through a
broker or
agent who
maintains an omnibus account with that Fund.
Also,
clients of
these advisors and
planners may make purchases under the same
conditions
if the
purchases are
through the master account of such advisor or
planner
on the
books of such
broker or agent. This provision applies to
assets of
retirement
and deferred
compensation plans and trusts used to fund
those plans
including,
but not
limited to, those defined in Section 401(a),
403(b) or
457 of the
Code and
"Rabbi Trusts" whose assets are used to
purchase shares
of a fund
through the
aforementioned channels.
Class A shares of a Fund may be purchased
at NAV by
retirement plans
qualified under section 401(a) or 403(b) of
the Code,
subject to
the Employee
Retirement Income Security Act of 1974, as
amended. A
CDSC of
1.00% (0.50%, in
the case of Ivy International Fund) will be
imposed on
such
purchases in the
event of certain plan-level redemption
transactions
within 24
months (12 months,
in the case of Ivy International Fund)
following such
purchases.
If investments by retirement plans at NAV
are made
through a
dealer who has
executed a dealer agreement with respect to a
Fund,
IMDI may, at
the time of
purchase, pay the dealer out of IMDI's own
resources a
commission
to compensate
the dealer for its distribution assistance in
connection with the
retirement
plan's investment. Please refer to the NAV
Commission
Tables on
page 20 of this
Prospectus. Please contact IMDI for
additional
information.
Class A shares can also be purchased
without an
initial sales
charge, but
subject to a CDSC of 1.00% during the first
24 months
(0.50%
during the first 12
months, in the case of Ivy International
Fund), by: (a)
any
state, county, city
(or any instrumentality, department,
authority or
agency of such
entities) that
is prohibited by applicable investment laws
from paying
a sales
charge or
commission when purchasing shares of a
registered
investment
management company
(an "eligible governmental authority"), and
(b) trust
companies,
bank trust
departments, credit unions, savings and loans
and other
similar
organizations in
their fiduciary capacity or for their own
accounts,
subject to
any minimum
requirements set by IMDI (currently, these
criteria
require that
the amount
invested or to be invested in the subsequent
13-month
period
totals at least
$250,000). In either case, IMDI may pay
commissions to
dealers
that provide
distribution assistance on the same basis as
in the
preceding
paragraph.
Class A shares of a Fund may also be
purchased
without a
sales charge in
connection with certain liquidation, merger
or
acquisition
transactions
involving other investment companies or
personal
holding
companies.
Each Fund may, from time to time, waive
the initial
sales
charge on its
Class A shares sold to clients of various
broker-dealers with
which IMDI has a
selling relationship. This privilege will
apply only to
Class A
Shares of a Fund
that are purchased using all or a portion of
the
proceeds
obtained by such
clients through redemptions of shares (on
which a
commission has
been paid) of
an investment company (other than Mackenzie
Series
Trust or the
Trust), unit
investment trust or limited partnership ("NAV
transfers"). Some
dealers may
elect not to participate in this program.
Those dealers
that do
elect to
participate in the program must complete
certain forms
required
by IMDI. The
normal service fee, as described in the
"Initial Sales
Charge
Alternative --
Class A Shares" and "Contingent Deferred
Sales Charge
Alternative
-- Class B and
Class C Shares" sections of this Prospectus,
will be
paid to
dealers in
connection with these purchases. Additional
information
on
reductions or waivers
may be obtained from IMDI at the address
listed on the
cover of
the Prospectus.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE
-- CLASS B
AND CLASS
C SHARES
Class B and Class C shares are offered at
NAV per
share
without a front end
sales charge. Class C shares redeemed within
one year
of purchase
will be
subject to a CDSC of 1%, and Class B shares
redeemed
within six
years of
purchase will be subject to a CDSC at the
rates set
forth below.
This charge
will be assessed on an amount equal to the
lesser of
the current
market value or
the original purchase cost of the shares
being
redeemed.
Accordingly, you will
not be assessed a CDSC on increases in
account value
above the
initial purchase
price, including shares derived from
dividends or
capital gains
reinvested. In
determining whether a CDSC applies to a
redemption, the
calculation will be
determined in a manner that results in the
lowest
possible rate
being charged.
It will be assumed that your redemption comes
first
from shares
you have held
beyond the requisite maximum holding period
or those
you acquire
through
reinvestment of dividends or capital gains,
and next
from the
shares you have
held the longest during the requisite holding
period.
Proceeds from the CDSC are paid to IMDI.
The
proceeds are
used, in whole or
in part, to defray its expenses related to
providing
each Fund
with distribution
services in connection with the sale of Class
B and
Class C
shares, such as
compensating selected dealers and agents for
selling
these
shares. The
combination of the CDSC and the distribution
and
service fees
makes it possible
for a Fund to sell Class B or Class C shares
without
deducting a
sales charge at
the time of the purchase.
In the case of Class B shares, the amount
of the
CDSC, if
any, will vary
depending on the number of years from the
time you
purchase your
Class B shares
until the time you redeem them. Solely for
purposes of
determining this holding
period, any payments you make during the
quarter will
be
aggregated and deemed
to have been made on the last day of the
quarter. In
the case of
Class C shares,
solely for purposes of determining this
holding period,
any
purchases you make
during a month will be deemed to have been
made on the
last day
of the month.
21
<PAGE>
CONTINGENT
DEFERRED SALES
CHARGE AS A
CLASS B SHARES
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE
SUBJECT TO
CHARGE
----------------------------------------------
-----------------
First.........................................
5%
Second........................................
4%
Third.........................................
3%
Fourth........................................
3%
Fifth.........................................
2%
Sixth.........................................
1%
Seventh and
thereafter........................
0%
IMDI currently intends to pay to dealers
a sales
commission
of 4% of the
sale price of Class B shares that they have
sold, and
will
receive the entire
amount of the CDSC paid by shareholders on
the
redemption of
Class B shares to
finance the 4% commission and related
marketing
expenses.
With respect to Class C shares, IMDI
currently
intends to pay
to dealers a
sales commission of 1% of the sale price of
Class C
shares that
they have sold,
a portion of which is to compensate the
dealers for
providing
Class C
shareholder account services during the first
year of
investment.
IMDI will
receive the entire amount of the CDSC paid by
shareholders on the
redemption of
Class C shares to finance the 1% commission
and related
marketing
expenses.
Pursuant to separate distribution plans
for the
Funds' Class
B and Class C
shares, IMDI bears various promotional and
sales
related
expenses, including the
cost of printing and mailing prospectuses to
persons
other than
shareholders.
Under the Funds' Class B Plan, IMDI retains
0.75% of
the
continuing 1.00%
service/distribution fee assessed to Class B
shareholders, and
pays a continuing
service fee to qualified dealers at an annual
rate of
0.25% of
qualified
investments. Under the Class C Plan, IMDI
pays
continuing
service/distribution
fees to qualified dealers at an annual rate
of 1.00% of
qualified
investments
after the first year of investment (0.25% of
which
represents a
service fee).
CONVERSION OF CLASS B SHARES: Your Class
B shares
and an
appropriate
portion of both reinvested dividends and
capital gains
on those
shares will be
converted into Class A shares automatically
no later
than the
month following
eight years after the shares were purchased,
resulting
in lower
annual
distribution fees. If you exchanged Class B
shares into
a Fund
from Class B
shares of another Ivy or Mackenzie fund, the
calculation will be
based on the
time the shares in the original fund were
purchased.
WAIVER OF CONTINGENT DEFERRED SALES
CHARGE: The
CDSC is
waived for (i)
redemptions in connection with distributions
not
exceeding 12%
annually of the
initial account balance (i.e., the value of
the
shareholder's
Class B or Class C
Fund account at the time of the initial
distribution)
(ia)
following retirement
under a tax qualified retirement plan, or
(ib) upon
attaining age
59 1/2 in the
case of an IRA, a custodial account pursuant
to section
403(b)(7)
of the Code or
a Keogh Plan; (ii) redemption resulting from
tax-free
return of
an excess
contribution to an IRA; or (iii) any partial
or
complete
redemption following
the death or disability (as defined in
Section 72(m)(7)
of the
Code) of a
shareholder from an account in which the
deceased or
disabled is
named, provided
that the redemption is requested within one
year of
death or
disability. IMDI
may require documentation prior to waiver of
the CDSC.
ARRANGEMENTS WITH BROKER-DEALERS AND
OTHERS: IMDI
may, at
its own expense,
pay concessions in addition to those
described above to
dealers
that satisfy
certain criteria established from time to
time by IMDI.
These
conditions relate
to increasing sales of shares of the Funds
over
specified periods
and to certain
other factors. These payments may, depending
on the
dealer's
satisfaction of the
required conditions, be periodic and may be
up to (i)
0.25% of
the value of Fund
shares sold by the dealer during a particular
period,
and (ii)
0.10% of the
value of Fund shares held by the dealer's
customers for
more than
one year,
calculated on an annual basis.
HOW TO REDEEM SHARES
You may redeem your Fund shares through
your
registered
securities
representative, by mail or by telephone. A
CDSC may
apply to
certain Class A
share redemptions, to Class B share
redemptions prior
to
conversion and to Class
C shares that are redeemed within one year of
purchase.
All
redemptions are made
at the NAV next determined after a redemption
request
has been
received in good
order. Requests for redemptions must be
received by
4:00 p.m.
Eastern time to be
processed at the NAV for that day. Any
redemption
request in good
order that is
received after 4:00 p.m. Eastern time will be
processed
at the
price determined
on the following business day. IF SHARES TO
BE REDEEMED
WERE
PURCHASED BY CHECK,
PAYMENT OF THE REDEMPTION MAY BE DELAYED
UNTIL THE
CHECK HAS
CLEARED OR FOR UP
TO 15 DAYS AFTER THE DATE OF PURCHASE. If you
own
shares of more
than one class
of a Fund, the Fund will redeem first the
shares having
the
highest 12b-1 fees;
any shares subject to a CDSC will be redeemed
last
unless you
specifically elect
otherwise.
When shares are redeemed, a Fund
generally sends
you payment
on the next
business day. Under unusual circumstances, a
Fund may
suspend
redemptions or
postpone payment to the extent permitted by
Federal
securities
laws. The
proceeds of the redemption may be more or
less than the
purchase
price of your
shares, depending upon, among other factors,
the market
value of
the Fund's
securities at the time of the redemption. If
the
redemption is
for over $50,000,
or the proceeds are to be sent to an address
other than
the
address of record,
or an address change has occurred in the last
30 days,
it must be
requested in
writing with a signature guarantee. See
"Signature
Guarantees,"
below.
If you are not certain of the
requirements for a
redemption,
please contact
IMSC at 1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES
DEALER: The
Dealer is
responsible for
promptly transmitting redemption orders.
Redemptions
requested by
dealers will
be made at the NAV (less any applicable CDSC)
determined at the
close of regular
trading (4:00 p.m. Eastern time) on the day
that a
redemption
request is
received in good order by IMSC.
BY MAIL: Requests for redemption in
writing are
considered
to be in "proper
or good order" if they contain the following:
- Any outstanding certificate(s) for
shares being
redeemed.
- A letter of instruction, including the
account
registration, fund number,
the account number and the dollar
amount or
number of
shares to be
redeemed.
- Signatures of all registered owners
whose names
appear on
the account.
- Any required signature guarantees.
- Other supporting legal documentation,
if required
(in the
case of estates,
trusts, guardianships, corporations,
unincorporated
associations,
retirement plan trustees or others
acting in
representative
capacities).
The dollar amount or number of shares
indicated for
redemption must not
exceed the available shares or NAV of your
account at
the
next-determined
prices. If your request exceeds these limits,
then the
trade will
be rejected in
its entirety.
22
<PAGE>
Mail your request to IMSC at one of the
addresses
on page 18
of this
Prospectus.
BY TELEPHONE: Individual and joint
accounts may
redeem up to
$50,000 per
day over the telephone by contacting IMSC at
1-800-777-6472. In
times of unusual
economic or market changes, the telephone
redemption
privilege
may be difficult
to implement. If you are unable to execute
your
transaction by
telephone, you
may want to consider placing the order in
writing and
sending it
by mail or
overnight courier.
Checks will be made payable to the
current account
registration and sent to
the address of record. If there has been a
change of
address in
the last 30
days, please use the instructions for
redemption
requests by mail
described
above. A signature guarantee would be
required.
Requests for telephone redemptions will
be accepted
from the
registered
owner of the account, the designated
registered
representative or
the registered
representative's assistant.
Shares held in certificate form cannot be
redeemed
by
telephone.
If Section 6E of the Account Application
is not
completed,
telephone
redemption privileges will be provided
automatically.
Although
telephone
redemptions may be a convenient feature, you
should
realize that
you may be
giving up a measure of security that you may
otherwise
have if
you terminated
the privilege and redeemed your shares in
writing. If
you do not
wish to make
telephone redemptions or let your registered
representative do so
on your
behalf, you must notify IMSC in writing.
Each Fund employs reasonable procedures
that
require personal
identification
prior to acting on redemption instructions
communicated
by
telephone to confirm
that such instructions are genuine. In the
absence of
such
procedures, a Fund
may be liable for any losses due to
unauthorized or
fraudulent
telephone
instructions.
Receiving Your Proceeds By Federal Funds
Wire: For
shareholders who
established this feature at the time they
opened their
account,
telephone
instructions will be accepted for redemption
of amounts
up to
$50,000 ($1,000
minimum) and proceeds will be wired on the
next
business day to a
predesignated
bank account.
In order to add this feature to an
existing account
or to
change existing
bank account information, please submit a
letter of
instructions
including your
bank information to IMSC at the address
provided above.
The
letter must be
signed by all registered owners, and their
signatures
must be
guaranteed.
Your account will be charged a fee of $10
each time
redemption proceeds are
wired to your bank. Your bank may also charge
you a fee
for
receiving a Federal
Funds wire.
Neither IMSC nor any of the Funds can be
responsible for the
efficiency of
the Federal Funds wire system or the
shareholder's
bank.
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small
accounts
and
subject to state law
requirements, a Fund may redeem the accounts
of
shareholders
whose investment,
including sales charges paid, has been less
than $1,000
for more
than 12 months.
A Fund will not redeem an account unless the
shareholder has been
given at least
60 days' advance notice of the Fund's
intention to do
so. No
redemption will be
made if a shareholder's account falls below
the minimum
due to a
reduction in
the value of the Fund's portfolio securities.
This
provision does
not apply to
IRAs, other retirement accounts and UGMA/UTMA
accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent
fraudulent
redemptions,
we require a
signature guarantee in order to accommodate
the
following
requests:
- Redemption requests over $50,000.
- Requests for redemption proceeds to be
sent to
someone
other than the
registered shareholder.
- Requests for redemption proceeds to be
sent to an
address
other than the
address of record.
- Registration transfer requests.
- Requests for redemption proceeds to be
wired to
your bank
account (if this
option was not selected on your
original
application, or if
you are
changing the bank wire information).
A signature guarantee may be obtained
only from an
eligible
guarantor
institution as defined in Rule 17Ad-15 of the
Securities Exchange
Act of 1934,
as amended. An eligible guarantor institution
includes
banks,
brokers, dealers,
municipal securities dealers, government
securities
dealers,
government
securities brokers, credit unions, national
securities
exchanges,
registered
securities associations, clearing agencies
and savings
associations. The
signature guarantee must not be qualified in
any way.
Notarizations from notary
publics are not the same as signature
guarantees, and
are not
accepted.
Circumstances other than those described
above may
require a
signature
guarantee. Please contact IMSC at
1-800-777-6472 for
more
information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the
distribution
option that
best suits
your needs:
AUTOMATIC REINVESTMENT OPTION -- Both
dividends and
capital
gains are
automatically reinvested at NAV in additional
shares of
the same
class of a Fund
unless you specify one of the other options.
INVESTMENT IN ANOTHER IVY OR MACKENZIE
FUND -- Both
dividends
and capital
gains are automatically invested at NAV in
another Ivy
or
Mackenzie Fund of the
same class.
DIVIDENDS IN CASH/CAPITAL GAINS
REINVESTED --
Dividends will
be paid in
cash. Capital gains will be reinvested at NAV
in
additional
shares of the same
class of a Fund or another Ivy or Mackenzie
Fund of the
same
class.
DIVIDENDS AND CAPITAL GAINS IN CASH --
Both
dividends and
capital gains will
be paid in cash.
If you wish to have your cash
distributions
deposited
directly to your bank
account via electronic funds transfer
("EFT"), or if
you wish to
change your
distribution option, please contact IMSC at
1-800-777-6472.
If you wish to have your cash
distributions go to
an address
other than the
address of record, you must provide IMSC with
a letter
of
instruction signed by
all registered owners with signatures
guaranteed.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a
31% U.S.
Federal
backup withholding
tax on dividends, capital gains distributions
and
redemption
proceeds, you must
furnish a Fund with your certified tax
identification
number
("TIN") and
23
<PAGE>
certify that you are not subject to backup
withholding
due to
prior
underreporting of interest and dividends to
the IRS. If
you fail
to provide a
certified TIN, or such other tax-related
certifications
as a Fund
may require,
within 30 days of opening your new account,
each Fund
reserves
the right to
involuntarily redeem your account and send
the proceeds
to your
address of
record.
You can avoid the above withholding
and/or
redemption by
correctly
furnishing your TIN, and making certain
certifications,
in
Section 2 of the
Account Application at the time you open your
new
account, unless
the IRS
requires that backup withholding be applied
to your
account.
Certain payees, such as corporations,
generally are
exempt
from backup
withholding. Please complete IRS Form W-9
with the new
account
application to
claim this exemption. If the registration is
for an
UGMA/UTMA
account, please
provide the social security number of the
minor.
Non-U.S.
investors who do not
have a TIN must provide, with their Account
Application, a
completed IRS Form
W-8.
CERTIFICATES
In order to facilitate transfers,
exchanges and
redemptions,
most
shareholders elect not to receive
certificates. Should
you wish
to have a
certificate issued, please contact IMSC at
1-800-777-6472 and
request that one
be sent to you. (Retirement plan accounts are
not
eligible for
this service.)
Please note that if you were to lose your
certificate,
you would
incur an
expense to replace it.
Certificates requested by telephone for
shares
valued up to
$50,000 will be
issued to the current registration and mailed
to the
address of
record. Should
you wish to have your certificates mailed to
a
different address,
or registered
differently from the current registration,
contact IMSC
1-800-777-6472.
EXCHANGE PRIVILEGE
Shareholders of a Fund have an exchange
privilege
with other
Ivy and
Mackenzie funds. The Funds reserve the right
to reject,
for any
reason, any
exchange orders.
Class A shareholders may exchange their
outstanding
Class A
shares for Class
A shares of another Ivy or Mackenzie fund on
the basis
of the
relative NAV per
Class A share, plus an amount equal to the
difference
between the
sales charge
previously paid on the outstanding Class A
shares and
the sales
charge payable
at the time of the exchange on the new Class
A shares.
Incremental sales charges
are waived for outstanding Class A shares
that have
been invested
for 12 months
or longer.
Class B (and Class C) shareholders may
exchange
their
outstanding Class B
(or Class C) shares for Class B (or Class C)
shares of
another
Ivy or Mackenzie
Fund on the basis of the relative NAV per
Class B (or
Class C)
share, without
the payment of any CDSC that would otherwise
be due
upon the
redemption of Class
B (or Class C) shares. Class B shareholders
who
exercise the
exchange privilege
would continue to be subject to the original
Fund's
CDSC schedule
(or period)
following an exchange if such schedule is
higher (or
longer) than
the CDSC for
the new Class B shares.
Class I shareholders may exchange their
outstanding
Class I
shares for Class
I shares of another Ivy or Mackenzie Fund on
the basis
of the
relative NAV per
Class I share.
Shares resulting from the reinvestment of
dividends
and other
distributions
will not be charged an initial sales charge
or a CDSC
when
exchanged into
another Ivy or Mackenzie Fund.
Exchanges are considered to be taxable
events, and
may result
in a capital
gain or a capital loss for tax purposes.
Before
executing an
exchange, you
should obtain and read the prospectus and
consider the
investment
objective of
the fund to be purchased. Shares must be
uncertificated
in order
to execute a
telephone exchange. Exchanges are available
only in
states where
they can be
legally made. This privilege is not intended
to provide
shareholders a means by
which to speculate on short-term movements in
the
market. The
Funds reserve the
right to limit the frequency of exchanges.
Exchanges
are accepted
only if the
registrations of the two accounts are
identical.
Amounts to be
exchanged must
meet minimum investment requirements for the
Ivy or
Mackenzie
Fund into which
the exchange is made.
With respect to shares subject to a CDSC,
if less
than all of
an investment
is exchanged out of a Fund, the shares
exchanged will
reflect,
pro rata, the
cost, capital appreciation and/or
reinvestment of
distributions
of the original
investment as well as the original purchase
date, for
purposes of
calculating
any CDSC for future redemptions of the
exchanged
shares.
An investor who was a shareholder of
American
Investors
Income Fund, Inc. or
American Investors Growth Fund, Inc. prior to
October
31, 1988,
or a shareholder
of the Ivy Funds prior to December 31, 1991,
who became
a
shareholder of the
Fund as a result of a reorganization or
merger between
the Funds
may exchange
between funds without paying a sales charge.
An
investor who was
a shareholder
of American Investors Income Fund, Inc. or
American
Investors
Growth Fund, Inc.
on or after October 31, 1988, who became a
shareholder
of the
Fund as a result
of the reorganization between the Funds will
receive
credit
toward any
applicable sales charge imposed by any Ivy or
Mackenzie
Fund into
which an
exchange is made.
In calculating the sales charge assessed
on an
exchange,
shareholders will
be allowed to use the Rights of Accumulation
privilege.
EXCHANGES BY TELEPHONE: If Section 6D of
the
Account
Application is not
completed, telephone exchange privileges will
be
provided
automatically.
Although telephone exchanges may be a
convenient
feature, you
should realize
that you may be giving up a measure of
security that
you may
otherwise have if
you terminated the privilege and exchanged
your shares
in
writing. If you do not
wish to make telephone exchanges or let your
registered
representative do so on
your behalf, you must notify IMSC in writing.
In order to execute an exchange, please
contact
IMSC at
1-800-777-6472. Have
the account number of your current fund and
the exact
name in
which it is
registered available to give to the telephone
representative.
Each Fund employs reasonable procedures
that
require personal
identification
prior to acting on exchange instructions
communicated
by
telephone to confirm
that such instructions are genuine. In the
absence of
such
procedures, a Fund
may be liable for any losses due to
unauthorized or
fraudulent
telephone
instructions.
EXCHANGES IN WRITING: In a letter,
request an
exchange and
provide the
following information:
- The name and class of the fund whose shares
you
currently own.
- Your account number.
- The name(s) in which the account is
registered.
- The name of the fund in which you wish your
exchange
to be
invested.
- The number of shares or the dollar amount
you wish to
exchange.
The request must be signed by all
registered
owners.
24
<PAGE>
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A
shares of a
Fund have a
one-time
privilege of reinvesting all or a part of the
proceeds
of the
redemption back
into Class A shares of that Fund at NAV
(without a
sales charge)
within 60 days
after the date of redemption. IN ORDER TO
REINVEST
WITHOUT A
SALES CHARGE,
SHAREHOLDERS OR THEIR BROKERS MUST INFORM
IMSC THAT
THEY ARE
EXERCISING THE
REINVESTMENT PRIVILEGE AT THE TIME OF
REINVESTMENT. The
tax
status of a gain
realized on a redemption generally will not
be affected
by the
exercise of the
reinvestment privilege, but a loss realized
on a
redemption
generally may be
disallowed by the IRS if the reinvestment
privilege is
exercised
within 30 days
after the redemption. In addition, upon a
reinvestment,
the
shareholder may not
be permitted to take into account sales
charges
incurred on the
original
purchase of shares in computing their taxable
gain or
loss.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal
Plan at any
time by
completing the
Account Application, which is attached to
this
Prospectus. You
can also obtain
this application by contacting your
registered
representative or
IMSC at
1-800-777-6472. To be eligible, you must have
at least
$5,000 in
your account.
Payments (minimum distribution amount -- $50)
from your
account
can be made
monthly, quarterly, semi-annually, annually
or on a
selected
monthly basis, to
yourself or any other designated payee. You
may elect
to have
your systematic
withdrawal paid directly to your bank account
via EFT,
at no
charge. Share
certificates must be unissued (i.e., held by
a Fund)
while the
plan is in
effect. A Systematic Withdrawal Plan may not
be
established if
you are currently
participating in the Automatic Investment
Method. For
more
information, please
contact IMSC at 1-800-777-6472.
If payments you receive through the
Systematic
Withdrawal
Plan exceed the
dividends and capital appreciation of your
account, you
will be
reducing the
value of your account. Additional investments
made by
shareholders participating
in the Systematic Withdrawal Plan must equal
at least
$1,000
while the plan is
in effect. However, it may not be
advantageous to
purchase
additional Class A,
Class B or Class C shares when you have a
Systematic
Withdrawal
Plan, because
you may be subject to an initial sales charge
on your
purchase of
Class A shares
or to a CDSC imposed on your redemptions of
Class B or
Class C
shares. In
addition, redemptions are taxable events.
Amounts paid to you through the
Systematic
Withdrawal Plan
are derived from
the redemption of shares in your account. Any
applicable CDSC
will be assessed
upon the redemptions. A CDSC will not be
assessed on
withdrawals
not exceeding
12% annually of the initial account balance
when the
Systematic
Withdrawal Plan
was started.
Should you wish at any time to add a
Systematic
Withdrawal
Plan to an
existing account or change payee
instructions, you will
need to
submit a written
request, signed by all registered owners,
with
signatures
guaranteed.
Retirement accounts are eligible for
Systematic
Withdrawal
Plans. Please
contact IMSC at 1-800-777-6472 to obtain the
necessary
paperwork
to establish a
plan.
If the U.S. Postal Service cannot deliver
your
checks, or if
deposits to a
bank account are returned for any reason,
your
redemptions will
be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be
automatically
drawn
each month from
your bank for investment in Fund shares by
completing
Sections 6A
and 7B of the
Account Application. Attach a "voided" check
or deposit
slip to
your account
application. At pre-specified intervals, your
bank
account will
be debited and
the proceeds will be credited to your Ivy
account. The
minimum
investment under
this plan is $50 per month ($25 per month for
retirement plans).
There is no
charge to you for this program.
You may terminate or suspend your
Automatic
Investment Method
by telephone
at any time by contacting IMSC at
1-800-777-6472.
If you have investments being withdrawn
from a bank
account
and we are
notified that the account has been closed,
your
Automatic
Investment Method will
be discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy or
Mackenzie fund
accounts
having the same
taxpayer I.D. number will receive a single
quarterly
account
statement, unless
otherwise specified. This feature
consolidates the
activity for
each account
onto one statement. Requests for quarterly
consolidated
statements for all other
accounts must be submitted in writing and
must be
signed by all
registered
owners.
RETIREMENT PLANS
The Ivy and Mackenzie family of funds
offer several
tax-sheltered retirement
plans that may fit your needs:
- IRA (Individual Retirement Account)
- 401(k), Money Purchase Pension and
Profit Sharing
Plans
- SEP-IRA (Simplified Employee Pension
Plan)
- 403(b)(7) Plan
Minimum initial and subsequent
investments for
retirement
plans are $25.
Investors Bank & Trust, which serves as
custodian
or trustee
under the
retirement plan prototypes available from
each Fund,
charges
certain nominal
fees for annual maintenance. A portion of
these fees is
remitted
to IMSC, as
compensation for its services to the
retirement plan
accounts
maintained with
each Fund.
Distributions from retirement plans are
subject to
certain
requirements
under the Code. Certain documentation,
including IRS
Form W4-P,
must be provided
to IMSC prior to taking any distribution.
Please
contact IMSC for
details. The
Ivy and Mackenzie family of funds and IMSC
assume no
responsibility to determine
whether a distribution satisfies the
conditions of
applicable tax
laws, and will
not be responsible for any penalties
assessed. For
additional
information,
please contact your broker, tax adviser or
IMSC.
Please call IMSC at 1-800-777-6472 for
complete
information
kits describing
the plans, their benefits, restrictions,
provisions and
fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Funds should be
directed to
IMSC at
1-800-777-6472.
25
<PAGE>
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<PAGE>
APPENDIX
SELECTED ECONOMIC AND
MARKET
DATA
FOR CHINA REGION
COUNTRIES
The information set forth in this
Appendix has been
extracted
from various
government and private publications. Ivy
China Region
Fund and
the Trust's Board
of Trustees make no representation as to the
accuracy
of such
information, nor
has the Fund or the Trust's Board of Trustees
attempted
to verify
it.
The China Region, one of the fastest
growing areas
of the
world, is diverse,
dynamic and evolving. In terms of population,
this
region is
almost ten times
the size of the United States and is five
times the
size of
Europe.
Countries in this region are at various
stages of
economic
development. Hong
Kong and Singapore are at a more advanced
stage of
economic
growth while
countries such as Indonesia and China are at
the early
stages of
economic
development. GDP per capita data presented
below
illustrates this
point. The
following table shows the GDP, population and
per
capita GDP of
the China Region
countries and, for comparison purposes, the
United
States.
1994
GDP ($US POPULATION
PER
CAPITA
BILLIONS) (MILLIONS)
GDP
($US)
-------------- ----------
----------
Hong
Kong.............................................................
....... 131.8 5.7
23,123
Korea............................................................
............ 379.6
43.4
8,747
Singapore........................................................
............ 60.7
2.7
22,481
Taiwan...........................................................
............ 228.9
20.6
11,112
Thailand.........................................................
............ 143.2
54.5
2,628
Malaysia.........................................................
............ 71.6
17.6
4,068
Indonesia........................................................
............ 159.7
129.4
890
Philippines......................................................
............ 63.9
60.6
1,055
China............................................................
............ 529.2
1,131.9
467
China
Region...........................................................
...... 1,767.6 1,516.4
1,166
USA..............................................................
............ 6,738.4
248.7
27,095
Source: International Marketing Data and
Statistics,
19th Ed.
(Euromonitor
1995).
Total GDP for the China Region was about
$1.7
billion in
1994, approximately
one quarter of the GDP of the United States.
Year over
year
growth in GDP for
the China Region is significant, averaging
9.50% for
the
five-year period
1990-1994 compared with only 3.39% for the
United
States for the
same period.
The following tables show the annual change
in real GDP
and
inflation, as
measured by the Consumer Price Indexes (CPI),
in
1990-1994 and
the average for
the five-year period 1990-1994.
CHANGE IN REAL GROSS
DOMESTIC
PRODUCT
AVERAGE
1990
1991 1992 1993
1994
1990-94
----- ----- ----- -----
------
-------
Hong
Kong................................................
2.99% 3.94% 14.31% 14.75%
13.69%
9.94%
Korea....................................................
9.05% 8.38% 4.68% 7.43%
14.06%
8.72%
Singapore................................................
8.37% 6.79% 14.49% 7.81%
10.38%
9.57%
Taiwan...................................................
5.00% 7.30% 11.70% 6.97%
3.80%
6.95%
Thailand.................................................
10.27% 8.00% 8.50% 13.65%
14.36%
10.96%
Malaysia.................................................
9.95% 8.90% 22.32% 5.89%
11.05%
11.62%
Indonesia................................................
6.99% 6.35% 9.05% 13.10%
10.36%
9.17%
Philippines..............................................
2.44% -1.02% 16.50% 1.87%
17.46%
7.45%
China....................................................
5.37% 6.42% 14.85% 25.03%
-6.72%
8.99%
United
States............................................
0.64% -1.34% 5.81% 5.62%
6.23%
3.39%
Sources: 1989-1991 China Region countries,
except
Taiwan: World
Tables 1993, A
World Bank Book; 1989-1991 Taiwan:
Baring
Securities,
Pacific Rim Stock
Market Review, July 1993; 1992-1994
China
Region
countries:
International Marketing Data and
Statistics,
19th Ed.
(Euromonitor
1995).
A-1
<PAGE>
CHANGE IN CONSUMER
PRICE
INDEXES
AVERAGE
1990 1991 1992 1993
1994
1990-94
----- ----- ----- -----
-----
-------
Hong
Kong.................................................
9.76% 10.98% 9.40% 8.54%
8.00%
9.34%
Korea.....................................................
8.56% 9.59% 6.30% 4.84%
6.22%
7.10%
Singapore.................................................
3.46% 3.44% 2.30% 2.42%
3.01%
2.93%
Taiwan....................................................
4.10% 3.60% 4.40% *
*%
4.03%
Thailand..................................................
5.94% 5.69% 4.10% 3.31%
5.65%
4.94%
Malaysia..................................................
2.66% 4.34% 4.80% 3.59%
*%
3.85%
Indonesia.................................................
7.39% 9.31% 7.20% 9.23%
6.28%
7.88%
Philippines...............................................
14.18% 18.74% 8.90% 7.60%
*%
12.36%
China.....................................................
1.35% 2.90% 5.40% *
16.97%
6.66%
United
States.............................................
5.41% 4.26% 3.00% 3.00%
2.57%
3.65%
Sources: 1989-91 China Region countries,
except Taiwan
and
1991-1992 China:
World Tables 1993, A World Bank
Book;
1989-1991 Taiwan:
Baring
Securities, Pacific Rim Stock Market
Review,
July 1993;
1991-1992
China: China Statistical Yearbook;
1992 China
Region
countries: Morgan
Stanley Investment Research Japan &
Asia/Pacific
June/July, 1993;
1993-1994 China Region countries,
except
Taiwan and
China:
International Marketing Data and
Statistics,
19th Ed.
(Euromonitor
1995).
* Not available. Average reflects data from
available
years.
As the economic in the China Region have
experienced
different levels of
growth, so too have their stock markets.
Countries in
the China
Region now
account for nearly 9.4% of world stock market
capitalization. The
following
tables show the capitalization of the stock
markets,
and the
changes in stock
prices as measured by the local stock
indexes.
STOCK MARKET
CAPITALIZATION ($US
MILLIONS)
1990 1991 1992
1993
1994
------- ------- -------
-------
-------
China.........................................................
-- 2,028 18,255
40,567
43,521
Hong
Kong.....................................................
83,397 121,986 172,106
385,247
269,508
Korea.........................................................
110,594 96,373 107,448
139,420
191,778
Singapore.....................................................
34,308 47,637 48,818
132,742
134,516
Taiwan........................................................
100,710 124,864 101,124
195,191
242,325
Thailand......................................................
23,896 35,815 58,259
130,510
131,479
Malaysia......................................................
48,611 58,627 94,004
220,328
199,276
Indonesia.....................................................
8,081 6,823 12,038
32,953
47,241
Philippines...................................................
5,927 10,197 13,794
40,327
55,519
Sources: Emerging Stock Market Fact Book
1995,
International
Finance Corp.
ANNUAL PERCENTAGE
CHANGES IN
LOCAL
STOCK MARKET
INDEXES
1990 1991 1992
1993
1994
------ ------ ------
------
------
China............................................................
.. -- 192.80% 166.53%
6.84%
-22.30%
Hong
Kong..........................................................
6.63% 42.08% 28.27% 115.70%
28.8%
Korea............................................................
.. -23.48% -12.24% 11.05%
27.67%
18.61%
Singapore........................................................
.. -22.06% 29.12% 2.26%
48.30%
3.30%
Taiwan...........................................................
.. -52.93% 1.56% -26.60%
79.76%
17.36%
Thailand.........................................................
.. -30.29% 16.07% 25.59%
88.36%
-19.18%
Malaysia.........................................................
.. -10.02% 9.94% 15.77%
98.04%
-23.85%
Indonesia........................................................
.. 4.53% -40.79% 10.89%
114.61%
-20.23%
Philippines......................................................
.. -45.10% 94.77% 5.27%
166.60%
-12.84%
Sources: China Region countries, except
Singapore,
Emerging Stock
Market Fact
Book 1995, International Finance
Corp.; Hong
Kong and
Singapore
1988-1992: Baring Securities,
Pacific Rim
Stock Market
Review, July
1993; Hong Kong and Singapore 1993:
Jardine
Fleming,
January 1994; Hong
Kong and Singapore 1994: Morgan
Stanley.
A-2
<PAGE>
Equity valuations in the China Region, as
measured
by
price/earnings ratios,
also vary from country to country according
to economic
growth
forecasts,
corporate earnings growth forecasts, the
outlook for
inflation,
exchange rates
and overall investor sentiment.
PRICE/EARNINGS
RATIOS
1990 1991 1992
1993
1994
----- ----- -----
-----
-----
Hong
Kong.............................................................
.. 10.5 12.9 15.8
*
13.3
Korea............................................................
....... 16.4 21.3 21.4
25.1
34.5
Singapore........................................................
....... 16.3 17.7 16.1
*
19.5
Taiwan...........................................................
....... 25.0 22.3 16.6
34.7
36.8
Thailand.........................................................
....... 8.7 12.0 13.9
27.5
21.2
Malaysia.........................................................
....... 23.6 21.3 21.8
43.5
29.0
Indonesia........................................................
....... 20.3 11.6 12.2
28.9
20.2
Philippines......................................................
....... 11.3 11.3 14.1
38.8
30.8
Sources: 1989-1992 Hong Kong and Singapore:
Morgan
Stanley;
1989-1993 all other
China Region countries: Emerging
Stock Market
Fact Book
1995,
International Finance Corp.; Hong
Kong and
Singapore
1994: Morgan
Stanley.
* Not available.
The following table shows changes in the
exchange
rate of the
currency of
each China Region country relative to the
U.S. dollar
for the
years ended
December 31, 1990-1994.
CURRENCY MOVEMENTS VERSUS US
DOLLAR (%
CHANGE)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1990 1991 1992
1993
1994
------ ----- ------
------
-----
Hong
Kong............................................................
0.10% 0.30% 0.50%
0.20%
0%
Korea............................................................
.... -5.19% -5.83% -3.77%
-2.44%
-6.13%
Singapore........................................................
.... 9.20% 7.40% -1.20%
2.30%
10.2%
Taiwan...........................................................
.... -2.18% 4.43% 1.31%
-4.51%
-2.73%
Thailand.........................................................
.... 1.20% 1.00% -1.70%
-0.20%
-1.47%
Malaysia.........................................................
.... 0.01% -0.82% 4.03%
-2.90%
-3.38%
Indonesia........................................................
.... -4.87% -4.79% -3.85%
-1.88%
4.51%
Philippines......................................................
.... -19.96% 4.02% 2.15%
-5.19%
-9.62%
China
(Official).....................................................
-9.80% -3.10% -7.50% -0.90%
4.51%
China
(SWAP).........................................................
3.70% -4.10% -19.80% -11.50%
*%
Sources: China Region countries, except Hong
Kong and
Singapore:
Emerging Stock
Market Fact Book 1995, International
Finance
Corp.; Hong
Kong,
Singapore and China, 1988-1992:
Baring
Securities,
Pacific Rim Stock
Market Review, July 1993; 1993 Hong
Kong and
Singapore:
Jardine
Fleming; 1993 China: Mees Pierson
Securities,
Inc.; 1994
Hong Kong and
Singapore: Morgan Stanley.
* Dual exchange rates were eliminated in
1994.
A-3
<PAGE>
ACCOUNT
APPLICATION
IVY CANADA
FUND
IVY CHINA REGION
FUND
IVY GLOBAL
FUND
______________________
IVY INTERNATIONAL
FUND
ACCOUNT NUMBER
IVY LATIN AMERICA
STRATEGY FUND
IVY NEW CENTURY
FUND
Please mail applications and checks to:
Ivy
Mackenzie
Services Corp.,
P.O. Box 3022, Boca Raton,
FL
33431-0922.
(This application should not be used for
retirement
accounts for
which Ivy is
custodian.)
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
FUND USE ONLY
101/
1 / 2 1 / 2 0 / 1 0
/ X
----------------------- --------- ---------
------------
-------- ---------- --------- ---------
------------
Dealer # Branch # Rep #
Acct
Type Soc
Cd Div Cd CG Cd Exc Cd
Red Cd
-----------------------------------------------------------------
-----------------------------------------------------------------
--
1 REGISTRATION
[ ] Individual
_________________________________________________________________
_______________________
[ ] Joint Tenant Owner,
Custodian or
Trustee
[ ] Estate
_________________________________________________________________
_______________________
[ ] UGMA|UTMA Co-owner or
Minor
[ ] Corporation
_________________________________________________________________
_______________________
[ ] Partnership
Minor's State of
Residence
[ ] Sole Proprietor
_________________________________________________________________
_______________________
[ ] Trust Street
__________________
_________________________________________________________________
_______________________
Date of Trust
[ ] Other ____________
_________________________________________________________________
_______|__|__|__|__|__|
__________________ City
State Zip
Code
|__|__|__|-|__|__|__|-|__|__|__|__|
|__|__|__|-|__|__|__|-|__|__|__|__|
Phone Number
-- Day
Phone Number -- Evening
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
2 TAX ID #
|__|__|__|-|__|__|-|__|__|__|__| or
|__|__|-|__|__|__|__|__|__|__| Citizenship [
] U.S. [
] Other
_______________
Social Security Number Tax
Identification Number
Under penalties of perjury, I certify by
signing in
Section 8
below that: (1) the number shown in this
section is my
correct
taxpayer identification number (TIN), and (2)
I am not
subject to
backup withholding because: (a) I have not
been
notified by the
Internal Revenue Service (IRS) that I am
subject to
backup
withholding as a result of a failure to
report all
interest or
dividends,
or (b) the IRS has notified me that I am no
longer
subject to
backup withholding. (Cross out item (2) if
you have
been notified
by
the IRS that you are currently subject to
backup
withholding
because of underreporting interest or
dividends on your
tax
return.)
Please see the "Tax Identification Number"
section of
the
Prospectus for additional information on
completing
this section.
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
3 DEALER INFORMATION
The undersigned ("Dealer") agrees to all
applicable
provisions in
this Application, guarantees the signature
and legal
capacity of
the Shareholder, and agrees to notify MIISC
of any
purchases made
under a Letter of Intent or Rights of
Accumulation.
__________________________________________________________
__________________________________________________________
Dealer Name
Representative's Name and Number
__________________________________________________________
__________________________________________________________
Branch Office Address
Representative's Phone Number
__________________________________________________________
__________________________________________________________
City State Zip
Code
Authorized Signature of Dealer
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
4 INVESTMENTS
A. Enclosed is my check ($1,000 minimum)
made payable
to the
appropriate Fund.* Please invest as follows:
$______________ Ivy Canada Fund
[ ] Class
A [ ] Class B or [ ] Class C shares
$______________ Ivy China Region Fund
[ ] Class
A [ ] Class B or [ ] Class C shares
$______________ Ivy Global Fund
[ ] Class
A [ ] Class B or [ ] Class C shares
$______________ Ivy International Fund
[ ] Class
A [ ] Class B [ ] Class C or [ ] Class I
shares
$______________ Ivy Latin America
Strategy Fund
[ ] Class
A [ ] Class B or [ ] Class C shares
$______________ Ivy New Centry Fund
[ ] Class
A [ ] Class B or [ ] Class C shares
*If
investing in more than one Fund, make your
check
payable
to "Ivy Funds".
B. I qualify for a reduced sales charge due
to the
following
privilege (applies only to Class A shares):
[ ] New Letter of Intent (if ROA or
90-day backdate
privilege
is applicable, provide account(s) information
below.)
[ ] ROA with the account(s) listed below.
[ ] Existing Letter of Intent with
account(s)
listed below.
_____________________________________________________
|__|__|__|__|__|__|__|__|__|__| [ ] or New
Fund Name
Account Number
_____________________________________________________
|__|__|__|__|__|__|__|__|__|__| [ ] or New
Fund Name
Account Number
If establishing a Letter of Intent, you
will need
to purchase
Class A shares over a thirteen-month period
in
accordance with
the provisions in the Prospectus. The
aggregate
amount of
these purchases will be at least equal to the
amount
indicated
below
(see Prospectus for minimum amount
required for
reduced sales
charges.)
[ ] $50,000 [ ] $100,000 [ ]
$250,000
[ ]
$500,000
C. FOR DEALER USE ONLY
Confirmed trade orders:
|__|__|__|__|__|__| |__|__|__|__|__|__| -
|__|__|__|
|__|__|__|__|__|__|
Confirm
Number Number of Shares
Trade
Date
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
5 DISTRIBUTION OPTIONS
A. I would like to reinvest dividends and
capital
gains into
additional shares of the same class in this
account at
net asset
value unless a different option is
checked below.
B. [ ] Reinvest all dividends and capital
gains into
additional
shares of the same class in an account in a
different
Ivy or
Mackenzie fund.
_____________________________________
|__|__|__|__|__|__|__|__|__|__| [ ]
New Account
Fund Name
Account Number
C. [ ] Pay all dividends in cash and
reinvest capital
gains into
additional shares of the same class in this
account or
an account
in a different Ivy or Mackenzie fund.
_____________________________________
|__|__|__|__|__|__|__|__|__|__| [ ]
New Account
Fund Name
Account Number
D. [ ] Pay all dividends and capital gains
in cash.
I REQUEST THE
ABOVE CASH
DISTRIBUTION, SELECTED IN C OR D ABOVE, BE:
[ ] Sent to the address listed in the
registration.
[ ] Sent
to the special payee listed in Section 7A [ ]
(By Mail)
7B [ ]
(By
E.F.T.)
-----------------------------------------------------------------
-----------------------------------------------------------------
--
<PAGE>
-----------------------------------------------------------------
-----------------------------------------------------------------
--
6 OPTIONAL SPECIAL FEATURES
A. [ ] AUTOMATIC INVESTMENT METHOD (AIM)
I wish to invest [ ] once per month.
My bank account will be debited on or about
the
[ ] twice
______________ day of the month(*)
[ ] 3 times
______________ day of the month
[ ] 4 times
______________ day of the month
______________ day of the month
Please invest $_____________ each
period
starting in the
month of _______ in [ ] Class A [ ] Class B
or
Dollar Amount
Month [ ] Class C of
_________________________ .
Fund Name
[ ] I have attached a voided check to
ensure my
correct
bank account will be debited.
B. [ ] SYSTEMATIC WITHDRAWAL PLANS(*)
I wish to automatically withdraw
funds from my
account in
Class A [ ] Class B [ ] or Class C [ ] of
_______________________
Fund
Name
[ ] Once [ ] Twice [ ] 3 times [ ] 4
times per
month
[ ] Monthly [ ] Quarterly [ ]
Semianually [ ]
Annually
I request the distribution be:
[ ] Sent to the address listed in the
registration.
[ ] Sent to the special payee listed in
Section 7.
[ ] Invested into additional shares of
the same
class of a different Ivy or Mackenzie
fund:
_______________________________
Fund Name
|__|__|__|__|__|__|__|__|__|__|
Account Number
Amount $ _______________, starting on or
about the
_______________day of
________________________
Minimum $50
month
_______________day of
________________________
month
_______________day of
________________________
month*
NOTE: Account minimum: $5,000 in shares
at current
offering
price
C. [ ] FEDERAL FUNDS WIRE FOR REDEMPTION
PROCEEDS**
I authorize the Agent to honor
telephone
instructions for
the redemption of Fund shares up to $50,000.
Proceeds
may be
wire transferred to the bank account
designated
($1,000
minimum). (COMPLETE SECTION 7B)
D. [ ] TELEPHONIC EXCHANGES** [ ] Yes [ ] No
I authorize exchanges by telephone
among the Ivy
and
Mackenzie family of funds, upon instructions
from any
person as
more
fully described in the Prospectus. To
change
this option
once established, written instructions must
be received
from the
shareholder of record or the current
registered
representative.
If neither box is checked, the
telephone
exchange
privilege will be provided automatically.
E. [ ] TELEPHONIC REDEMPTIONS** [ ] Yes [ ]
No
The Fund or its agents are authorized
to honor
telephone
instructions from any person as more fully
described in
the
Prospectus for the redemption of Fund
shares.
The amount
of the redemption shall not exceed $50,000
and the
proceeds
are to be payable to the shareholder
of record
and mailed
to the address of record. To change this
option once
established,
written instructions must be received
from the
shareholder
of record or the current registered
representative.
If neither box is checked, the
telephone
exchange
privilege will be provided automatically.
* There must be a period of at least
seven
calendar days
between each investment/withdrawal period.
** This option may not be selected if
shares are
issued in
certificate form.
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
7 SPECIAL PAYEE
A. MAILING ADDRESS
B. FED WIRE / E.F.T.
INFORMATION
-----------------------------------------------------------------
------------------------------------------------------------
Please send all disbursements to this
special
payee
-------------------------------------------------------
----------------------------------------------------
Name of Bank or Individual
Financial Institution
-------------------------------------------------------
----------------------------
---------------------
Account Number (If Applicable)
ABA # Account
#
-------------------------------------------------------
----------------------------------------------------
Street
Street
-------------------------------------------------------
----------------------------------------------------
City/State/Zip
City/State/Zip
(Please attach a voided
check)
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
8 SIGNATURES
Investors should be aware that failure to
check "No"
under
Section 6D and 6E above means that the
Telephone
Exchange/Redemptions
Privileges will be provided. The Funds employ
reasonable
procedures that require personal
identification prior
to acting
on
exchange/redemption instructions communicated
by
telephone to
confirm that such instructions are genuine.
In the
absence of
such
procedures, a Fund may be liable for any
losses due to
unauthorized or fraudulent telephone
instructions.
Please see
"Exchange
Privilege" and "How to Redeem Shares" in the
Prospectus
for more
information on these privileges.
I certify to my legal capacity to purchase or
redeem
shares of
the Fund for my own account or for the
account of the
organization
named in Section 1. I have received a current
Prospectus and
understand its terms are incorporated in this
application by
reference. I am certifying my taxpayer
information as
stated in
Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE
YOUR
CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATION
REQUIRED
TO AVOID BACKUP WITHHOLDING.
-----------------------------------------------------------------
---------- ------------------
Signature of Owner, Custodian, Trustee or
Corporate
Officer
Date
-----------------------------------------------------------------
---------- ------------------
Signature of Joint Owner, Co-Trustee or
Corporate
Officer
Date
-----------------------------------------------------------------
-----------------------------------------------------------------
--
INTL-1-496 (REMEMBER TO SIGN
SECTION 8)
<PAGE>
April 30, 1996
Ivy
Money
Market
Fund
----------
Prospectus
----------
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
IVY FUND (THE "TRUST") IS A REGISTERED
INVESTMENT
COMPANY
CURRENTLY CONSISTING
OF THIRTEEN SEPARATE PORTFOLIOS. ONE
PORTFOLIO OF THE
TRUST, IVY
MONEY MARKET
FUND (THE "FUND"), IS DESCRIBED IN THIS
PROSPECTUS.
THIS PROSPECTUS SETS FORTH CONCISELY THE
INFORMATION
ABOUT THE
FUND THAT A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE
INVESTING.
PLEASE READ IT
CAREFULLY AND
RETAIN IT FOR FUTURE REFERENCE. ADDITIONAL
INFORMATION
ABOUT THE
FUND IS
CONTAINED IN THE STATEMENT OF ADDITIONAL
INFORMATION
FOR THE FUND
DATED APRIL
30, 1996 (THE "SAI"), WHICH HAS BEEN FILED
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION ("SEC") AND IS INCORPORATED BY
REFERENCE
INTO THIS
PROSPECTUS. THE
SAI IS AVAILABLE UPON REQUEST AND WITHOUT
CHARGE FROM
THE TRUST
AT THE
DISTRIBUTOR'S ADDRESS AND TELEPHONE NUMBER
BELOW.
AN INVESTMENT IN THE FUND IS NEITHER INSURED
NOR
GUARANTEED BY
THE U.S.
GOVERNMENT. THERE IS NO ASSURANCE THAT THE
FUND WILL BE
ABLE TO
MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED
BY THE
SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
NOR HAS
THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES
COMMISSION PASSED
UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S>
<C>
Expense Information . . . . . . . . . . . . .
. 2
The Fund's Financial Highlights . . . . . . .
. 2
Investment Objective and Policies . . . . . .
. 3
Risk Factors and Investment Techniques . . .
. 3
Organization and Management of the Fund . . .
. 4
Investment Manager . . . . . . . . . . . . .
. 4
Fund Administration and Accounting . . . . .
. 4
Transfer Agent . . . . . . . . . . . . . . .
. 5
Dividends and Taxes . . . . . . . . . . . . .
. 5
Performance Data . . . . . . . . . . . . . .
. 5
How to Buy Shares . . . . . . . . . . . . . .
. 5
How Your Purchase Price is Determined . . . .
. 6
How the Fund Values its Shares . . . . . . .
. 6
How to Redeem Shares . . . . . . . . . . . .
. 6
Minimum Account Balance Requirements . . . .
. 7
Signature Guarantees . . . . . . . . . . . .
. 7
Choosing a Distribution Option . . . . . . .
. 8
Tax Identification Number . . . . . . . . . .
. 8
Certificates . . . . . . . . . . . . . . . .
. 8
Exchange Privilege . . . . . . . . . . . . .
. 8
Systematic Withdrawal Plan . . . . . . . . .
. 9
Automatic Investment Method . . . . . . . . .
. 9
Consolidated Account Statements . . . . . . .
. 9
Retirement Plans . . . . . . . . . . . . . .
. 10
Shareholder Inquiries . . . . . . . . . . . .
. 10
</TABLE>
<TABLE>
<S> <C>
<C> <C>
BOARD OF TRUSTEES
OFFICERS
TRANSFER AGENT
INVESTMENT
MANAGER
John S. Anderegg, Jr. Michael G.
Landry,
President
Ivy Mackenzie Ivy
Management,
Inc.
Paul H. Broyhill Keith J.
Carlson, Vice
President
Services Corp.
Boca Raton,
FL
Stanley Channick C.
William Ferris,
P.O. Box 3022
Frank W. DeFriece, Jr.
Secretary/Treasurer
Boca Raton, FL 33431-0922
DISTRIBUTOR
Roy J. Glauber Michael R.
Peers,
Chairman
1-800-777-6472
Ivy
Mackenzie
Michael G. Landry
Distributors,
Inc.
Michael R. Peers LEGAL
COUNSEL
AUDITORS Via
Mizner
Financial Plaza
Joseph G. Rosenthal Dechert
Price &
Rhoads
Coopers & Lybrand L.L.P. 700
South Federal
Highway
Richard N. Silverman
Boston, MA
Ft. Lauderdale, FL Boca
Raton, FL
33432
J. Brendan Swan
1-800-456-5111
CUSTODIAN
Brown
Brothers Harriman
& Co.
Boston, MA
</TABLE>
Throughout
the
centuries,
the castle keep
has
been a
source
of long-range
vision
and
strategic
advantage.
<PAGE>
EXPENSE INFORMATION
The table and example below are
designed to
assist you in
understanding the
various costs and expenses that you will bear
directly
or
indirectly as an
investor in the Fund.
SHAREHOLDER
TRANSACTION
EXPENSES
<TABLE>
<CAPTION>
CLASS A,
CLASS B
AND
CLASS C
SHARES
-----------
<S>
<C>
Maximum sales load imposed on purchases
(as a
percentage of
offering
price)*..........................................................
.. None
The Fund has no sales load on reinvested
dividends,
no
deferred
sales load, no redemption fees and no
exchange
fees.**
</TABLE>
* Exchanges from the Fund into any other Ivy
or
Mackenzie fund
into which
exchanges are permitted may be subject to
a sales
charge
unless previously
paid (see "Exchange Privilege").
** The Fund does not assess a contingent
deferred sales
charge
("CDSC").
However, if the shares of another Ivy or
Mackenzie
fund that
are subject to a
CDSC are exchanged for shares of the Fund,
the CDSC
may carry
over to the
investment in the Fund and may be assessed
upon
redemption
(see "How to
Redeem Shares" and "Exchange Privilege").
ANNUAL FUND
OPERATING EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET
ASSETS)
<TABLE>
<CAPTION>
CLASS A,
CLASS B
AND
CLASS C
SHARES
-----------
<S>
<C>
Management Fees After Expense
Reimbursements*.......................
0.00%
12b-1 Service/Distribution
Fees.....................................
N/A
Other
Expenses......................................................
0.85%
-----------
Total Fund Operating Expenses After
Expense
Reimbursements**........ 0.85%
===========
</TABLE>
* Management Fees reflect expense
reimbursements.
Without
expense
reimbursements, Management Fees would have
been
0.40%.
** Ivy Management, Inc. ("IMI"), as
investment adviser,
currently
limits the
Fund's Total Fund Operating Expenses After
Expense
Reimbursements (excluding
taxes, interest, litigation and
indemnification
expenses and
other
extraordinary expenses) to an annual rate
of 0.85%
of the
Fund's average net
assets. Without the expense
reimbursements, Total
Fund
Operating Expenses for
the year ended December 31, 1995 would
have been
1.39%.
EXAMPLE*
(CLASS A, CLASS B AND
CLASS C
SHARES)
The following table lists the expenses an
investor
would pay
on a $1,000
investment in the Fund, assuming (1) 5%
annual return
and (2)
redemption at the
end of each time period. The Example further
assumes
reinvestment
of all
dividends and distributions, and that the
percentage
amounts
under "Total Fund
Operating Expenses After Expense
Reimbursements"
(above) remain
the same each
year. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF
PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE HIGHER OR
LOWER THAN
THOSE
SHOWN.
<TABLE>
<CAPTION>
1 YEAR(1) 3 YEARS
5
YEARS
10 YEARS
----------- -----------
-----------
-----------
<S> <C>
<C>
<C>
$9 $27
$47
$105
</TABLE>
* Net of expense reimbursements. See Annual
Fund
Operating
Expenses, above.
The information in the table above
does not
reflect the
charge of $10 per
transaction that would apply if a shareholder
elects to
have
redemption proceeds
wired to his/her bank account. For a more
detailed
discussion of
the Fund's fees
and expenses, see "Organization and
Management of the
Fund" in
this Prospectus,
and "Investment Advisory and Other Services"
in the
SAI.
THE FUND'S FINANCIAL HIGHLIGHTS
Unless otherwise noted, the following
table is
for fiscal
periods ending
December 31 of each year. The accounting firm
of
Coopers &
Lybrand L.L.P. has
audited the Fund since December 31, 1992.
Their report
is
included in the Fund's
Annual Report, which is incorporated by
reference into
the SAI.
The information
for fiscal periods prior to December 31, 1992
was
audited by
other independent
accountants. The Fund's Annual Report
contains
additional
information about the
Fund's performance. For a copy of the Fund's
Annual
Report, call
1-800-777-6472.
Expense and income ratios have been
annualized
for periods
of
less than one
year. Total returns do not reflect sales
charges, and
are not
annualized for
periods of less than one year. There were no
Class B or
Class C
shares
outstanding as of December 31, 1995.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------
SELECTED PER SHARE
DATA
1995 1994 1993
1992
------- ------- -------
-------
<S>
<C> <C> <C>
<C>
Net asset value, beginning of
period................................... $
1.00
$ 1.00
$ 1.00 $ 1.00
------- ------- -------
-------
Income from investment operations:
Net investment
income(a)..............................................
.05
.04 .02 .03
Less distributions:
From net investment
income:...........................................
(.05)
(.04) (.02) (.03)
------- ------- -------
-------
Net asset value, end of
period......................................... $
1.00 $
1.00 $ 1.00 $ 1.00
======= ======= =======
=======
Total
return(%)........................................................
4.80 4.21 2.42
2.81
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)...............................
$24,609
$26,827
$25,782 $18,839
Ratio of expenses to average net assets:
With expense
reimbursement(%).........................................
.85 .85 .85 .85
Without expense
reimbursement(%)......................................
1.39
1.24 1.56 1.45
Ratio of net investment income to average net
assets(%)(a)............. 4.91
3.29
2.22
2.75
<CAPTION>
SELECTED PER SHARE
DATA
1991 1990 1989
1988
------- ------- -------
-------
<S>
<C> <C>
Net asset value, beginning of
period................................... $
1.00
$ 1.00
$ 1.00 $ 1.00
------- ------- -------
-------
Income from investment operations:
Net investment
income(a)..............................................
.05
.07 .09 .07
Less distributions:
From net investment
income:...........................................
(.05)
(.07) (.09) (.07)
------- ------- -------
-------
Net asset value, end of
period......................................... $
1.00 $
1.00 $ 1.00 $ 1.00
======= ======= =======
=======
Total
return(%)........................................................
5.16 7.69 8.87
6.89
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)...............................
$21,675
$26,140
$19,708 $11,789
Ratio of expenses to average net assets:
With expense
reimbursement(%).........................................
.85 .67 .65 .68
Without expense
reimbursement(%)......................................
1.21
1.22 1.37 1.73
Ratio of net investment income to average net
assets(%)(a)............. 5.06
7.43
8.42
6.86
<CAPTION>
SELECTED PER SHARE
DATA
1987(B)
-------
Net asset value, beginning of
period................................... $
1.00
-------
Income from investment operations:
Net investment
income(a)..............................................
.01
Less distributions:
From net investment
income:...........................................
(.01)
-------
Net asset value, end of
period......................................... $ 1.00
=======
Total
return(%)........................................................
1.86
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)...............................
$6,784
Ratio of expenses to average net assets:
With expense
reimbursement(%)......................................... .85
Without expense
reimbursement(%)......................................
1.94
Ratio of net investment income to average net
assets(%)(a)............. 6.77
</TABLE>
---------------
(a) Net investment income is net of expenses
reimbursed
by IMI.
(b) From October 15, 1987 (commencement of
operations)
to
December 31, 1987.
2
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to obtain as high a
level of
current income
as
is consistent
with the preservation of capital and
liquidity by
investing in
high-quality,
short-term securities. The Fund's investment
objective
is
fundamental and may
not be changed without the approval of a
majority of
the Fund's
outstanding
voting shares, although the Trustees may make
non-material
changes in the Fund's
objectives without shareholder approval.
Except for the
Fund's
investment
objective and those investment restrictions
specifically
identified as
fundamental, all investment policies and
practices
described in
this Prospectus
and in the SAI are not fundamental and
therefore may be
changed
by the Trustees
without shareholder approval. There can be no
assurance
that the
Fund will
achieve its investment objectives. The
different types
of
securities and
investment techniques used by the Fund
involve varying
degrees of
risk. For
information about the particular risks
associated with
each type
of investment,
see "Investment Techniques and Risk Factors,"
below,
and the
SAI.
Whenever an investment objective, policy
or
restriction
described in this
Prospectus or in the SAI states a maximum
percentage of
assets
that may be
invested in a security or other asset, or
describes a
policy
regarding quality
standards, that percentage limitation or
standard will,
unless
otherwise
indicated, apply to the Fund only at the time
a
transaction takes
place. Thus,
if a percentage limitation is adhered to at
the time of
investment, a later
increase or decrease in the percentage that
results
from
circumstances not
involving any affirmative action by the Fund
will not
be
considered a violation.
The Fund invests in money market
instruments
maturing
within
thirteen months
or less and maintains a portfolio with a
dollar-weighted average
maturity of 90
days or less. By purchasing such short-term
securities,
the Fund
will attempt to
maintain a constant net asset value of $1.00
per share.
The
Fund's portfolio of
investments is actively monitored on a daily
basis to
maintain
competitive
yields on investments.
The Fund will invest in the following
categories of
money
market
instruments: (i) debt securities issued or
guaranteed
by the U.S.
Government,
its agencies or instrumentalities; (ii)
obligations
(including
certificates of
deposit and bankers' acceptances) of domestic
banks and
savings
and loan
associations; (iii) high-quality commercial
paper that
at the
time of purchase
is rated at least A-2 by Standard and Poor's
Corporation ("S&P")
or P-2 by
Moody's Investors Service, Inc. ("Moody's")
or, if
unrated, is
issued or
guaranteed by a corporation with outstanding
debt rated
AA or
higher by S&P or
Aa or higher by Moody's or which is judged by
IMI to be
of at
least equivalent
quality; (iv) short-term corporate notes,
bonds and
debentures
that at the time
of purchase are rated at least AA by S&P or
Aa by
Moody's or that
are judged by
IMI to be of at least equivalent quality; and
(v)
repurchase
agreements with
domestic banks for periods not exceeding
seven days and
only with
respect to
U.S. Government securities that throughout
the period
have a
value at least
equal to the amount of the loan (including
accrued
interest).
The securities in which the Fund invests
must
present minimal
credit risk
and be rated in one of the two highest rating
categories for
short-term debt
obligations by at least two major rating
agencies
assigning a
rating to the
securities or issuer, or if only one rating
agency has
assigned a
rating, by
that agency or determined to be of equivalent
value by
IMI.
Purchases of
securities that are rated by only one rating
agency
must be
previously approved
or ratified subsequently by the Trustees.
Securities
that are
rated in the
highest category by at least two major rating
agencies
(or that
have been issued
by an issuer that is rated with respect to a
class of
short-term
debt
obligations, or any security within that
class,
comparable in
priority and
quality with such securities) are designated
"First
Tier
Securities." Securities
rated in the top two categories by at least
two major
rating
agencies, but which
are not rated in the highest category by two
or more
major rating
agencies, are
designated "Second Tier Securities." IMI
shall
determine whether
a security
presents minimal credit risk under procedures
adopted
by the
Board of Trustees.
The Fund may not invest more than 5%
of its
total assets
in
the securities
of any one issuer, except this limitation
shall not
apply to U.S.
Government
securities. Further, the Fund will not invest
more than
the
greater of 1% of its
total assets or one million dollars in the
securities
of a single
issuer that
were Second Tier Securities when acquired by
the Fund.
In
addition, the Fund may
not invest more than 5% of its total assets
in
securities that
are Second Tier
Securities when acquired by the Fund. As a
fundamental
policy,
the Fund may not
borrow money, except for temporary purposes,
and then
only in an
amount not
exceeding 10% of the value of the Fund's
total
assets.
RISK FACTORS AND INVESTMENT TECHNIQUES
DEBT SECURITIES, IN GENERAL: Investment
in debt
securities
involves both
interest rate and credit risk. Generally, the
value of
debt
instruments rises
and falls inversely with fluctuations in
interest
rates. Bonds
with longer
maturities generally are more volatile than
bonds with
shorter
maturities. The
market value of debt securities also varies
according
to the
relative financial
condition of the issuer. In general,
lower-quality
bonds offer
higher yields due
to the increased risk that the issuer will be
unable to
meet its
obligations on
interest or principal payments at the time
called for
by the debt
instrument.
INVESTMENT-GRADE DEBT SECURITIES:
Bonds rated
Aaa by
Moody's
and AAA by S&P
are judged to be of the best quality (i.e.,
capacity to
pay
interest and repay
principal is extremely strong). Bonds rated
Aa/AA are
considered
to be of high
quality (i.e., capacity to pay interest and
repay
principal is
very strong and
differs from the highest rated issues only to
a small
degree).
Bonds rated A are
viewed as having many favorable investment
attributes,
but
elements may be
present that suggest a susceptibility to the
adverse
effects of
changes in
circumstances and economic conditions than
debt in
higher rated
categories.
Bonds rated Baa/BBB (considered by Moody's to
be
"medium grade"
obligations) are
considered to have an adequate capacity to
pay interest
and repay
principal, but
certain protective elements may be lacking
(i.e., such
bonds lack
outstanding
investment characteristics and have some
speculative
characteristics).
U.S. GOVERNMENT SECURITIES: U.S.
Government
securities are
obligations of,
or guaranteed by, the U.S. Government, its
agencies or
instrumentalities. Such
securities include: (1) direct obligations of
the U.S.
Treasury
(such as
Treasury bills, notes, and bonds) and (2)
Federal
agency
obligations guaranteed
as to principal and interest by the U.S.
Treasury (such
as GNMA
certificates,
which are mortgage-backed securities). When
such
securities are
held to
maturity, the payment of principal and
interest is
unconditionally guaranteed by
the U.S. Government, and thus they are of the
highest
possible
credit quality.
U.S. Government securities that are not held
to
maturity are
subject to
variations in market value caused by
fluctuations in
interest
rates.
Mortgage-backed securities are securities
representing part
ownership of a
pool of mortgage loans. Although the mortgage
loans in
the pool
will have
maturities of up to 30 years, the actual
average life
of the
loans typically
will be substantially less because the
mortgages will
be subject
to principal
amortization and may be prepaid prior to
maturity. In
periods of
falling
interest rates, the rate of prepayment tends
to
increase, thereby
shortening the
actual average life of the security.
Conversely, rising
interest
rates tend to
decrease the rate of prepayment, thereby
lengthening
the
security's actual
average life. Since it is not possible to
predict
accurately the
average life of
a particular pool, and
3
<PAGE>
because prepayments are reinvested at current
rates,
the market
value of
mortgage-backed securities may decline during
periods
of
declining interest
rates.
BANK OBLIGATIONS: Bank obligations in
which the
Fund may
invest include
certificates of deposit, bankers'
acceptances, and
other
short-term debt
obligations. Investments in certificates of
deposit and
bankers'
acceptances are
limited to obligations of (i) banks having
total assets
in excess
of $1 billion,
and (ii) other banks if the principal amount
of such
obligation
is fully insured
by the Federal Deposit Insurance Corporation
("FDIC").
Investments in
certificates of deposit of savings
associations are
limited to
obligations of
Federal or state-chartered institutions whose
total
assets exceed
of $1 billion
and whose deposits are insured by the FDIC.
COMMERCIAL PAPER: Commercial paper
represents
short-term
unsecured
promissory notes issued in bearer form by
bank holding
companies,
corporations
and finance companies. Investments in
commercial paper
are
limited to
obligations rated Prime 1 by Moody's or A-1
by S&P or,
if not
rated by Moody's
or S&P, issued by companies having an
outstanding debt
issue
currently rated Aaa
or Aa by Moody's or AAA or AA by S&P.
REPURCHASE AGREEMENTS: Repurchase
agreements are
agreements
under which the
Fund buys a money market instrument and
obtains a
simultaneous
commitment from
the seller to repurchase the instrument at a
specified
time and
at an
agreed-upon yield. The Fund will not enter
into a
repurchase
agreement with more
than seven days to maturity if, as a result,
more than
10% of the
Fund's net
assets would be invested in illiquid
securities
including such
repurchase
agreements. The Fund may enter into
repurchase
agreements with
banks or
broker-dealers deemed to be creditworthy by
IMI under
guidelines
approved by the
Board of Trustees. The Fund could experience
a delay in
obtaining
direct
ownership of the underlying collateral and
might incur
a loss if
the value of
the security should decline.
BORROWING: Borrowing may subject the
Fund's share
price to
greater
fluctuation. Money borrowed will be subject
to interest
costs
(which may include
commitment fees and/or the cost of
maintaining minimum
average
balances).
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is organized as a separate,
diversified
portfolio
of
the Trust, an
open-end management investment company
organized as a
Massachusetts business
trust on December 21, 1983. The business and
affairs of
the Fund
are managed
under the direction of the Trustees.
Information about
the
Trustees, as well as
the Trust's executive officers, may be found
in the
SAI. The
Trust has an
unlimited number of authorized shares of
beneficial
interest, and
currently has
13 separate portfolios. The Fund has three
classes of
shares,
designated as
Class A, Class B and Class C. The purpose of
these
designations
is primarily to
enable the transfer agent for the Ivy and
Mackenzie
funds to
track the
contingent deferred sales charge period that
applies to
Class B
and Class C
shares of other Ivy and Mackenzie funds that
are being
exchanged
for shares of
the Fund. In all other relevant respects, the
Fund's
Class A,
Class B and Class
C shares are identical (i.e., having the same
arrangement for
shareholder
services and the distribution of securities).
Shares of
each
class are entitled
to one vote per share (with proportionate
voting for
fractional
shares), and
have equal rights as to voting, redemption,
dividends
and
liquidation.
The Trust employs IMI to provide business
management and
investment advisory
services; Mackenzie Investment Management
Inc. ("MIMI")
to
provide
administrative and accounting services; Ivy
Mackenzie
Distributors, Inc.
("IMDI") to distribute the Fund's shares; and
Ivy
Mackenzie
Services Corp.
("IMSC") to provide transfer agent and
shareholder-related
services for the
Fund. IMI, IMDI and IMSC are wholly-owned
subsidiaries
of MIMI.
As of March 29,
1996, IMI and MIMI had approximately $1.39
billion and
$186
million,
respectively, in assets under management.
MIMI is a
subsidiary of
Mackenzie
Financial Corporation ("MFC"), which has been
an
investment
counsel and mutual
fund manager in Toronto, Ontario, Canada for
more than
25 years.
INVESTMENT MANAGER
For IMI's business management and
investment
advisory
services, the Fund
pays IMI a fee that is accrued daily and paid
monthly,
based on
the Fund's daily
net assets. The fee is equal, on an annual
basis, to
0.40% of the
Fund's average
net assets.
IMI pays all expenses it incurs in
rendering
management
services to the
Fund. The Fund bears its cost of operations.
General
expenses of
the Trust that
are not readily identifiable as belonging to
a
particular series
of the Trust
(or a particular class thereof) are allocated
among and
charged
to each series
based on its relative net asset size.
Expenses that are
attributable to a
particular Fund (or class thereof) will be
borne solely
by that
Fund (or class).
IMI will reimburse the Fund to the extent
total
expenses exceed
required limits
imposed by state securities regulators.
IMI currently limits the Fund's total
operating
expenses
(excluding
interest, taxes, litigation and
indemnification
expenses, and
other
extraordinary expenses) to an annual rate of
0.85% of
the Fund's
average net
assets. As long as the Fund's expense
limitation
continues, it
may lower the
Fund's expenses and increase its yield. The
Fund's
expense
limitation may be
terminated or revised at any time, at which
time the
Fund's
expenses may
increase and its yield may be reduced.
PORTFOLIO MANAGEMENT: The Fund is
managed by a
team, with
each team member
having specific responsibilities. The
following
individuals have
responsibilities related to the management of
the Fund:
Leslie A.
Ferris, a
Senior Vice President of IMI and Managing
Director --
Fixed
Income, has been a
portfolio manager for the Fund since 1995.
Ms. Ferris
joined the
Ivy Mackenzie
fund complex (the "Fund Complex") in 1988 and
has 14
years of
professional
investment experience. She is a Chartered
Financial
Analyst and
holds an MBA
degree from The University of Chicago. Prior
to joining
the Fund
Complex, Ms.
Ferris was a portfolio manager at Kemper
Financial
Services Inc.
from 1982 to
1988. Michael Borowsky serves as a Portfolio
Analyst
for the
Fund.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative
services for
the Fund,
such as
maintaining the registration of Fund shares
under state
"Blue
Sky" laws,
assisting in the preparation of Federal and
state
income tax
returns and
preparing financial and other information for
prospectuses,
statements of
additional information, and periodic reports
to
shareholders.
MIMI also assists
the Trust's legal counsel with SEC
registration
statements,
proxies and other
required filings. Under the agreement, the
Fund's net
assets are
subject to a
fee, accrued daily and paid monthly, at the
annual rate
of 0.10%.
MIMI also provides certain accounting
and
pricing services
for the Fund (see
"Fund Accounting Services" in the SAI for
more
information).
4
<PAGE>
TRANSFER AGENT
IMSC is the transfer and
dividend-paying agent
for the
Fund,
and also
provides certain shareholder-related
services. Certain
broker-dealers that
maintain shareholder accounts with the Fund
through an
omnibus
account provide
transfer agent and other shareholder-related
services
that would
otherwise be
provided by IMSC if the individual accounts
that
comprise the
omnibus account
were opened by their beneficial owners
directly (see
"Investment
Advisory and
Other Services" in the SAI).
DIVIDENDS AND TAXES
Distributions you receive from the Fund
are
reinvested in
additional Fund
shares of the same class unless you elect to
receive
them in
cash. If you elect
the cash option and the U.S. Postal Service
cannot
deliver your
checks, your
election will be converted to the
reinvestment option.
TAXATION: The following discussion is
intended for
general
information
only. You should consult with your tax
advisor as to
the tax
consequences of an
investment in the Fund, including the status
of
distributions
from the Fund
under applicable state or local law.
The Fund intends to qualify annually a
regulated
investment
company under
the Code. To qualify, the Fund must meet
certain
income,
distribution and
diversification requirements. In any year in
which the
Fund
qualifies as a
regulated investment company and timely
distributes all
of its
taxable income,
the Fund generally will not pay any Federal
income or
excise tax.
Dividends paid out of the Fund's
investment company
taxable
income
(including dividends, interest and net
short-term
capital gain)
will be taxable
to a shareholder as ordinary income. If a
portion of
the Fund's
income consists
of dividends paid by U.S. corporations, a
portion of
the
dividends paid by the
Fund may be eligible for the corporate
dividends-received
deduction.
Distributions of net capital gain (the excess
of net
long-term
capital gain over
net short-term capital loss), if any, are
taxable as
long-term
capital gains,
regardless of how long the shareholder has
held the
Fund's
shares. Dividends are
taxable to shareholders in the same manner
whether
received in
cash or
reinvested in additional Fund shares.
A distribution will be treated as paid on
December
31 of the
current
calendar year if it is declared by the Fund
in October,
November
or December
with a record date in such a month and paid
by the Fund
during
January of the
following calendar year. Such distributions
will be
taxable to
shareholders in
the calendar year in which the distributions
are
declared, rather
than the
calendar year in which the distributions are
received.
Each year the Fund will notify
shareholders of the
tax status
of dividends
and distributions.
Investments in securities that are issued
at a
discount will
result in
income to the Fund each year equal to a
portion of the
excess of
the face value
of the securities over their issue price,
even though
the Fund
receives no cash
interest payments from the securities.
Shareholders generally are not expected
to realize
any gain
or loss upon a
disposition of shares of the Fund, as long as
the Fund
maintains
a constant net
asset value per share. In the unlikely event
that the
Fund were
unable to do so,
any gain or loss realized by a shareholder
upon the
sale or other
disposition of
shares of the Fund, or upon receipt of a
distribution
in complete
liquidation of
the Fund, generally would be a capital gain
or loss
which would
be long-term or
short-term, generally depending upon the
shareholder's
holding
period for the
shares.
The Fund may be required to withhold U.S.
Federal
income tax
at the rate of
31% of all taxable distributions payable to
shareholders who fail
to provide the
Fund with their correct taxpayer
identification number
or to make
required
certifications, or who have been notified by
the
Internal Revenue
Service
("IRS") that they are subject to backup
withholding.
Backup
withholding is not
an additional tax. Any amounts withheld may
be credited
against
the
shareholder's U.S. Federal income tax
liability.
Fund distributions may be subject to
state, local
and foreign
taxes. Fund
distributions that are derived from interest
on
obligations of
the U.S.
Government and certain of its agencies,
authorities and
instrumentalities may be
exempt from state and local taxes in certain
states.
You should
consult with
your tax advisor regarding the particular tax
consequences of an
investment in
the Fund. Further information relating to tax
consequences is
contained in the
SAI.
PERFORMANCE DATA
Comparative performance information
may be used
from time
to
time in
advertising or marketing the shares of the
Fund,
including data
from Lipper
Analytical Services, Inc., Donoghue's Money
Fund
Report, The Bank
Rate Monitor,
other industry publications, business
periodicals,
rating
services and market
indices. ALL PERFORMANCE INFORMATION IS
HISTORICAL AND
IS NOT
INTENDED TO
SUGGEST FUTURE RESULTS.
The yield of a Fund refers to the
income
generated by an
investment in the
Fund over a seven-day period (which period
will be
stated in the
advertisement).
This income is then annualized; that is, the
amount of
income
generated by the
investment during that week is assumed to be
generated
each week
over a 52 week
period and is shown as a percentage of the
investment.
HOW TO BUY SHARES
OPENING AN ACCOUNT: Complete and sign
the
Account
Application on the last
page of this Prospectus. Make your check
payable to Ivy
Money
Market Fund. No
third party checks will be accepted. Deliver
these
items to your
registered
representative or selling broker, or send
them to one
of the
addresses below:
Regular Mail:
IVY MACKENZIE
SERVICES CORP.
P.O. BOX
3022
BOCA RATON, FL
33431-0922
Courier:
IVY MACKENZIE
SERVICES CORP.
700 SOUTH FEDERAL
HIGHWAY, SUITE
300
BOCA RATON, FL
33432
The Fund reserves the right to reject,
for any
reason, any
purchase order.
5
<PAGE>
MINIMUM INVESTMENT POLICIES: The minimum
initial
investment
is $1,000; the
minimum additional investment is $100.
Initial or
additional
amounts for
retirement accounts may be less (see
"Retirement
Plans").
BUYING ADDITIONAL SHARES: You may add to
your
account at any
time through
any of the following options:
By Mail: Complete the investment slip
attached to
your
statement, or write
instructions, including the account
registration, Fund
number and
account number
of the shares you wish to purchase. Send your
check
(payable to
Ivy Money Market
Fund), along with your investment slip or
written
instructions,
to one of the
addresses above.
Through your Broker: Deliver the
investment slip
attached to
your
statement, or written instructions, along
with your
payment to
your registered
representative or selling broker.
By Wire: Purchases may also be made by
wiring
money from
your bank account
to your Ivy account. Your bank may charge a
fee for
wiring funds.
Before wiring
any funds, please call IMSC at
1-800-777-6472. Wiring
instructions are as
follows:
FIRST UNION NATIONAL
BANK OF
FLORIDA
JACKSONVILLE,
FL
ABA#063000021
ACCOUNT
#2090002063833
FOR FURTHER
CREDIT TO:
YOUR IVY ACCOUNT
REGISTRATION
YOUR FUND NUMBER AND
ACCOUNT
NUMBER
By Automatic Investment Method: Complete
Sections
6A and 7B
on the Account
Application (see "Automatic Investment
Method" on page
9 for more
information.
DIRECT PURCHASES OF CLASS B AND CLASS
C SHARES:
Class B
and
Class C shares
may be purchased directly through your
election of a
systematic
withdrawal plan
under which specified withdrawal amounts are
used to
purchase
Class B or Class C
shares of a different Ivy or Mackenzie fund.
This
arrangement is
designed to
take advantage of dollar-cost averaging as a
method of
investment. To establish
this type of arrangement, complete section 6B
of the
Account
Application.
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price is the net asset
value per
share ("NAV").
Share
purchases will be made at the next determined
price
after the
purchase order is
received. The price is effective for orders
received by
IMSC or
by your
registered securities dealer prior to the
time of the
determination of the net
asset value. Any orders received after the
time of the
determination of the net
asset value will be entered at the next
calculated
price.
Orders placed with a securities dealer
before the
net asset
value is
determined and that are transmitted through
the
facilities of the
National
Securities Clearing Corporation on the same
day are
confirmed at
that day's
price. Any loss resulting from the dealer's
failure to
submit an
order by the
deadline will be borne by that dealer.
You will receive an account statement
after any
purchase,
exchange or full
liquidation. Statements related to
reinvestment of
dividends or
capital gains,
automatic investment plans (see the SAI for
further
explanation)
and/or
systematic withdrawal plans will be sent
quarterly.
HOW THE FUND VALUES ITS SHARES
The Fund offers three classes of
shares in this
Prospectus,
designated as
Class A, Class B and Class C shares. The NAV
per share
is the
value of one Class
A, Class B, or Class C share. The NAV is
determined for
each
Class of shares as
of the close of the New York Stock Exchange
on each day
the
Exchange is open by
dividing the value of the Fund's net assets
attributable to a
class by the
number of shares of that class that are
outstanding,
adjusted to
the nearest
cent.
For purposes of determining the
aggregate net
assets of
the
Fund, cash and
receivables will be valued at their
realizable amounts.
The Fund
values all of
its portfolio securities using the amortized
cost
method, which
involves valuing
a security at cost on the date of acquisition
and
thereafter
assuming a constant
rate of accretion of discount or amortization
of
premium. While
this method
provides certainty in valuation, it may
result in
periods during
which value, as
determined by amortized cost, is higher or
lower than
the price
the Fund would
receive if it sold the instrument. During
such periods,
the yield
to an investor
in the Fund may differ somewhat from that
obtained in a
similar
investment
company which uses available market
quotations to value
all of
its portfolio
securities.
HOW TO REDEEM SHARES
You may redeem your Fund shares through
your
registered
securities
representative, by mail, by telephone or by
check
writing. All
redemptions are
made at the NAV next determined after a
redemption
request has
been received in
good order. Requests for redemptions must be
received
by 4:00
p.m. Eastern time
to be processed at the NAV for that day. Any
redemption
request
in good order
that is received after 4:00 p.m. Eastern time
will be
processed
at the price
determined on the following business day. IF
SHARES TO
BE
REDEEMED WERE
PURCHASED BY CHECK, PAYMENT OF THE REDEMPTION
MAY BE
DELAYED
UNTIL THE CHECK HAS
CLEARED OR FOR UP TO 15 DAYS AFTER THE DATE
OF
PURCHASE,
WHICHEVER IS LESS. The
Fund does not assess a CDSC. However, if the
shares of
another
Ivy or Mackenzie
fund that are subject to a CDSC are exchanged
for
shares (of the
same class) of
the Fund, the CDSC will carry over to the
investment in
the Fund
and may be
assessed upon redemption.
When shares are redeemed, the Fund
generally
sends you
payment on the next
business day. Unless otherwise requested,
your
redemption
proceeds will be
mailed in the form of a check to your address
of
record. Under
unusual
circumstances, the Fund may suspend
redemptions or
postpone
payment to the
extent permitted by Federal securities laws.
The
proceeds of the
redemption may
be more or less than the purchase price of
your shares,
depending
upon, among
other factors, the market value of the Fund's
securities at the
time of the
redemption. If the redemption is for over
$50,000, or
the
proceeds are to be
sent to an address other than the address of
record, or
an
address change has
occurred in the last 30 days, it must be
requested in
writing
with a signature
guarantee. See "Signature Guarantees"
below.
If you are not certain of the
requirements for a
redemption,
please contact
IMSC at 1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES
DEALER: Your
Dealer is
responsible for
promptly transmitting redemption orders.
Redemptions
requested by
dealers will
be made at the NAV (less any applicable CDSC)
determined at the
close of regular
trading (4:00 p.m. Eastern time) on the day
that a
redemption
request is
received in good order by IMSC.
BY MAIL: Requests for redemption in
writing are
considered
to be in "proper
or good order" if they contain the following:
6
<PAGE>
- Any outstanding certificate(s) for
shares being
redeemed.
- A letter of instruction, including
the account
registration, the Fund
number, the account number, the address
and the
dollar
amount or number of
shares to be redeemed.
- Signatures of all registered owners
whose names
appear on
the account.
- Any required signature guarantees.
- Other supporting legal documentation,
if required
(in the
case of estates,
trusts, guardianships, corporations,
retirement
plans or
others acting in
representative capacities).
The dollar amount or number of shares
indicated for
redemption must not
exceed the available shares or NAV of your
account at
the
next-determined
prices. If your request exceeds these limits,
then the
trade will
be rejected in
its entirety.
Mail your request to IMSC at one of the
addresses
on page 6
of this
Prospectus.
BY TELEPHONE: Individual and joint
accounts may
redeem up to
$50,000 per
day over the telephone by contacting IMSC at
1-800-777-6472. In
times of unusual
economic or market changes, the telephone
redemption
privilege
may be difficult
to implement. If you are unable to execute
your
transaction by
telephone, you
may want to consider placing the order in
writing and
sending it
by mail or
overnight courier.
Checks will be made payable to the
current account
registration and sent to
the address of record. If there has been a
change of
address in
the last 30
days, please use the instructions for
redemption
requests by mail
described
above. A signature guarantee would be
required.
Requests for telephone redemptions will
be accepted
from the
registered
owner of the account, the designated
registered
representative or
the registered
representative's assistant.
Shares held in certificate form cannot be
redeemed
by
telephone.
If Section 6E of the Account Application
is not
completed,
telephone
redemption privileges will be provided
automatically.
Although
telephone
redemptions may be a convenient feature, you
should
realize that
you may be
giving up a measure of security that you may
otherwise
have if
you terminated
the privilege and redeemed your shares in
writing. If
you do not
wish to make
telephone redemptions or let your registered
representative do so
on your
behalf, you must notify IMSC in writing.
The Fund employs reasonable procedures
that require
personal
identification
prior to acting on redemption instructions
communicated
by
telephone to confirm
that such instructions are genuine. In the
absence of
such
procedures, the Fund
may be liable for any losses due to
unauthorized or
fraudulent
telephone
instructions.
RECEIVING YOUR PROCEEDS BY FEDERAL
FUNDS WIRE:
For
shareholders who
established this feature at the time they
opened their
account,
telephone
instructions will be accepted for redemption
amounts up
to
$50,000 ($1,000
minimum) and proceeds will be wired on the
next
business day to a
predesignated
bank account.
In order to add this feature to an
existing
account or to
change existing
bank account information, please submit a
letter of
instructions
including your
bank information to IMSC at the address
provided above.
The
letter must be
signed by all registered owners, and their
signatures
must be
guaranteed.
Your account will be charged a $10.00
fee each
time
redemption proceeds are
wired to your bank. Your bank may also charge
you a fee
for
receiving a Federal
Funds wire.
Neither IMSC nor the Fund can be
responsible for
the
efficiency of the
Federal Funds wire system or the
shareholder's
bank.
BY CHECK WRITING: The check writing
privilege
is only
available to Class A
shareholders and is not available for
retirement
accounts. You
may write checks
against your Fund account. Checks written
must be for a
minimum
of $100. You may
sign up for this option by completing Section
8 of the
Account
Application. IF
YOU ARE REDEEMING SHARES THAT HAVE BEEN
PURCHASED BY
CHECK,
PAYMENT MAY BE
DELAYED UNTIL YOUR CHECK HAS CLEARED OR FOR
UP TO 15
CALENDAR
DAYS AFTER THE
DATE OF PURCHASE. Please note that all
registered
owners named on
the account
must sign the signature card, and only
registered
owners may have
the check
writing privilege on an account.
In order to qualify for the check writing
privilege, Class A
shareholders
must maintain a minimum average account
balance of
$1,000. Shares
must be
uncertificated (i.e., held by the Fund) for
any account
requesting check writing
privileges. Checks can be reordered by
calling IMSC at
1-800-777-6472. Checking
activity is reported on your statement, and
canceled
check copies
are returned
to you each month. There is no limitation on
the number
of checks
a shareholder
may write.
When a check is presented for payment,
the Fund
redeems a
sufficient number
of shares to cover the amount of the check.
Checks
written on
accounts with
insufficient shares will be returned to the
payee
marked
"non-sufficient funds."
There may be a nominal charge for each supply
of
checks, copies
of canceled
checks, stop payment orders, checks drawn for
amounts
less than
the Fund minimum
(i.e., $100) and checks returned for
"non-sufficient
funds." To
pay for these
charges, the Fund automatically redeems an
appropriate
number of
the
shareholder's Fund shares after the charges
are
incurred.
You may not close your Fund account by
writing a
check,
because any earned
dividends will remain in your account. The
Fund
reserves the
right to change,
modify or terminate the check writing service
at any
time upon
notification
mailed to your address of record.
Your account will be charged a $10 fee
each time
redemption
proceeds are
wired to your bank.
Neither IMSC nor the Fund can be
responsible for
the
efficiency of the
Federal Funds wire system or the
shareholder's
bank.
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small
accounts
and
subject to state law
requirements, the Fund may redeem the
accounts of
shareholders
whose investment,
including sales charges paid, has been less
than $1,000
for more
than 12 months.
The Fund will not redeem an account unless
the
shareholder has
been given at
least 60 days' advance notice of the Fund's
intention
to do so.
No redemption
will be made if a shareholder's account falls
below the
minimum
due to a
reduction in the value of the Fund's
portfolio
securities. This
provision does
not apply to IRA's, other retirement accounts
and
UGMA/UTMA
accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent
fraudulent
redemptions,
we require a
signature guarantee in order to accommodate
the
following
requests:
- Redemption requests over $50,000.
7
<PAGE>
- Requests for redemption proceeds to be
sent to
someone
other than the
registered shareholder.
- Requests for redemption proceeds to be
sent to an
address
other than the
address of record.
- Registration transfer requests.
- Requests for redemption proceeds to be
wired to
your bank
account (if this
option was not selected on your
original
application, or if
you are
changing the bank wire information).
A signature guarantee may be obtained
only from an
eligible
guarantor
institution as defined in Rule 17Ad-15 of the
Securities Exchange
Act of 1934,
as amended. An eligible guarantor institution
includes
banks,
brokers, dealers,
municipal securities dealers, government
securities
dealers,
government
securities brokers, credit unions, national
securities
exchanges,
registered
securities associations, clearing agencies
and savings
associations. The
signature guarantee must not be qualified in
any way.
Notarizations from notary
publics are not the same as signature
guarantees, and
are not
accepted.
Circumstances other than those described
above may
require a
signature
guarantee. Please contact IMSC at
1-800-777-6472 for
more
information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the
distribution
option that
best suits
your needs:
AUTOMATIC REINVESTMENT OPTION -- Both
dividends and
capital
gains are
automatically reinvested at NAV in additional
shares of
the same
class of the
Fund unless you specify one of the other
options.
INVESTMENT IN ANOTHER IVY OR MACKENZIE
FUND -- Both
dividends
and capital
gains are automatically invested at NAV in
another Ivy
or
Mackenzie fund of the
same class.
DIVIDENDS IN CASH/CAPITAL GAINS
REINVESTED --
Dividends will
be paid in
cash. Capital gains will be reinvested at NAV
in
additional
shares of the same
class of the Fund or another Ivy or Mackenzie
fund of
the same
class.
DIVIDENDS AND CAPITAL GAINS IN CASH --
Both
dividends and
capital gains will
be paid in cash.
If you wish to have your cash
distributions
deposited
directly to your bank
account via electronic funds transfer
("EFT"), or if
you wish to
change your
distribution option, please contact IMSC at
1-800-777-6472.
If you wish to have your cash
distributions go to
an address
other than the
address of record, you must provide IMSC with
a letter
of
instruction, signed by
all registered owners with signatures
guaranteed.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a
31% U.S.
Federal
backup withholding
tax on dividends, capital gain distributions
and, in
the event
the Fund failed
to maintain a constant NAV per share,
redemption
proceeds, you
must furnish the
Fund with your certified tax identification
number
("TIN") and
certify that you
are not subject to backup withholding due to
prior
under-reporting of interest
and dividends to the IRS. If you fail to
provide a
certified TIN,
or such other
tax-related certifications as the Fund may
require,
within 30
days of opening
your new account, the Fund reserves the right
to
involuntarily
redeem your
account and send the proceeds to the address
of record.
You can avoid the above withholding
and/or
redemption by
correctly
furnishing your TIN, and making certain
certifications,
in
Section 2 of the
Account Application at the time you open your
new
account, unless
the IRS
requires that backup withholding be applied
to your
account.
Certain payees, such as corporations,
generally are
exempt
from backup
withholding. Please complete IRS Form W-9
with the
Account
Application to claim
the exemption. If the registration is for a
UGMA/UTMA
account,
please provide
the social security number of the minor.
Non-U.S.
investors who
do not have a
TIN must provide, with the Account
Application, a
completed IRS
Form W-8.
CERTIFICATES
In order to facilitate transfers,
exchanges and
redemptions,
most
shareholders elect not to receive
certificates. Should
you wish
to have a
certificate issued, please contact IMSC at
1-800-777-6472 and
request that one
be sent to you. (Retirement plan accounts are
not
eligible for
this service.)
Please note that if you were to lose your
certificate,
you would
incur an
expense to replace it.
Certificates for shares valued up to
$50,000 will
be issued
to the current
registration and mailed to the address of
record.
Should you wish
to have your
certificates mailed to a different address,
or
registered
differently from the
current registration, contact IMSC at
1-800-777-6472.
EXCHANGE PRIVILEGE
Shareholders of the Fund have an
exchange
privilege with
other Ivy and
Mackenzie funds. The Fund reserves the right
to reject,
for any
reason, any
exchange order.
Class A shareholders of the Fund may
exchange their
outstanding shares for
Class A shares of another Ivy or Mackenzie
fund on the
basis of
the relative NAV
per Class A share, plus an amount equal to
the sales
charge
payable with respect
to the new shares at the time of the
exchange.
Incremental sales
charges are
waived for outstanding shares that have been
invested
for 12
months or longer.
Shareholders who have purchased Class B (or
Class C)
shares of
the Fund directly
may exchange their Class B (or Class C)
shares for
Class B (or
Class C) shares
of another Ivy or Mackenzie fund on the basis
of the
relative NAV
per Class B
(or Class C) share (see "Direct Purchases of
Class B
and Class C
Shares" under
"How to Buy Shares"), subject to the CDSC
schedule (or
period) of
the fund into
which the exchange is being made (beginning
with the
date of the
exchange).
Class B and Class C shareholders of
another Ivy
or
Mackenzie
fund may
exchange their shares for Class B and Class C
shares of
the Fund.
Exchanges from
another Ivy or Mackenzie Fund will continue
to be
subject to the
CDSC schedule
(or period) of the fund from which the
exchange was
made, but
will reflect the
time the shares are held in the Fund.
Class A, Class B and Class C shares
that have
been
acquired
as a result of
the reinvestment of dividends and other
distributions
will not be
charged an
initial sales charge or a CDSC when exchanged
into
another Ivy or
Mackenzie
fund.
Exchanges are considered to be taxable
events, and
may result
in a capital
gain or a capital loss for tax purposes.
Before
executing an
exchange, you
should obtain and read the prospectus and
consider the
investment
objective of
the fund into which the exchange is being
made. Shares
must be
uncertificated in
order to execute an exchange. Exchanges are
available
only in
states where they
can be legally made. This privilege is not
intended to
provide
shareholders a
8
<PAGE>
means by which to speculate on short-term
movements in
the
market. Exchanges are
accepted only if the registrations of the two
accounts
are
identical. Amounts to
be exchanged must meet minimum investment
requirements
for the
Ivy or Mackenzie
fund into which the exchange is made.
With respect to Fund shares subject to a
CDSC
(i.e., Class B
or Class C
shares acquired through an exchange from
another Ivy or
Mackenzie
fund), if less
than all of an investment is exchanged out of
the Fund,
the
shares exchanged
will reflect, pro rata, the cost, capital
appreciation
and/or
reinvestment of
distributions of the original investment as
well as the
original
purchase date,
for purposes of calculating any CDSC for
future
redemptions of
the exchanged
shares.
An investor who was a shareholder of
American
Investors
Income Fund, Inc. or
American Investors Growth Fund, Inc. prior to
October
31, 1988,
or a shareholder
of Ivy Fund prior to December 31, 1991, who
became a
shareholder
of the Fund as
a result of a reorganization or merger
between the
Funds may
exchange between
funds without paying a sales charge. An
investor who
was a
shareholder of
American Investors Income Fund, Inc. or
American
Investors Growth
Fund, Inc. on
or after October 31, 1988 who became a
shareholder of
the Fund as
a result or
the reorganization between the Funds will
receive
credit toward
any applicable
sales charge imposed by any Ivy or Mackenzie
fund into
which an
exchange is
made.
EXCHANGES BY TELEPHONE: If Section 6D of
the
Account
Application is not
completed, telephone exchange privileges will
be
provided
automatically.
Although telephone exchanges may be a
convenient
feature, you
should realize
that you may be giving up a measure of
security that
you may
otherwise have if
you terminated the privilege and exchanged
your shares
in
writing. If you do not
wish to make telephone exchanges or let your
registered
representative do so on
your behalf, you must notify IMSC in writing.
In order to execute an exchange, please
contact
IMSC at
1-800-777-6472. Have
the account number of your current fund and
the exact
name in
which it is
registered available to give to the telephone
representative.
The Fund employs reasonable procedures
that require
personal
identification
prior to acting on exchange instructions
communicated
by
telephone to confirm
that such instructions are genuine. In the
absence of
such
procedures, the Fund
may be liable for any losses due to
unauthorized or
fraudulent
telephone
instructions.
EXCHANGES IN WRITING: In a letter,
request an
exchange and
provide the
following information:
- The name of the fund whose shares you
currently
own.
- Your account number
- The name(s) in which the account is
registered.
- The name of the fund into which you
wish to
exchange your
existing shares.
- The number of shares or the dollar
amount you
wish to
exchange.
The request must be signed by all
registered
owners.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal
Plan at any
time by
completing
Section 6B of the Account Application. You
can also
obtain this
application by
contacting your registered representative or
IMSC at
1-800-777-6472. To be
eligible, you must have at least $5,000 in
your
account. Payments
(minimum
distribution amount -- $50) from your account
can be
made
monthly, quarterly,
semi-annually, annually or on a selected
monthly basis,
to
yourself or any other
designated payee. You may elect to have your
systematic
withdrawal paid directly
to your bank account via EFT. Share
certificates must
be unissued
(i.e., held by
the Fund) while the Systematic Withdrawal
Plan is in
effect. A
Systematic
Withdrawal Plan may not be established if you
are
currently
participating in the
Automatic Investment Method. For more
information,
please contact
IMSC at
1-800-777-6472.
If payments you receive through the
Systematic
Withdrawal
Plan exceed the
dividends and capital appreciation of your
account, you
will be
reducing the
value of your account. Additional investments
made by
shareholders participating
in the Systematic Withdrawal Plan must equal
at least
$1,000
while the plan is
in effect. In addition, redemptions are
taxable events.
Amounts paid to you through the
Systematic
Withdrawal Plan
are derived from
the redemption of shares in your account. Any
applicable CDSC
will be assessed
upon redemption. A CDSC will not be assessed
on
withdrawals not
exceeding 12%
annually of the initial account balance when
the
Systematic
Withdrawal Plan was
started.
Should you wish at any time to add a
Systematic
Withdrawal
Plan to an
existing account or change payee
instructions, you will
need to
submit a written
request, signed by all registered owners,
with
signatures
guaranteed.
Retirement accounts are eligible for
Systematic
Withdrawal
Plans. Please
contact IMSC at 1-800-777-6472 to obtain the
necessary
paperwork
to establish a
plan.
If the U.S. Postal Service cannot deliver
your
checks, or if
deposits to a
bank account are returned for any reason,
your
redemptions will
be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be
automatically drawn
each month from
your bank for investment in Fund shares by
completing
Sections 6A
and 7B of the
Account Application. Attach a "voided" check
to your
account
application. At
pre-specified intervals, your bank account
will be
debited and
the proceeds will
be credited to your Ivy account. The minimum
investment
under
this plan is $50
per month ($25 per month for retirement
plans). There
is no
charge to you for
this program.
You may terminate or suspend your
Automatic
Investment Method
by telephone
at any time by contacting IMSC at
1-800-777-6472.
If you have investments being withdrawn
from a bank
account
and we are
notified that the account has been closed,
your
Automatic
Investment Method will
be discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy or
Mackenzie fund
accounts
having the same
tax I.D. number will receive a single
quarterly account
statement, unless
otherwise specified. This feature
consolidates the
activity for
each account
onto one statement. Requests for quarterly
consolidated
statements for all other
accounts must be submitted in writing and
must be
signed by all
registered
owners.
9
<PAGE>
RETIREMENT PLANS
The Ivy and Mackenzie family of funds
offer several
tax-sheltered retirement
plans that may fit your needs:
- IRA (Individual Retirement Account)
- 401(k), Money Purchase Pension and
Profit Sharing
Plans
- SEP-IRA (Simplified Employee Pension
Plan)
- 403(b)(7) Plan
Minimum initial and subsequent
investments for
retirement
plans are $25.
Investors Bank & Trust, which serves as
custodian
or trustee
under the
retirement plan prototypes available from the
Fund,
charges
certain nominal fees
for annual maintenance. A portion of these
fees is
remitted to
IMSC, as
compensation for its services to the
retirement plan
accounts
maintained with
the Fund.
Distributions from retirement plans are
subject to
certain
requirements
under the Code, and various documents
(available from
IMSC),
including IRS Form
W-4P, and information must be provided before
the
distribution
may be made. The
Ivy and Mackenzie family of funds and IMSC
assume no
responsibility to determine
whether a distribution satisfies the
conditions of
applicable tax
laws, and will
not be responsible for any penalties
assessed. For
additional
information,
please contact your broker, tax adviser or
IMSC.
Please call IMSC at 1-800-777-6472 for
complete
information
kits describing
the plans and their benefits, restrictions,
provisions
and fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Fund should be
directed to
IMSC at
1-800-777-6472.
10
<PAGE>
IVY MONEY MARKET
FUND
________________________
ACCOUNT
APPLICATION
ACCOUNT NUMBER
Please mail applications and checks to:
Mackenzie Ivy
Investor
Services Corp.,
P.O. Box 3022, Boca
Raton, FL
33431-0922.
(This application should not be used for
retirement
accounts for
which Ivy is
custodian.)
<TABLE>
<S> <C>
<C>
-----------------------------------------------------------------
-----------------------------------------------------------------
--
IVY MONEY
MARKET
FUND ACCOUNT APPLICATION
-----------------------------------------------------------------
-----------------------------------------------------------------
--
FUND
USE
101/
1 / 2 1 / 2 0
/ 1 0
/ X
ONLY ----------------------- ---------
---------
------------ -------- ----------
---------
---------
------------
Dealer # Branch #
Rep #
Acct
Type Soc Cd Div Cd CG Cd
Exc Cd
Red Cd
-----------------------------------------------------------------
-----------------------------------------------------------------
--
REGISTRATION
1 [ ] Individual
_________________________________________________________________
_______________________
[ ] Joint Tenant
Owner,
Custodian or
Trustee
[ ] Estate
_________________________________________________________________
_______________________
[ ] UGMA/UTMA
Co-owner or
Minor
[ ] Corporation
_________________________________________________________________
_______________________
[ ] Partnership
Minor's
State of
Residence
[ ] Sole Proprietor
_________________________________________________________________
_______________________
[ ] Trust
Street
__________________
_________________________________________________________________
_______________________
Date of Trust
[ ] Other ____________
_________________________________________________________________
_______/__/__/__/__/__/
__________________
City
State
Zip
Code
/__/__/__/-/__/__/__/-/__/__/__/__/
/__/__/__/-/__/__/__/-/__/__/__/__/
Phone Number
-- Day
Phone Number --
Evening
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
TAX ID #
2 /__/__/__/-/__/__/-/__/__/__/__/ of
/__/__/-/__/__/__/__/__/__/__/ Citizenship [
] U.S. [
] Other
_______________
Social Security Number
Tax
Identification
Number
Under penalties of perjury, I
certify by
signing in
Section 9 below that: (1) the number shown in
this
section is my
correct taxpayer identification
number (TIN),
and (2) I
am not subject to backup withholding because:
(a) I
have not
been notified by the Internal
Revenue Service
(IRS)
that I am subject to backup withholding as a
result of
a failure
to report all interest or
dividends, or (b)
the IRS has
notified me that I am no longer subject to
backup
withholding. (Cross out item (2) if
you have
been
notified by the IRS that you are currently
subject to
backup
withholding because of
underreporting
interest or
dividends on your tax return.) Please see the
"Tax
Identification
Number" section of the Prospectus
for
additional
information on completing this section.
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
DEALER INFORMATION
3 The undersigned ("Dealer") agrees
to all
applicable
provisions in this Application, guarantees
the
signature and
legal
capacity of the Shareholder, and
agrees to
notify MIISC
of any purchases made under a Letter of
Intent or
Rights
of Accumulation.
__________________________________________________________
__________________________________________________________
Dealer Name
Representative's Name and Number
__________________________________________________________
__________________________________________________________
Branch Office Address
Representative's Phone Number
__________________________________________________________
__________________________________________________________
City State
Zip
Code
Authorized Signature of Dealer
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
INVESTMENTS
4 A. Enclosed is my check ($1,000
minimum)
made payable
to Ivy Money Market Fund. Please invest it in
[ ] Class
A
[ ] Class B(*) or [ ] Class
C(*) shares.
$_____________________ (Amount
Enclosed)
(*) Direct purchases of
Class B and
Class C
shares
may be made in conjunction with a systematic
withdrawal
plan into
the same Class of a
different Ivy or
Mackenzie
fund. (See "Direct Purchase of Class B and
Class C
Shares" under
"How To Buy Shares.")
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
DISTRIBUTION OPTIONS
5 A. I would like to reinvest
dividends and
capital
gains into additional shares in this account
at net
asset value
unless
a different option is checked
below.
B. [ ] Reinvest all dividends and
capital
gains into
additional shares of a different Ivy or
Mackenzie fund.
_____________________________________
/__/__/__/__/__/__/__/__/__/__/ [ ]
New Account
Fund Name
Account
Number
C. [ ] Pay all dividends in cash
and
reinvest capital
gains into additional shares in this Fund or
a
different Ivy or
Mackenzie fund.
_____________________________________
/__/__/__/__/__/__/__/__/__/__/ [ ]
New Account
Fund Name
Account
Number
D. [ ] Pay all dividends and
capital gains
in cash.
I REQUEST THE
ABOVE CASH
DISTRIBUTION, SELECTED IN C OR D ABOVE, BE:
[ ] Sent to the address listed
in the
registration.
[ ] Sent to the special payee listed in
Section 7A [ ]
(By Mail)
7B [ ]
(By E.F.T.)
-----------------------------------------------------------------
-----------------------------------------------------------------
--
</TABLE>
<PAGE>
<TABLE>
<S> <C>
-----------------------------------------------------------------
-----------------------------------------------------------------
--
OPTIONAL SPECIAL FEATURES
6 A. [ ] AUTOMATIC INVESTMENT METHOD
(AIM)
I wish to invest [ ] once per
month.
My bank account will be debited on or
about the
[ ] twice
______________ day of the
month(*)
[ ] 3 times
______________ day of the month
[ ] 4 times
______________ day of the month
______________ day of the month
Please invest $_____________ each
period
starting in
the month of _______ in Ivy Money Market
Fund.
Dollar Amount
Month
[ ] I have attached a voided check
to ensure
my
correct bank account will be debited.
B. [ ] SYSTEMATIC WITHDRAWAL
PLANS(*)
Class: I wish to
automatically withdraw
funds
from my account in Ivy Money Market Fund: [ ]
Class A
Shares
[ ] Class B Shares [ ] Class
C Shares
Frequency: [ ] Monthly If
monthly,
withdraw
funds: [ ] One per month
[ ] Quarterly
[ ] Twice per month
[ ] Semi-Annually
[ ] 3 times per month
[ ] Annually
[ ] 4 times per month
Payment Method: I request the
withdrawl
to be: [
] Sent to the address listed in the
registration
[
] Sent to the special payee listed in Section
7A
[
] Invested as part of a dollar-cost averaging
program into additional shares of another
Ivy or Mackenzie fund (fill out information
below)
If part of a dollar-cost
averaging
program:
____________________________________
/__/__/__/__/__/__/__/__/__/__/
Ivy
or Mackenzie fund to be invested
Account
Number
Amount/Start Date $ _______________,
starting on or
about
the_______________day of
the________________________
month(*)
_______________day of
the________________________
month
_______________day of
the________________________
month
_______________day of
the________________________
month
C. [ ] FEDERAL FUNDS WIRE FOR
REDEMPTION
PROCEEDS(**)
I authorize the Agent to honor
telephone
instructions for the redemption of Fund
shares up to
$50,000.
Proceeds may
be wire transferred to the bank
account
designated
($1,000 minimum). Shares issued in
certificate form may
not be
redeemed under this privilege.
(COMPLETE
SECTION
7B)
D. [ ] TELEPHONE EXCHANGES(**) [ ] Yes
[ ] No
I authorize exchanges by
telephone among
the Ivy
and Mackenzie family of funds upon
instructions from
any person
as
more fully described in the
Prospectus.
To change
this option once established, written
instructions must
be
received
from the shareholder of record
or the
current
registered representative.
If neither box is checked, the
telephone
exchange
privilege will be provided automatically.
E. [ ] TELEPHONE REDEMPTIONS(**) [ ]
Yes [ ] No
The Fund or its agents are
authorized to
honor
telephone instructions from any person as
more fully
described in
the
Prospectus for the redemption
of Fund
shares. The
amount of the redemption shall not exceed
$50,000 and
the
proceeds
are to be payable to the
shareholder of
record and
mailed to the address of record. To change
this option
once
established, written
instructions must be
received
from the shareholder of record or the current
registered
representative.
If neither box is checked, the
telephone
exchange
privilege will be provided automatically.
(*) There must be a period of at least
seven
calendar days
between each investment/withdrawal period.
(**) This option may not be selected if
shares
are in
certificate form.
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
SPECIAL PAYEE
7 A. MAILING
ADDRESS
B. FED WIRE / E.F.T.
INFORMATION
-------------------------------------------------------
----------------------------------------------------
Please send all disbursements to
this
special payee
-------------------------------------------------------
----------------------------------------------------
Name of Bank or Individual
Financial
Institution
-------------------------------------------------------
----------------------------
---------------------
Account Number (If Applicable)
ABA #
Account #
-------------------------------------------------------
----------------------------------------------------
Street
Street
-------------------------------------------------------
----------------------------------------------------
City/State/Zip
City/State/Zip
(Please attach a
voided check)
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
CHECK WRITING ENROLLMENT FORM
8 THIS FEATURE IS AVAILABLE TO CLASS A
SHAREHOLDERS ONLY.
CHECKS MUST BE WRITTEN FOR A MINIMUM OF $100.
Shares
purchased in
the
Fund may be subject to a holding
period of up to
15
calendar days before being redeemed by check.
Please
see the
Prospectus
for details.
HOW TO ENROLL
1. ALL REGISTERED OWNERS MUST SIGN
THIS FORM IN
THE SPACE
PROVIDED BELOW.
2. Check the appropriate Number of
Signatures
Required box
to indicate the number of signatures required
when
writing
checks.
NUMBER OF SIGNATURES REQUIRED
[ ] One signature is required [ ]
More than
one
signature is required
-----------------------------
number of signatures required
[ ] All signatures are required
IF NONE OF THE ABOVE IS CHECKED THEN
ALL
SIGNATURES WILL
BE REQUIRED
---------------------------------------------------------
------------------------------
Authorized Signature
Date
---------------------------------------------------------
------------------------------
Authorized Signature
Date
---------------------------------------------------------
------------------------------
Authorized Signature
Date
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
SIGNATURES
9 Investors should be aware that the
failure to
check the
"No" under Section 6D and 6E above means that
the
Telephone
Exchanges/Redemptions Privileges will
be
provided. The
Funds employ reasonable procedures that
require
personal
identification prior to acting on
exchange/redemption
instructions communicated by telephone to
confirm that
such
instructions are genuine. In the
absence of such
procedures, a Fund may be liable for any
losses due to
unauthorized or
fraudulent telephone instructions.
Please see
"Exchange
Privilege" and "How to Redeem Shares" in the
Prospectus
for more
information on these privileges.
I certify to my legal capacity to
purchase or
redeem
shares of the Fund for my own account or for
the
account of the
organization named in Section 1. I
have received
a current
Prospectus and understand its terms are
incorporated in
this
application by reference. I am
certifying my
taxpayer
information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT
REQUIRE
YOUR CONSENT
TO ANY PROVISION OF THIS DOCUMENT OTHER THAN
THE
CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
-----------------------------------------------------------------
---------- ------------------
Signature of Owner, Custodian, Trustee
or
Corporate
Officer Date
-----------------------------------------------------------------
---------- ------------------
Signature of Joint Owner, Co-Trustee
or
Corporate Officer
Date
-----------------------------------------------------------------
-----------------------------------------------------------------
--
</TABLE>
(REMEMBER TO SIGN
SECTION 9)
IMMF-1-496
<PAGE>
April 30, 1996
Ivy
Short-Term
Bond Fund
----------
Prospectus
----------
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
Ivy Fund (the "Trust") is a registered
investment
company
currently consisting
of thirteen separate portfolios. One
portfolio of the
Trust, Ivy
Short-Term
Bond Fund (the "Fund"), is described in this
Prospectus.
This Prospectus sets forth concisely the
information
about the
Fund that a
prospective investor should know before
investing.
Please read it
carefully and
retain it for future reference. Additional
information
about the
Fund is
contained in the Statement of Additional
Information
for the Fund
dated April
30, 1996 (the "SAI"), which has been filed
with the
Securities
and Exchange
Commission ("SEC") and is incorporated by
reference
into this
Prospectus. The
SAI is available upon request and without
charge from
the Trust
at the
Distributor's address and telephone number
below.
Investments in
the Fund are
neither insured nor guaranteed by the U.S.
Government
or any
governmental
agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED
BY THE
SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
NOR HAS
THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES
COMMISSION PASSED
UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S>
<C>
Expense Information . . . . . . . . . . . . .
. . . .
2
The Fund's Financial Highlights . . . . . . .
. . . .
3
Investment Objectives and Policies . . . . .
. . . .
4
Risk Factors and Investment Techniques . . .
. . . .
5
Organization and Management of the Fund . . .
. . . .
8
Fund Administration and Accounting . . . . .
. . . .
8
Transfer Agent . . . . . . . . . . . . . . .
. . . .
9
Alternative Purchase Arrangements . . . . . .
. . . .
9
Dividends and Taxes . . . . . . . . . . . . .
. . . .
9
Performance Data . . . . . . . . . . . . . .
. . . .
10
How to Buy Shares . . . . . . . . . . . . . .
. . . .
10
How Your Purchase Price is Determined . . . .
. . . .
11
How the Fund Values Its Shares . . . . . . .
. . . .
11
Initial Sales Charge Alternative - Class A
Shares . .
11
Contingent Deferred Sales Charge - Class A
Shares . .
12
Qualifying for a Reduced Sales Charge . . . .
. . . .
12
Contingent Deferred Sales Charge Alternative
-
Class B Shares . . . . . . . . . . . . . .
. . . .
13
How to Redeem Shares . . . . . . . . . . . .
. . . .
14
Check Writing . . . . . . . . . . . . . . . .
. . . .
15
Minimum Account Balance Requirements . . . .
. . . .
15
Signature Guarantees . . . . . . . . . . . .
. . . .
15
Choosing a Distribution Option . . . . . . .
. . . .
15
Tax Identification Number . . . . . . . . . .
. . . .
16
Certificates . . . . . . . . . . . . . . . .
. . . .
16
Exchange Privilege . . . . . . . . . . . . .
. . . .
16
Reinvestment Privilege . . . . . . . . . . .
. . . .
17
Systematic Withdrawal Plan . . . . . . . . .
. . . .
17
Automatic Investment Method . . . . . . . . .
. . . .
17
Consolidated Account Statements . . . . . . .
. . . .
17
Retirement Plans . . . . . . . . . . . . . .
. . . .
17
Shareholder Inquiries . . . . . . . . . . . .
. . . .
18
</TABLE>
<TABLE>
<S> <C>
<C> <C>
BOARD OF TRUSTEES
OFFICERS
TRANSFER AGENT
INVESTMENT
John S. Anderegg, Jr. Michael G.
Landry,
President
Ivy Mackenzie
MANAGER
Paul H. Broyhill Keith J.
Carlson, Vice
President
Services Corp. Ivy
Management,
Inc.
Stanley Channick C.
William
Ferris,
P.O. Box 3022 Boca
Raton, FL
Frank W. DeFriece, Jr.
Secretary/Treasurer
Boca Raton, FL
Roy J. Glauber Michael R.
Peers,
Chairman
33431-0922
DISTRIBUTOR;
Michael G. Landry
1-800-777-6472 Ivy
Mackenzie
Michael R. Peers
LEGAL COUNSEL
Distributors,
Inc.
Joseph G. Rosenthal Dechert
Price &
Rhoads
AUDITORS Via Mizner
Financial
Plaza
Richard N. Silverman
Boston, MA
Coopers & Lybrand L.L.P. 700 South
Federal
Highway
J. Brendan Swan
Ft. Lauderdale, FL Boca
Raton, FL
33432
CUSTODIAN;
1-800-456-5111
Brown
Brothers
Harriman & Co.
Boston, MA
</TABLE>
THROUGHOUT
THE
CENTURIES,
THE CASTLE KEEP
HAS
BEEN A
SOURCE
OF LONG-RANGE
VISION
AND
STRATEGIC
ADVANTAGE.
<PAGE>
EXPENSE INFORMATION
SHAREHOLDER
TRANSACTION
EXPENSES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS I
------- ------- -------
<S>
<C>
<C> <C>
Maximum sales load imposed on purchases (as a
percentage of
offering price at time of
purchase).......................
3.00%* None None
Maximum contingent deferred sales charge (as
a
percentage
of original purchase
price)...............................
None** 3.00%*** None
The Fund has no sales load on reinvested
dividends, no
redemption fees and no exchange fees.
</TABLE>
* Class A Shares of the Fund may be
purchased under a
variety
of plans that
provide for the reduction or elimination
of the
sales charge.
** A contingent deferred sales charge may
apply to the
redemption of Class A
shares that are purchased without an
initial sales
charge.
See "Purchases of
Class A Shares at Net Asset Value" and
"Contingent
Deferred
Sales
Charge -- Class A Shares."
*** The maximum contingent deferred sales
charge on
Class B
shares applies to
redemptions during the first year after
purchase.
The charge
declines to
2 1/2% during the second year; 2% during
the third
year; 1
1/2% during the
fourth year; 1% during the fifth year;
and 0% in
the sixth
year and
thereafter.
ANNUAL FUND
OPERATING EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET
ASSETS)
<TABLE>
<CAPTION>
CLASS A
CLASS B CLASS I
-------
------- -------
<S>
<C>
<C> <C>
Management Fees After Expense
Reimbursements(1).....
0.00%
0.00% 0.00%
12b-1 Service/Distribution
Fees.....................
0.25%
0.75%(2) 0.00%
Other
Expenses......................................
0.68%
0.68% 0.59%(3)
--
-- --
Total Fund Operating Expenses After Expense
Reimbursements(4)..................................
0.93%
1.43% 0.59%
=======
======= ======
</TABLE>
(1) Management Fees reflect expense
reimbursements (see
note (4)
below). Without
expense reimbursements, Management Fees
for all
classes would
have been
0.60%.
(2) Long-term investors may, as a result of
the Fund's
12b-1
fees, pay more than
the economic equivalent of the maximum
front-end
sales charge
permitted by
the Rules of Fair Practice of the
National
Association of
Securities
Dealers, Inc.
(3) The "Other Expenses" of Class I of the
Fund are
lower than
such expenses for
the Fund's other classes because Class I
shares
bear lower
shareholder
services fees than Class A and Class B
shares.
(4) The voluntary portion of the Fund's
expense
reimbursement may
be terminated
or revised at any time, at which time the
Fund's
expenses
would increase.
Total Fund Operating Expenses for all
classes
(excluding
12b-1 fees) without
expense reimbursement would have been
3.02%.
EXAMPLE
CLASS A AND CLASS I
SHARES*
You would pay the following expenses on a
$1,000
investment
in the Fund,
assuming (1) 5% annual return and (2)
redemption at the
end of
each time period:
<TABLE>
<CAPTION>
1 YEAR
3
YEARS 5 YEARS 10 YEARS
------
------- ------- --------
<S>
<C>
<C>
<C> <C>
Class A(1)...................................
$ 39
$59
$80 $141
Class I(2)...................................
$ 7
$22
$38 $ 85
</TABLE>
* Net of expense reimbursements. See
Note (4) in
the Annual
Fund Operating
Expense Table above.
(1) Assumes deduction of the maximum 3%
initial sales
charge at
the time of
purchase and no deduction of a contingent
deferred
sales
charge at the time
of redemption.
(2) Class I shares are not subject to initial
sales
charges at
the time of
purchase, nor are they subject to the
deduction of
a
contingent deferred
sales charge at the time of
redemption.
EXAMPLE (1 OF
2)
CLASS B
SHARES*
You would pay the following expenses on a
$1,000
investment
in the Fund,
assuming (1) 5% annual return and (2)
redemption at the
end of
each time period:
<TABLE>
<CAPTION>
1 YEAR(1) 3 YEARS(2) 5 YEARS(3)
10 YEARS(4)
--------- ---------- ----------
-----------
<S> <C> <C>
<C>
$45 $ 65 $ 88
$ 158
</TABLE>
EXAMPLE (2 OF
2)
CLASS B
SHARES*
You would pay the following expenses on a
$1,000
investment
in the Fund,
assuming (1) 5% annual return and (2) no
redemption:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10
YEARS(4)
------ ------- -------
-----------
<S> <C> <C> <C>
$ 15 $45 $78 $ 158
</TABLE>
* Net of expense reimbursements.
(1) Assumes deduction of a 3% contingent
deferred sales
charge at
the time of
redemption.
(2) Assumes deduction of a 2% contingent
deferred sales
charge at
the time of
redemption.
(3) Assumes deduction of a 1% contingent
deferred sales
charge at
the time of
redemption.
(4) Ten-year figures assume conversion of
Class B
shares to Class
A shares at
the end of the eighth year and,
therefore, reflect
Class A
expenses for
years nine and ten.
The purpose of the foregoing tables is to
provide
an investor
with an
understanding of the various costs and
expenses that an
investor
in the Fund
will bear, directly or indirectly. The
Examples assume
reinvestment of all
dividends and distributions and that the
percentage
amounts under
"Total Fund
Operating Expenses After Expense
Reimbursement" remain
the same
each year. The
assumed annual return of 5% is required by
applicable
law to be
applied by all
investment companies and is used for
illustrative
purposes only.
This assumption
is not a projection of future performance.
The actual
expenses
for the Fund may
be higher or lower than the estimates given.
Except as set forth below, the
percentages
expressing annual
fund operating
expenses are based on amounts incurred by the
Fund
during the
year ended
December 31, 1995. The management fees for
the Fund
have been
adjusted to
reflect the expected level of expense
reimbursement for
the
current fiscal year.
The information in the table does not reflect
the
charge of
$10.00 per
transaction if a shareholder makes a request
to have
redemption
proceeds wired
to his or her bank account. For a more
detailed
discussion of the
Fund's fees
and expenses, see the following sections of
the
Prospectus:
"Organization and
Management of the Fund," "Initial Sales
Charge
Alternative --
Class A Shares,"
"Contingent Deferred Sales Charge Alternative
-- Class
B Shares,"
and "How to
Buy Shares," and the following section of the
SAI:
"Investment
Advisory and
Other Services."
2
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The Fund results from a reorganization
of
Mackenzie
Short-Term U.S.
Government Securities Fund (formerly
Mackenzie
Adjustable U.S.
Government
Securities Trust), a series of The Mackenzie
Funds
Inc., which
reorganization
was approved by shareholders in December,
1994. From
commencement
of operations
until September 20, 1994 (during which time
the Fund
was known as
Mackenzie
Adjustable U.S. Government Securities Trust)
the Fund
had an
investment
objective of seeking a high level of current
income,
consistent
with lower
volatility of principal. From September 20,
1994 until
December
31, 1994 the
Fund was known as Mackenzie Short-Term U.S.
Government
Securities
Fund (d/b/a
Ivy Short-Term U.S. Government Securities
Fund), with
the same
investment
objective as that described in this
Prospectus and the
SAI.
The following information through
December 31, 1995
relating
to the Fund,
operating prior to the reorganization of
Mackenzie
Short-Term
U.S. Government
Securities Fund (d/b/a Ivy Short-Term U.S.
Government
Securities
Fund) into Ivy
Short-Term U.S. Government Securities Fund,
has been
audited by
Coopers &
Lybrand L.L.P., independent accountants. The
report of
Coopers &
Lybrand L.L.P.
on the Fund's financial statements appears in
the
Fund's Annual
Report dated
December 31, 1995 which is incorporated by
reference
into the
Fund's SAI. The
Annual Report contains further information
about and
management's
discussion of
the Fund's performance, and is available to
shareholders upon
request and
without charge. The information presented
below should
be read in
conjunction
with the financial statements and notes
thereto.
Expense and income ratios and
portfolio turnover
rates
have
been annualized
for periods of less than one year. Total
returns do not
reflect
sales charges,
and are not annualized for periods of less
than one
year.
Prior to December 31, 1994, Mackenzie
Investment
Management
Inc. ("MIMI"),
of which IMI is a wholly owned subsidiary,
served as
investment
adviser to the
Fund.
<TABLE>
<CAPTION>
CLASS A
-------------------------------
FOR THE FOR
THE SIX
YEAR ENDED
MONTHS ENDED
DECEMBER 31,
DECEMBER 31,
------------
------------
SELECTED PER
SHARE DATA
1995
1994
------------
------------
<S>
<C> <C>
Net asset value, beginning of
period.................................................... $
9.49 $ 9.71
-----
-----
Income from investment operations:
Net investment
income(a)........................................................
....... .54 .23
Net loss on investments (both realized and
unrealized).................................
(.02)
(.22)
-----
-----
Total from investment
operations..................................................
.52 .01
-----
-----
Less distributions:
From net investment
income...........................................................
.. .54 .23
From capital
paid-in..........................................................
......... -- --
-----
-----
Total
distributions....................................................
........... .54 .23
-----
-----
Capital contributed by
manager.........................................................
.26 --
-----
-----
Net asset value, end of
period..........................................................
$ 9.73 $ 9.49
============
============
Total
return(%)........................................................
................. 8.56(c)
.03
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................................................
$6,027 $8,572
Ratio of total expenses to average net
assets:
With expense reimbursement and fees paid
indirectly(%).................................
.93
1.38
Without expense reimbursement and fees paid
indirectly(%)..............................
3.27
2.80
Ratio of net investment income to average net
assets(%)(a)..............................
5.53
4.65
Portfolio turnover
rate(%)..........................................................
.... 54 143
<CAPTION>
CLASS A
---------------------------------------
FOR THE YEAR ENDED
JUNE 30,
---------------------------------------
SELECTED PER
SHARE DATA
1994 1993
1992
-------
-------
-------
<S>
<C>
Net asset value, beginning of
period.................................................... $
9.92 $ 9.96 $ 9.97
-------
-------
-------
Income from investment operations:
Net investment
income(a)........................................................
....... .36 .46
.66
Net loss on investments (both realized and
unrealized).................................
(.21)
(.04) --
-------
-------
-------
Total from investment
operations..................................................
.15 .42 .66
-------
-------
-------
Less distributions:
From net investment
income...........................................................
.. .36 .46 .66
From capital
paid-in..........................................................
......... -- --
--
-------
-------
-------
Total
distributions....................................................
........... .36 .46
.67
-------
-------
-------
Capital contributed by
manager.........................................................
-- -- --
Net asset value, end of
period..........................................................
$ 9.71 $ 9.92 $ 9.96
=======
=======
=======
Total
return(%)........................................................
................. 1.57 4.33
6.80
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................................................
$12,267 $44,375 $25,259
Ratio of total expenses to average net
assets:
With expense reimbursement and fees paid
indirectly(%)................................. .92
.82 .86
Without expense reimbursement and fees paid
indirectly(%)..............................
1.52
1.45 1.30
Ratio of net investment income to average net
assets(%)(a)..............................
3.73
4.54 6.43
Portfolio turnover
rate(%)..........................................................
.... 37 69 106
<CAPTION>
CLASS A
-------------------------------
FOR THE YEAR ENDED JUNE
30,
-------------------------------
SELECTED PER
SHARE DATA
1991(B)
-------
Net asset value, beginning of
period....................................................
$10.00
-------
Income from investment operations:
Net investment
income(a)........................................................
....... .16
Net loss on investments (both realized and
unrealized).................................
(.03)
-------
Total from investment
operations..................................................
.13
-------
Less distributions:
From net investment
income...........................................................
.. .16
From capital
paid-in..........................................................
......... --
-------
Total
distributions....................................................
........... .16
-------
Capital contributed by
manager.........................................................
--
-------
Net asset value, end of
period..........................................................
$ 9.97
=======
Total
return(%)........................................................
................. 6.65
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................................................
$13,708
Ratio of total expenses to average net
assets:
With expense reimbursement and fees paid
indirectly(%)................................. .25
Without expense reimbursement and fees paid
indirectly(%)..............................
3.00
Ratio of net investment income to average net
assets(%)(a)..............................
8.70
Portfolio turnover
rate(%)..........................................................
.... 7
</TABLE>
---------------
<TABLE>
<S> <C>
(a) Net investment income is net of
expenses
reimbursed by
the Fund's Manager.
(b) April 18, 1991 (commencement) to
June 30,
1991.
(c) Without a capital contribution by
the Manager,
total
return would have been 5.82%.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CLASS B
-----------------
JANUARY 12,
1995
(COMMENCEMENT)
TO
DECEMBER 31,
1995
-----------------
<S>
<C>
Net asset value, beginning of
period...........................................................
.......... $9.44
---
Income (loss) from investment operations:
Net investment
income(a)........................................................
........................ .49
Net income (loss) on investments (both
realized and
unrealized).........................................
.03
---
Total from investment
operations.......................................................
............ .52
---
Less distributions:
From net investment
income...........................................................
................... .49
---
Capital contributed by
manager..........................................................
................ .26
---
Net asset value, end of
period...........................................................
................ $9.73
===================
Total
return(%)........................................................
..................................
8.53(b)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................................................
.......... $ 27
Ratio of total expenses to average net
assets:
With expense
reimbursement(%).................................................
.......................... 1.43
Without expense
reimbursement(%).................................................
....................... 3.77
Ratio of net investment income to average net
assets(%)(a)...............................................
5.03
Portfolio turnover
rate(%)..........................................................
..................... 54
<CAPTION>
CLASS I
------------
FOR
THE YEAR
ENDED
DECEMBER 31,
1995*
------------
<S>
<C>
Net asset value, beginning of
period...........................................................
.......... $ --
---
Income (loss) from investment operations:
Net investment
income(a)........................................................
........................ --
Net income (loss) on investments (both
realized and
unrealized).........................................
--
---
Total from investment
operations.......................................................
............ --
---
Less distributions:
From net investment
income...........................................................
................... --
---
Capital contributed by
manager..........................................................
................ --
---
Net asset value, end of
period...........................................................
................ $ --
============
Total
return(%)........................................................
.................................. --
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................................................
.......... $ --
Ratio of total expenses to average net
assets:
With expense
reimbursement(%).................................................
.......................... --
Without expense
reimbursement(%).................................................
....................... --
Ratio of net investment income to average net
assets(%)(a)...............................................
--
Portfolio turnover
rate(%)..........................................................
..................... --
<CAPTION>
CLASS I
------------
FOR
THE SIX
MONTHS ENDED
DECEMBER 31,
1994
------------
Net asset value, beginning of
period...........................................................
.......... $ 9.71
---
Income (loss) from investment operations:
Net investment
income(a)........................................................
........................ .14
Net income (loss) on investments (both
realized and
unrealized).........................................
(.22)
---
Total from investment
operations.......................................................
............ (.08)
---
Less distributions:
From net investment
income...........................................................
................... .14
---
Capital contributed by
manager..........................................................
................ --
---
Net asset value, end of
period...........................................................
................ $ 9.49
============
Total
return(%)........................................................
..................................
(.99)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................................................
.......... $ --
Ratio of total expenses to average net
assets:
With expense
reimbursement(%).................................................
.......................... 1.13
Without expense
reimbursement(%).................................................
....................... 2.55
Ratio of net investment income to average net
assets(%)(a)...............................................
4.90
Portfolio turnover
rate(%)..........................................................
..................... 143
<CAPTION>
CLASS I
-----------------
FOR
THE PERIOD
JULY 3, 1993
(COMMENCEMENT)
TO
JUNE 30,
1994
-----------------
Net asset value, beginning of
period...........................................................
.......... $ 9.92
-----
Income (loss) from investment operations:
Net investment
income(a)........................................................
........................ .39
Net income (loss) on investments (both
realized and
unrealized).........................................
(.21)
-----
Total from investment
operations.......................................................
............ .18
-----
Less distributions:
From net investment
income...........................................................
................... .39
-----
Capital contributed by
manager..........................................................
................ --
-----
Net asset value, end of
period...........................................................
................ $ 9.71
===================
Total
return(%)........................................................
..................................
1.77
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................................................
.......... $ 1,495
Ratio of total expenses to average net
assets:
With expense
reimbursement(%).................................................
.......................... .67
Without expense
reimbursement(%).................................................
....................... 1.27
Ratio of net investment income to average net
assets(%)(a)...............................................
3.98
Portfolio turnover
rate(%)..........................................................
..................... 37
</TABLE>
---------------
<TABLE>
<S> <C>
*
(a)
(b)
<CAPTION>
* There were no Class I shares
outstanding
during the
period.
<S> <C>
(a) Net investment income is net of
expenses
reimbursed by
the Fund's Manager.
(b) Without a capital contribution by
the Manager,
total
return would have been 5.78%.
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund is a diversified company which
offers
investors a
convenient way to
invest in a managed portfolio of government
debt
securities. The
Fund seeks a
high level of current income consistent with
a high
degree of
principal
stability. The Fund pursues this objective by
investing
primarily
(at least 65%
of its total assets) in short-term U.S.
Government
securities,
including bonds,
notes and bills issued by the U.S. Treasury,
and
securities
issued by agencies
or instrumentalities of the U.S. Government.
Although the Fund may purchase individual
securities with a
greater
maturity, the dollar-weighted average
maturity of the
Fund's
portfolio may not
exceed three years. In addition, whenever in
IMI's
judgment
abnormal market or
economic conditions warrant, the Fund may,
for
temporary
defensive purposes,
invest without limit in short-term U.S.
Government
Securities
(maturing in 13
months or less), certificates of deposit,
banker's
acceptances,
repurchase
agreements and commercial paper rated Prime-A
by
Moody's
Investors Services,
Inc. ("Moody's") or A-1 by S&P, or, if not
rated by
Moody's or
S&P, issued by
companies having an outstanding debt issue
currently
rated Aa or
better by
Moody's or AA or better by S&P.
The Fund may invest up to 20% of its net
assets in
debt
securities of
foreign issuers meeting the credit quality
standards
described
above, including
non-U.S. dollar-denominated debt securities,
American
Depository
Receipts
("ADRs"), Eurodollar securities, and debt
securities
issued,
assumed or
guaranteed by foreign governments or
political
subdivisions or
instrumentalities
thereof. The Fund may also enter into forward
foreign
currency
contracts to
protect against the uncertainty in the level
of future
foreign
exchange rates,
but not for speculative purposes.
The Fund may invest up to 5% of its net
assets in
dividend
paying common
stocks (including adjustable rate preferred
stocks);
zero coupon
bonds in
accordance with the Fund's credit quality
standards;
and
securities sold on a
"when-issued" or firm-commitment basis. The
Fund may
lend its
portfolio
securities to increase current income, and
borrow from
banks as a
temporary
measure for emergency purposes. The Fund may
also
invest in
mortgage-related
securities, including mortgage pass-through
securities
(such as
adjustable rate
mortgage securities, or "ARMs") and
collateralized
mortgage
obligations (CMOs).
The Fund may invest up to 35% of its
assets in
corporate debt
securities
rated Aaa, Aa, A or Baa by Moody's or AAA,
AA, A or BBB
by S&P at
the time of
purchase. The Fund may invest less than 35%
of its net
assets in
corporate debt
securities considered medium or lower grade
(commonly
referred to
as "high
yield" or "junk" bonds). The Fund will not
invest in
corporate
debt securities
that, at the time of investment, are rated
less than C
by either
Moody's or S&P.
During the twelve months ended December
31, 1995,
based upon
the
dollar-weighted average ratings of the Fund's
portfolio
holdings
at the end of
each month during such period, the Fund had
the
following
percentages of its
total assets invested in securities rated in
the
categories
indicated (all
ratings are by either S&P or Moody's,
whichever rating
is
higher): 75.1% in
securities rated AAA/Aaa; 0% in securities
rated AA/Aa;
0% in
securities rated
A/A; 0% in securities rated BBB/Baa; 7.3% in
securities
rated
BB/Ba; 11.4% in
securities rated B/B; and 0% in securities
which were
unrated.
These figures are
intended solely to provide disclosure about
the Fund's
asset
composition during
the period specified above. The asset
composition after
this time
may or may not
be approximately the same as represented by
such
figures.
The Fund can use various techniques to
increase or
decrease
its exposure to
changing security prices, interest rates,
currency
exchange
rates, commodity
prices, or other factors that affect security
values.
These
techniques may
involve derivative transactions such as
selling call
options and
purchasing put
and call options on U.S. government
securities,
interest rate
futures, foreign
currency futures and foreign currencies that
are traded
on an
exchange or board
of trade. IMI can use these practices to
adjust the
risk and
return
characteristics of the Fund's portfolio of
investments.
If IMI
judges market
conditions incorrectly or employs a strategy
that does
not
correlate well with
the Fund's investments, these techniques
could result
in a loss.
These
techniques may increase the
4
<PAGE>
volatility of the Fund and may involve a
small
investment of cash
relative to
the magnitude of the risk assumed. In
addition, these
techniques
could result in
a loss if the counterparty to the transaction
does not
perform as
promised. The
Fund may only engage in transactions in
interest rate
futures,
currency rate
futures and options on interest rate futures
and
currency futures
contracts for
hedging purposes.
The Fund's investment objectives are
fundamental
and may not
be changed
without the approval of a majority of the
outstanding
voting
shares of the Fund.
The Trustees may make non-material changes in
the
Fund's
objectives without
shareholder approval. Except for the Fund's
investment
objective
and those
investment restrictions specifically
identified as
fundamental,
all investment
policies and practices described in this
Prospectus and
in the
SAI are
non-fundamental and, therefore, may be
changed by the
Trustees
without
shareholder approval. There can be no
assurance that
the Fund's
objectives will
be met. The different types of securities and
investment
techniques used by the
Fund involve varying degrees of risk. For
information
about the
particular risks
associated with each type of investment, see
"Risk
Factors and
Investment
Techniques," below, and the SAI.
Whenever an investment objective,
policy or
restriction of
the Fund
described in this Prospectus or in the SAI
states a
maximum
percentage of assets
that may be invested in a security or other
asset or
describes a
policy
regarding quality standards, that percentage
limitation
or
standard will, unless
otherwise indicated, apply to the Fund only
at the time
a
transaction takes
place. Thus, for example, if a percentage
limitation is
adhered
to at the time
of investment, a later increase or decrease
in the
percentage
that results from
circumstances not involving any affirmative
action by
the Fund
will not be
considered a violation.
RISK FACTORS AND INVESTMENT TECHNIQUES
The following discussion describes in
greater
detail the
different types of
securities and investment techniques used by
the Fund,
as well as
the risks
associated with such securities and
techniques.
DEBT SECURITIES, IN GENERAL: Investment
in debt
securities
involves both
interest rate and credit risk. Generally, the
value of
debt
instruments rises
and falls inversely with interest rates. As
interest
rates
decline, the value of
debt securities generally increases.
Conversely, rising
interest
rates tend to
cause the value of debt securities to
decrease. Bonds
with longer
maturities
generally are more volatile than bonds with
shorter
maturities.
The market value
of debt securities also varies according to
the
relative
financial condition of
the issuer. In general, lower-quality bonds
offer
higher yields
due to the
increased risk that the issuer will be unable
to meet
its
obligations on
interest or principal payments at the time
called for
by the debt
instrument.
The Fund may invest up to 35% of its assets
in
corporate debt
securities rated
Aaa, Aa, A or Baa by Moody's or AAA, AA, A or
BBB by
S&P at the
time of
purchase.
U.S. GOVERNMENT SECURITIES: U.S.
Government
securities are
obligations of,
or guaranteed by, the U.S. Government, its
agencies or
instrumentalities. Such
securities include: (1) direct obligations of
the U.S.
Treasury
(such as
Treasury bills, notes, and bonds) and (2)
Federal
agency
obligations guaranteed
as to principal and interest by the U.S.
Treasury (such
as GNMA
certificates,
which are mortgage-backed securities). When
such
securities are
held to
maturity, the payment of principal and
interest is
unconditionally guaranteed by
the U.S. Government, and thus they are of the
highest
possible
credit quality.
U.S. Government securities that are not held
to
maturity are
subject to
variations in market value caused by
fluctuations in
interest
rates.
Mortgage-backed securities are securities
representing part
ownership of a
pool of mortgage loans. Although the mortgage
loans in
the pool
will have
maturities of up to 30 years, the actual
average life
of the
loans typically
will be substantially less because the
mortgages will
be subject
to principal
amortization and may be prepaid prior to
maturity. In
periods of
falling
interest rates, the rate of prepayment tends
to
increase, thereby
shortening the
actual average life of the security.
Conversely, rising
interest
rates tend to
decrease the rate of prepayment, thereby
lengthening
the
security's actual
average life. Since it is not possible to
predict
accurately the
average life of
a particular pool, and because prepayments
are
reinvested at
current rates, the
market value of mortgage-backed securities
may decline
during
periods of
declining interest rates.
INVESTMENT-GRADE DEBT SECURITIES:
Bonds rated
Aaa by
Moody's
and AAA by S&P
are judged to be of the best quality (i.e.,
capacity to
pay
interest and repay
principal is extremely strong). Bonds rated
Aa/AA are
considered
to be of high
quality (i.e., capacity to pay interest and
repay
interest is
very strong and
differs from the highest rated issues only to
a small
degree).
Bonds rated A are
viewed as having many favorable investment
attributes,
but
elements may be
present that suggest a susceptibility to the
adverse
effects of
changes in
circumstances and economic conditions than
debt in
higher rated
categories.
Bonds rated Baa/BBB (considered by Moody's to
be
"medium grade"
obligations) are
considered to have an adequate capacity to
pay interest
and repay
principal, but
certain protective elements may be lacking
(i.e., such
bonds lack
outstanding
investment characteristics and have some
speculative
characteristics).
LOW-RATED DEBT SECURITIES: Securities
rated lower
than Baa
or BBB (and
comparable unrated securities), commonly
referred to as
"high
yield" or "junk"
bonds, are considered by major credit-rating
organizations to
have predominately
speculative characteristics with respect to
the
issuer's capacity
to pay
interest and repay principal. While such debt
securities are
likely to have some
quality and protective characteristics, these
are
largely
outweighed by the risk
of exposure to adverse conditions and other
uncertainties.
Accordingly,
investments in such securities, while
generally
providing for
greater income and
potential opportunity for gain than
investments in
higher-rated
securities, also
entail greater risk (including the
possibility of
default or
bankruptcy of the
issuer of such securities) and generally
involve
greater price
volatility than
securities in higher rating categories.
Investors in
the Fund
should be willing
to accept the risks associated with
high-yield
securities. IMI
seeks to reduce
risk through diversification (including
investments in
foreign
securities),
credit analysis and attention to current
developments
and trends
in both the
economy and financial markets.
Should the rating of a portfolio security
be
downgraded, IMI
will determine
whether it is in the Fund's best interest to
retain or
dispose of
the security.
However, should any individual bond held by
the Fund be
downgraded below the
rating of C, IMI currently intends to dispose
of it
based on then
existing
market conditions. See Appendix A to the SAI
for a more
complete
description of
the ratings assigned by Moody's and S&P.
MORTGAGE-RELATED SECURITIES: The market
value of
mortgage
securities, like
that of U.S. Government securities, will
generally vary
inversely
with changes
in market interest rates, declining when
interest rates
rise and
rising when
interest rates decline. However, mortgage
securities,
while
having less risk of
a decline during periods of rapidly rising
interest
rates, may
also have less
potential for capital appreciation than other
investments of
comparable
maturities due to the likelihood of increased
prepayments of
mortgages as
interest rates decline and the possibility of
a lower
rate of
return upon
reinvestment. In addition, to the extent
mortgage
securities are
purchased at a
premium,
5
<PAGE>
mortgage foreclosures and unscheduled
principal
repayments may
result in some
loss of the holders' principal investment to
the extent
of
premium paid. On the
other hand, if mortgage securities are
purchased at a
discount,
both a scheduled
payment of principal and an unscheduled
prepayment of
principal
will increase
current and total returns and will accelerate
the
recognition of
income which
when distributed to shareholders will be
taxable as
ordinary
income.
Mortgage pass-through securities are
securities
representing
interests in
"pools" of mortgage loans secured by
residential or
commercial
real property in
which payments of both interest and principal
on the
securities
are generally
made monthly, in effect "passing through"
monthly
payments made
by the
individual borrowers on the mortgage loans
which
underlie the
securities (net of
fees paid to the issuer or guarantor of the
securities).
ARMs are pass-through mortgage securities
which are
collateralized by
mortgages with adjustable rather than fixed
interest
rates. The
ARMs in which
the Fund invests are issued primarily by
GNMA, FNMA and
FHLMC and
are actively
traded in the secondary market. The Fund will
not
benefit from
increases in
interest rates to the extent that interest
rates rise
to the
point where they
cause the current coupon of adjustable rate
mortgages
held as
investments to
exceed the maximum allowable annual or
lifetime reset
limits (or
"cap rates")
for a particular mortgage. Also, the Fund's
net asset
value could
vary to the
extent that current yields on mortgage
securities are
different
than market
yields during interim periods between coupon
reset
dates.
Payment of principal and interest on some
mortgage
pass-through securities
(but not the market value of the securities
themselves)
may be
guaranteed by the
full faith and credit of the U.S. Government
(in the
case of
securities
guaranteed by GNMA); or guaranteed by
agencies or
instrumentalities of the U.S.
Government (in the case of securities
guaranteed by
FNMA or the
Federal Home
Loan Mortgage Corporation ("FHLMC"), which
are
supported only by
the
discretionary authority of the U.S.
Government to
purchase the
agency's
obligations). Mortgage-related securities
created by
non-governmental issuers
(such as commercial banks, savings and loan
institutions, private
mortgage
insurance companies, mortgage bankers and
other
secondary market
issuers) may be
supported by various forms of insurance or
guarantees,
including
individual
loan, title, pool and hazard insurance and
letters of
credit,
which may be
issued by governmental entities, private
insurers or
the mortgage
poolers.
CMOs are bonds issued by single-purpose,
stand-alone finance
subsidiaries or
trusts of financial institutions, government
agencies,
investment
bankers or
other similar institutions. CMOs purchased by
the Fund
may be:
(1)
collateralized by pools of mortgages in which
each
mortgage is
guaranteed as to
payment of principal and interest by an
agency or
instrumentality
of the U.S.
Government; (2) collateralized by pools of
mortgages in
which
payment of
principal and interest are guaranteed by the
issuer and
the
guarantee is
collateralized by U.S. Government securities;
or (3)
securities
in which the
proceeds of the issuance are invested in
mortgage
securities and
payment of the
principal and interest are supported by the
credit of
an agency
or
instrumentality of the U.S. Government. All
CMOs
purchased by the
Fund will be
either issued by a U.S. Government agency or
rated AAA
by S&P or
Aaa by Moody's.
BANKING INDUSTRY AND SAVING AND LOAN
OBLIGATIONS:
The bank
obligations in
which the Fund may invest include
certificates of
deposit,
bankers' acceptances,
and other short-term debt obligations.
Investments in
certificates of deposit
and bankers' acceptances are limited to
obligations of
(i) banks
having total
assets in excess of $1 billion, and (ii)
other banks if
the
principal amount of
such obligation is fully insured by the
Federal Deposit
Insurance
Corporation
("FDIC"). Investments in certificates of
deposit of
savings
associations are
limited to obligations of federally or
state-chartered
institutions that have
total assets in excess of $1 billion and
whose deposits
are
insured by the FDIC.
COMMERCIAL PAPER: Commercial paper
represents
short-term
unsecured
promissory notes issued in bearer form by
bank holding
companies,
corporations,
and finance companies. Investments in
commercial paper
are
limited to
obligations rated Prime-1 by companies having
an
outstanding debt
issue
currently rated Aaa or Aa by Moody's or AAA
or AA by
S&P.
FOREIGN SECURITIES: The foreign
securities in
which the Fund
may invest
include non-U.S. dollar-denominated debt
securities,
Eurodollar
securities, and
debt securities issued, assumed or guaranteed
by
foreign
governments or
political subdivisions or instrumentalities
thereof.
The Fund may
also purchase
sponsored or unsponsored ADRs. Eurodollar
securities
are
securities that are
issued offshore and which pay interest and
principal in
U.S.
dollars. ADRs are
dollar-denominated receipts issued generally
by U.S.
banks and
which represent a
deposit with the bank of a foreign company's
securities.
Unsponsored ADRs differ
from sponsored ADRs in that the establishment
of
unsponsored ADRs
is not
approved by the issuer of the underlying
foreign
securities.
Ownership of
unsponsored ADRs may not entitle the Fund to
financial
or other
reports of the
issuer, to which it would be entitled as the
owner of
sponsored
ADRs. ADRs are
publicly traded on exchanges or over the
counter in the
United
States. See the
Fund's SAI. Investors should consider
carefully the
substantial
risks involved
in investing in securities issued by
companies and
governments of
foreign
nations, which are in addition to the usual
risks
inherent in
domestic
investments.
The Fund may invest in debt securities
issued by
governments,
government-related entities and corporations
in foreign
countries
with emerging
or developing economies ("emerging markets"),
including
the
developing countries
of Latin America and Eastern Europe.
Securities of many
issuers
in emerging
markets may be less liquid and more volatile
than
securities of
issuers
operating in developed economies, such as the
United
States,
Canada and most of
Europe. The risks described above with
respect to
investment in
foreign
countries are heightened when the foreign
country is an
emerging
market.
Furthermore, throughout the last decade, many
emerging
markets
have experienced
and continue to experience high rates of
inflation. In
certain
countries,
inflation has at times accelerated rapidly to
hyperinflationary
levels, creating
a negative interest rate environment and
sharply
eroding the
value of
outstanding financial assets in those
countries.
Although the Fund intends to invest only
in nations
that the
Investment
Manager considers to have relatively stable
and
friendly
governments, there is
the possibility of expropriation,
nationalization or
confiscatory
taxation,
taxation of income earned in a foreign
country and
other foreign
taxes, foreign
exchange controls (which may include
suspension of the
ability to
transfer
currency from a given country), default in
foreign
government
securities,
political or social instability or diplomatic
developments which
could affect
investments in securities of issuers in those
nations.
In
addition, in many
countries there is less publicly available
information
about
issuers than is
available in reports about companies in the
United
States.
Foreign companies are
not generally subject to uniform accounting,
auditing
and
financial reporting
standards, and auditing practices and
requirements may
not be
comparable to
those applicable to U.S. companies. In many
foreign
countries,
there is less
government supervision and regulation of
business and
industry
practices, stock
exchanges, brokers and listed companies than
in the
United
States. Foreign
securities transactions may be subject to
higher
brokerage costs
than domestic
securities transactions. In addition, the
foreign
securities
markets of many of
the countries in which the
6
<PAGE>
Fund may invest may also be smaller, less
liquid and
subject to
greater price
volatility than those in the United States.
Further,
the Fund may
encounter
difficulties or be unable to pursue legal
remedies and
obtain
judgments in
foreign courts.
OPTIONS AND FUTURES TRANSACTIONS: A put
option is
a
short-term contract
that gives the purchaser of the option, in
return for a
premium,
the right to
sell the underlying security or currency to
the seller
of the
option at a
specified price during the term of the
option. A call
option is a
short-term
contract that gives the purchaser of the
option, in
return for a
premium, the
right to buy the underlying security or
currency from
the seller
of the option
at a specified price during the term of the
option.
When the Fund
writes a put
or call option, the Fund will segregate
assets, such as
cash,
U.S. Government
securities or other high-grade debt
securities, or
"cover" its
position in
accordance with the Investment Company Act of
1940, as
amended
(the "1940 Act").
The Fund will not write puts with respect to
more than
50% of the
value of its
net assets (calculated at market value at the
time of
the
transaction). The Fund
will not write any call options if as a
result it would
have more
than 20% of
its net assets (calculated at market value at
the time
of the
writing of the
call) subject to being purchased upon the
exercise of
calls. The
Fund may
purchase options provided the aggregate
premium paid
for all
options held will
not exceed 10% (calculated at market value)
of the
value of its
net assets at
the time of purchase.
An interest rate futures contract is an
agreement
between two
parties to buy
or sell a specified debt security at a set
price on a
future
date. A foreign
currency futures contract is an agreement to
buy or
sell a
specified amount of a
foreign currency for a set price on a future
date. See
"Investment Objectives
and Policies -- Futures Contracts and Options
on
Futures
Contracts" in the SAI.
When the Fund enters into a futures
contract, it
must make an
initial
deposit known as an "initial margin," as a
partial
guarantee of
its performance
under the contract. As the value of the
security or
currency
fluctuates, either
party to the contract is required to make
additional
margin
payments, known as
"variation margins," to cover any additional
obligation
it may
have under the
contract. In addition, when the Fund enters
into a
futures
contract, it will
segregate assets, such as cash, U.S.
Government
securities or
other high-grade
debt securities, or "cover" its position in
accordance
with the
1940 Act.
Use of option contracts, foreign currency
contracts, futures
contracts and
options on futures contracts is subject to
special risk
considerations. The risk
of loss from the use of futures is
potentially
unlimited. A
liquid secondary
market for any futures or related options
contract may
not be
available when a
futures or options position is sought to be
closed and
the Fund
would remain
obligated to meet margin requirements until
the
position is
closed. In addition,
there may be an imperfect correlation between
price
movements in
the securities
or currency on which the futures or options
contract is
based and
in the Fund's
portfolio securities being hedged. Use of
futures or
related
options contracts
is further dependent on the Investment
Manager's
ability to
predict correctly
price movements in the securities or currency
being
hedged, and
no assurance can
be given that its judgment will be correct.
Currency
futures
contracts and
options thereon may be traded on foreign
exchanges;
such
transactions may not be
regulated as effectively as similar
transactions in the
United
States; may not
involve a clearing mechanism and related
guarantees;
and are
subject to the risk
of governmental action affecting trading in,
or the
prices of,
foreign
securities.
FORWARD FOREIGN CURRENCY CONTRACTS: A
forward
foreign
currency contract
involves an obligation to purchase or sell a
specific
currency at
a future date,
which may be any fixed number of days from
the date of
the
contract agreed upon
by the parties, at a price set at the time of
the
contract.
Although these
contracts are intended to minimize the risk
of loss due
to a
decline in the
value of the hedged currencies, at the same
time, they
tend to
limit any
potential gain which might result should the
value of
such
currencies increase.
Although the Fund may enter into forward
contracts
to reduce
currency
exchange risks, changes in currency exchange
rates may
result in
poorer overall
performance for the Fund than if it had not
engaged in
such
transactions.
Moreover, there may be an imperfect
correlation between
the
Fund's portfolio
holdings of securities denominated in a
particular
currency and
forward
contracts entered into by the Fund. Such
imperfect
correlation
may prevent the
Fund from achieving the intended hedge or
expose the
Fund to the
risk of
currency exchange loss. The Fund will enter
into such a
forward
contract only if
it is expected that there will be a liquid
market in
which to
close out the
contract. However, there can be no assurance
that a
liquid market
will exist in
which to close a forward contract, in which
case the
Fund may
suffer a loss.
ZERO COUPON BONDS: Zero coupon bonds are
debt
obligations
issued without
any requirement for the periodic payment of
interest.
Zero coupon
bonds are
issued at a significant discount from face
value.
Because
interest on zero
coupon obligations is not distributed to the
Fund on a
current
basis but is in
effect compounded, the value of the
securities of this
type is
subject to
greater fluctuations in response to changing
interest
rates than
the value of
debt obligations which distribute income
regularly.
REPURCHASE AGREEMENTS: Repurchase
agreements are
agreements
under which the
Fund buys a money market instrument and
obtains a
simultaneous
commitment from
the seller to repurchase the instrument at a
specified
time and
at an
agreed-upon yield. The Fund will not enter
into a
repurchase
agreement with more
than seven days to maturity if, as a result,
more than
10% of the
Fund's net
assets would be invested in illiquid
securities
including such
repurchase
agreements. The Fund may enter into
repurchase
agreements with
banks or
broker-dealers deemed to be creditworthy by
the
Investment
Manager under
guidelines approved by the Board of Trustees.
In the
unlikely
event of failure
of the executing bank or broker-dealer, the
Fund could
experience
some delay in
obtaining direct ownership of the underlying
collateral
and might
incur a loss
if the value of the security should decline,
as well as
costs in
disposing of
the security.
BORROWING, LENDING, "WHEN-ISSUED"
SECURITIES AND
FIRM
COMMITMENTS: The Fund
may borrow from a bank up to a limit of 10%
of its
total assets,
but only for
temporary or emergency purposes. Borrowing
may
exaggerate the
effect on the
Fund's net asset value of any increase or
decrease in
the value
of the Fund's
portfolio securities. Money borrowed will be
subject to
interest
costs (which
may include commitment fees and/or the cost
of
maintaining
minimum average
balances).
Loans of securities by the Fund will be
collateralized by
cash, letters of
credit or securities issued or guaranteed by
the U.S.
Government
or its agencies
or instrumentalities. There may be risks of
delay in
receiving
additional
collateral, or risks of delay in recovery of
the
securities or
even loss of
rights in the collateral, should the borrower
of the
securities
fail
financially. As a non-fundamental policy,
loans will
not be made
if, as a
result, the aggregate of all outstanding
securities
loaned
exceeds 30% of the
value of the Fund's total assets.
The Fund may invest in securities issued
on a
"when-issued"
or firm
commitment basis in order to secure an
advantageous
price and
yield to the Fund
at the time of entering into the transaction.
Purchasing
securities on a
"when-issued" or firm commitment basis
involves a risk
of loss if
the value of
the security to be purchased declines prior
to the
settlement
date.
7
<PAGE>
RESTRICTED AND ILLIQUID SECURITIES: The
Fund's
policy is
that restricted
and other illiquid securities (including
repurchase
agreements of
more than
seven days' duration and other securities
which are not
readily
marketable or
which have a limited trading market) may not
constitute
more than
10% of the
value of the Fund's net assets. In addition,
as a
matter of
nonfundamental
policy, the Fund may not invest more than 10%
of its
net assets
in securities
which are not readily marketable, repurchase
agreements
maturing
in more than
seven days, and restricted securities; in no
event may
the Fund
invest more than
5% of its assets in restricted securities.
Issuers of
restricted
securities may
not be subject to the disclosure and other
investor
protection
requirements that
would be applicable if their securities were
publicly
traded.
Restricted
securities may be sold only in privately
negotiated
transactions
or in a public
offering with respect to which a registration
statement
is in
effect under the
Securities Act of 1933. Where a registration
statement
is
required, the Fund may
be required to bear all or part of the
registration
expenses.
There may be a
lapse of time between the Fund's decision to
sell a
restricted or
illiquid
security and the point at which the Fund is
permitted
or able to
sell such
security. If, during such a period, adverse
market
conditions
were to develop,
the Fund might obtain a price less favorable
than the
price that
prevailed when
it decided to sell.
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is organized as a separate,
diversified
portfolio
of
the Trust, an
open-end management investment company
organized as a
Massachusetts business
trust on December 21, 1983. The Fund results
from a
reorganization of Mackenzie
Short-Term U.S. Government Securities Fund, a
series of
The
Mackenzie Funds
Inc., into the Fund, a newly created series
of the
Trust, which
reorganization
was approved by shareholders in December,
1994. The
business and
affairs of the
Fund are managed under the direction of the
Trustees.
Information
about the
Trustees, as well as the Trust's executive
officers,
may be found
in the SAI.
The Trust has an unlimited number of
authorized shares
of
beneficial interest,
and currently has 13 series of shares. The
Trustees
have
authorized the issuance
of three classes of the Fund, designated as
Class A,
Class B and
Class I. Shares
of the Fund entitle their holders to one vote
per share
(with
proportionate
voting for fractional shares). The shares of
each class
represent
an interest in
the same portfolio of investments of the
Fund. Each
class of
shares has a
different 12b-1 distribution plan and bears
different
distribution fees. Shares
of each class have equal rights as to voting,
redemption,
dividends and
liquidation but have exclusive voting rights
with
respect to
their Rule 12b-1
distribution plans. As of March 29,1996, M.
Fraser, 184
Euclid
Avenue, Hamburg,
New York 14075, held 2,572.28 (43.23%) of the
outstanding Class B
shares of the
Fund, and is considered to hold a controlling
interest
(as
defined under the
1940 Act) in Class B shares of the Fund.
The Trust employs IMI to provide
business
management and
investment advisory
services; MIMI to provide administrative and
accounting
services;
Ivy Mackenzie
Distributors, Inc. ("IMDI") to distribute the
Fund's
shares and
Ivy Mackenzie
Services Corp. ("IMSC") to provide transfer
agent and
shareholder-related
services. IMI, IMDI and IMSC are wholly-owned
subsidiaries of
MIMI. Until
December 31, 1994, MIMI served as investment
adviser to
the Fund.
As of March
29, 1996, IMI and MIMI had approximately
$1.39 billion
and $186
million,
respectively, in assets under management.
MIMI is a
subsidiary of
Mackenzie
Financial Corporation ("MFC"), which has been
an
investment
counsel and mutual
fund manager in Toronto, Ontario, Canada for
more than
25
years.
PORTFOLIO MANAGEMENT: The Fund is
managed by a
team, with
each team member
having specific responsibilities for
management of the
Fund:
Leslie A. Ferris, a
Senior Vice President of IMI and Managing
Director-Fixed Income,
is portfolio
manager for the Fund. Ms. Ferris joined the
Ivy/Mackenzie fund
complex (the
"Fund Complex") in 1988 and has 14 years of
professional
investment experience.
She is a Chartered Financial Analyst and
holds an MBA
degree from
The University
of Chicago. Prior to joining Ivy/Mackenzie,
Ms. Ferris
was a
portfolio manager
at Kemper Financial Services Inc. from 1982
to 1988.
Michael G.
Landry, the
President and a Director of MIMI and IMI, and
the
President and a
Trustee of the
Trust, is the investment strategist for the
Fund. Mr.
Landry
joined the Fund
Complex in 1987 and has over 20 years of
professional
invesment
experience.
INVESTMENT MANAGEMENT EXPENSES: For
management
of its
investments and
business affairs, the Fund pays IMI a monthly
fee
calculated on
the basis of the
Fund's average daily net assets at an annual
rate of
0.60%.
Under the Fund's management agreement,
IMI pays
all
expenses
incurred by it
in rendering management services to the Fund.
The Fund
bears its
cost of
operations. See the SAI. If, however, the
Fund's total
expenses
in any fiscal
year exceed the permissible limit applicable
to the
Fund in any
state in which
the shares are then qualified for sale, IMI
will bear
the excess
expenses. The
ratio of operating expenses after expense
reimbursements to
average net assets
for Class A and Class B shares for the period
ended
December 31,
1995 was 0.93%
and 1.43% (annualized), respectively. Without
expense
reimbursements, the ratio
of operating expenses to average net assets
for Class A
and Class
B Shares for
the period ended December 31, 1995 was 3.27%
and 3.77%
(annualized),
respectively. There were no Class I shares
outstanding
during the
year ended
December 31, 1995.
The assets received by each class of the
Fund for
the issue
or sale of its
shares and all income, earnings, profits,
losses and
proceeds
therefrom, subject
only to the rights of creditors, are
allocated to, and
constitute
the underlying
assets of that class of the Fund. The
underlying assets
of each
class of the
Fund are allocated and are charged with the
expenses
with respect
to that class
of the Fund and with a share of the general
expenses of
the
Trust. General
expenses of the Trust (such as the costs of
maintaining
the
Trust's existence,
legal fees, proxy and shareholders' meeting
costs,
etc.) that are
not readily
identifiable as belonging to a particular
fund or to a
particular
class of a
fund will be allocated among and charged to
the assets
of that
fund on a fair
and equitable basis, which may be based on
the relative
assets of
that fund or
the nature of the services performed and
their relative
applicability to that
fund. Expenses that relate exclusively to the
Fund,
such as
certain registration
fees, brokerage commissions and other
portfolio
expenses, will be
borne directly
by the Fund.
FUND ADMINISTRATION AND ACCOUNTING
The Trust has entered into an
Administrative
Services
Agreement with MIMI
pursuant to which MIMI provides various
administrative
services
for the Fund,
including maintenance of registration or
qualification
of Fund
shares under
state "Blue Sky" laws, assisting in the
preparation of
Federal
and state income
tax returns and preparing financial
statements of
additional
information, and
periodic reports to shareholders. In
addition, MIMI
will assist
the Trust's
legal counsel with SEC registration
statements, proxies
and other
required
filings. Under the agreement, the Fund pays
MIMI a
monthly fee
based upon the
Fund's average daily net assets at the annual
rate of
0.10%.
MIMI also provides certain accounting
and
pricing services
for the Fund (see
"Fund Accounting Services" in the SAI for
more
information).
8
<PAGE>
TRANSFER AGENT
IMSC is the transfer and
dividend-paying agent
for the
Fund
and provides
certain shareholder and shareholder-related
services.
Certain
broker/dealers
that maintain shareholder accounts with the
Fund
through an
omnibus account
provide transfer agent and other
shareholder-related
services
that would
otherwise be provided by IMSC if the
individual
accounts that
comprise the
omnibus account were opened by their
beneficial owners
directly.
(See
"Investment Advisory and Other Services" in
the
SAI).
ALTERNATIVE PURCHASE ARRANGEMENTS
You can purchase shares of the Fund at a
price
equal to their
net asset
value per share, plus a sales charge. At your
election,
this
charge may be
imposed either at the time of the purchase
(see
"Initial Sales
Charge
Alternative -- Class A shares") or on a
contingent
deferred basis
(see
"Contingent Deferred Sales Charge Alternative
-- Class
B
shares"). If you do not
specify on your account application which
class of
shares you are
purchasing, it
will be assumed that you are investing in
Class A
shares.
CLASS A SHARES: If you elect to
purchase Class
A shares,
you
will incur an
initial sales charge unless the amount you
purchase is
$1,000,000
or more. If
you purchase $1,000,000 or more of Class A
shares, you
will not
be subject to an
initial sales charge, but you will incur a
contingent
deferred
sales charge
("CDSC") if you redeem your shares within 24
months of
purchase.
See "Contingent
Deferred Sales Charge -- Class A Shares".
Class A
shares are
subject to ongoing
service fees at an annual rate of 0.25% of
the Fund's
average
daily net assets
attributable to Class A shares. Certain
purchases of
Class A
shares qualify for
a reduced initial sales charge. See
"Qualifying for a
Reduced
Sales Charge." If
you do not specify on your account
application which
class of
shares you are
purchasing, it will be assumed that you are
investing
in Class A
shares.
CLASS B SHARES: You will not incur a
sales
charge when
you
purchase Class B
shares, but the shares are subject to a CDSC
if you
redeem them
within five
years of purchase. Class B shares are subject
to
ongoing service
and
distribution fees at a combined annual rate
of 0.75% of
the
Fund's average daily
net assets attributable to Class B shares.
The ongoing
distribution fee will
cause these shares to have a higher expense
ratio than
that of
Class A shares.
To the extent that any dividends are paid by
the Fund,
these
higher expenses
will also result in lower dividends than
those paid on
Class A
shares.
CLASS I SHARES: Class I shares are
offered only to
institutions and certain
individuals. They are not subject to an
initial or a
contingent
deferred sales
charge nor to ongoing service/distribution
fees.
FACTORS TO CONSIDER IN CHOOSING AN
ALTERNATIVE:
The
multi-class structure
of the Fund allows you to choose the most
beneficial
way to buy
shares given the
amount of your purchase, the length of time
you expect
to hold
your shares and
other circumstances. You should consider
whether,
during the
anticipated life of
your Fund investment, the accumulated fees on
Class B
shares
would be less than
the initial sales charge and accumulated fees
on Class
A shares
purchased at the
same time, and to what extent this
differential would
be offset
by the Class A
shares' potentially higher yield. Also, sales
personnel
may
receive different
compensation depending on which class of
shares they
are selling.
To help you
make this determination, the table under the
caption
"Expense
Data Table" at the
beginning of this Prospectus gives examples
of the
charges
applicable to each
class of shares. Class A shares will normally
be more
beneficial
if you qualify
for a reduced sales charge. See "Qualifying
for a
Reduced Sales
Charge."
DIVIDENDS AND TAXES
Dividends and capital gain
distributions
received from the
fund are
reinvested in additional shares of your class
unless
your elect
to receive them
in cash. If you elect the cash option and the
U.S.
Postal Service
cannot deliver
your checks, your election will be converted
to the
reinvestment
option. Because
of the higher expenses associated with Class
B shares,
any
dividend on these
shares will be lower than on the Class A and
Class I
shares.
In order to provide a steady cash flow
to the
Fund's
shareholders, the Board
of Trustees intends normally to make monthly
distributions from
the Fund's net
investment income to the Fund's Class A,
Class B and
Class I
shareholders based
on their relative net asset value. The Fund
intends to
make a
final distribution
for each fiscal year of any remaining net
investment
income and
net realized
short-term capital gain, as well as
undistributed net
long-term
capital gain
realized during the year. An additional
distribution
may be made
of net
investment income, net realized short-term
capital
gains and net
realized
long-term capital gains to comply with the
calendar
year
distribution
requirement under the excise tax provisions
of Section
4982 of
the Internal
Revenue Code of 1986, as amended (the
"Code").
If, for any year, the total distributions
from the
Fund
exceed net
investment income and net realized capital
gain for the
Fund, the
excess,
distributed from the assets of the Fund, will
generally
be
treated as a return
of capital. The amount treated as a return of
capital
will reduce
a
shareholder's adjusted basis in his or her
shares
(thereby
increasing his or her
potential gain or reducing his or her
potential loss on
the sale
of his or her
shares) and, to the extent that the amount
exceeds this
basis,
will be treated
as a taxable gain. However, if the Fund has
current or
accumulated earnings and
profits, so as to characterize all or a
portion of such
excess as
a dividend for
federal income tax purposes, the
distributions, to that
extent,
would normally
be taxable as ordinary income (or, if a
capital gain
dividend, as
long-term
capital gain).
TAXATION: The following discussion is
intended for
general
information
only. An investor should consult with his or
her own
tax adviser
as to the tax
consequences of an investment in the Fund,
including
the status
of distributions
from the Fund under applicable state or local
law.
The Fund intends to qualify annually and
elect to
be treated
as a regulated
investment company under the Code. To
qualify, the Fund
must meet
certain
income, distribution and diversification
requirements.
In any
year in which the
Fund qualifies as a regulated investment
company and
timely
distributes all of
its taxable income, the Fund generally will
not pay any
U.S.
Federal income or
excise tax.
Dividends paid out of the Fund's
investment company
taxable
income
(including dividends, interest and net
short-term
capital gain)
will be taxable
to a shareholder as ordinary income. If a
portion of
the Fund's
income consists
of dividends paid by U.S. corporations, a
portion of
the
dividends paid by the
Fund may be eligible for the corporate
dividends-received
deduction.
Distributions of net capital gains (the
excess of net
long-term
capital gains
over net short-term capital losses), if any,
designated
as
capital gain
dividends are taxable as long-term capital
gains,
regardless of
how long the
shareholder has held the Fund's shares.
Dividends are
taxable to
shareholders in
the same manner whether received in cash or
reinvested
in
additional Fund
shares.
A distribution will be treated as paid on
December
31 of the
current
calendar year if it is declared by a Fund in
October,
November or
December with
a record date in such a month and paid by the
Fund
during January
of the
following calendar year. Such distributions
will be
taxable to
shareholders in
the
9
<PAGE>
calendar year in which the distributions are
declared,
rather
than the calendar
year in which the distributions are received.
Each year the Fund will notify
shareholders of the
tax status
of dividends
and distributions.
Any gain or loss realized by a
shareholder upon the
sale or
other
disposition of shares of the Fund, or upon
receipt of a
distribution in complete
liquidation of the Fund, generally will be a
capital
gain or loss
which will be
long-term or short-term, generally depending
upon the
shareholder's holding
period for the shares.
The Fund may be required to withhold U.S.
Federal
income tax
at the rate of
31% of all taxable distributions payable to
shareholders who fail
to provide the
Fund with their correct taxpayer
identification number
or to make
required
certifications, or who have been notified by
the IRS
that they
are subject to
backup withholding. Backup withholding is not
an
additional tax.
Any amounts
withheld may be credited against the
shareholder's U.S.
Federal
income tax
liability.
Further information relating to tax
consequences is
contained
in the SAI.
Fund distributions may be subject to
state, local
and foreign
taxes. Fund
distributions that are derived from interest
on
obligations of
the U.S.
Government and certain of its agencies,
authorities and
instrumentalities may be
exempt from state and local taxes in certain
states.
Shareholders
should consult
their own tax advisers regarding the
particular tax
consequences
of an
investment in the Fund.
PERFORMANCE DATA
Performance information (e.g., "total
return"
and "yield")
is
computed
separately for each class of Fund shares in
accordance
with
formulas prescribed
by the SEC. Performance information for each
class may
be
compared in reports
and promotional literature to indices such as
the
Standard and
Poor's 500 Stock
Index, Dow Jones Industrial Average, and
Morgan Stanley
Capital
International
World Index. Advertisements, sales literature
and
communications
to shareholders
may also contain statements of the Fund's
current
yield, various
expressions of
total return and current distribution rate.
Performance
figures
will vary in
part because of the different expense
structures of the
Fund's
different
classes. ALL PERFORMANCE INFORMATION IS
HISTORICAL AND
IS NOT
INTENDED TO
SUGGEST FUTURE RESULTS.
"Total return" is the change in value
of an
investment in
the
Fund for a
specified period, and assumes the
reinvestment of all
distributions and
imposition of the maximum applicable sales
charge.
"Average
annual total return"
represents the average annual compound rate
of return
of an
investment in a
particular class of Fund shares assuming the
investment
is held
for one year,
five years and ten years as of the end of the
most
recent
calendar quarter.
Where the Fund provides total return
quotations for
other
periods, or based on
investments at various sales charge levels or
at net
asset value,
"total return"
is based on the total of all income and
capital gains
paid to
(and reinvested
by) shareholders, plus (or minus) the change
in the
value of the
original
investment expressed as a percentage of the
purchase
price.
"Current yield" reflects the income
per share
earned by
the
Fund's portfolio
investments, and is calculated by dividing
the Fund's
net
investment income per
share during a recent 30-day period by the
maximum
public
offering price on the
last day of that period and then annualizing
the
result.
Dividends or
distributions that were paid to the Fund's
shareholders
are
reflected in the
"current distribution rate," which is
computed by
dividing the
total amount of
dividends per share paid by the Fund during
the
preceding 12
months by the
Fund's current maximum offering price (which
includes
any
applicable sales
charge). The "current distribution rate" will
differ
from the
"current yield"
computation because it may include
distributions to
shareholders
from sources
other than dividends and interest, short term
capital
gain and
net equalization
credits and will be calculated over a
different period
of
time.
HOW TO BUY SHARES
The minimum initial investment is $1,000;
the
minimum
additional investment
is $100. Initial or additional investment
amounts for
retirement
accounts may be
less. See "Retirement Plans." Accounts in
Class I of
the Fund can
be opened with
a minimum initial investment of $5,000,000;
the minimum
additional investment is
$10,000. The minimum initial investment in
Class I of
the Fund
may be spread
over the thirteen-month period after an
Institution or
a high net
worth
individual opens an account and the Fund, at
its
discretion, may
accept initial
and additional investments of small amounts.
All
purchases must
be made in U.S.
dollars. Complete the Account Application
attached to
this
Prospectus. Indicate
whether you are purchasing Class A, Class B
or Class I
shares. If
you do not
specify which class of shares you are
purchasing, IMSC
will
assume you are
investing in Class A shares. The Fund
reserves the
right to
reject for any
reason any purchase order.
OPENING AN ACCOUNT
BY CHECK
1. Make your check payable to the fund in
which you
are
investing.
2. Deliver the completed application and
check to
your
registered
representative or selling broker, or
mail it
directly to
IMSC.
3. Our address is:
IVY MACKENZIE
SERVICES CORP.
P.O. BOX
3022
BOCA RATON, FL
33431-0922
4. Our courier address is:
IVY MACKENZIE
SERVICES CORP.
700 SOUTH FEDERAL
HIGHWAY, SUITE
300
BOCA RATON, FL
33432
BY WIRE
1. Deliver a completed fund application
to your
registered
representative or
selling broker, or mail it directly to
IMSC.
Before wiring
any funds,
please contact IMSC at 1-800-777-6472
to verify
your
account number.
2. Instruct your bank to wire funds to:
FIRST UNION NATIONAL
BANK OF
FLORIDA
JACKSONVILLE,
FLORIDA
ABA
#063000021
ACCOUNT
#2090002063833
FOR FURTHER
CREDIT TO:
YOUR IVY ACCOUNT
REGISTRATION
YOUR FUND NUMBER AND
ACCOUNT
NUMBER
Your bank may charge a fee for wiring
funds.
THROUGH A REGISTERED SECURITIES DEALER:
You may
also place
an order to
purchase shares through your Registered
Securities
Dealer.
10
<PAGE>
BUYING ADDITIONAL CLASS A AND CLASS B
SHARES
BY CHECK
1. Complete the investment stub attached
to your
statement or
include a note
with your investment listing the name
of the
Fund, the
class of shares to
purchase, your account number and the
name(s) in
which the
account is
registered.
2. Make your check payable to the fund in
which you
are
investing.
3. Mail the account information and check
to:
IVY MACKENZIE
SERVICES CORP.
P.O. BOX
3022
BOCA RATON, FL
33431-0922
Our courier address is:
IVY MACKENZIE
SERVICES CORP.
700 SOUTH FEDERAL
HIGHWAY, SUITE
300
BOCA RATON, FL
33432
or deliver it to your registered
representative or
selling
broker.
BY WIRE
Instruct your bank to wire funds to:
FIRST UNION NATIONAL
BANK OF
FLORIDA
JACKSONVILLE,
FLORIDA
ABA
#063000021
ACCOUNT
#2090002063833
FOR FURTHER
CREDIT TO:
YOUR IVY ACCOUNT
REGISTRATION
YOUR FUND NUMBER AND
ACCOUNT
NUMBER
Your bank may charge a fee for wiring
funds.
THROUGH A REGISTERED SECURITIES DEALER
You may also place an order to purchase
shares
through your
Registered
Securities Dealer.
BY AUTOMATIC INVESTMENT METHOD ("AIM")
1. Complete the "Automatic Investment
Method" and
"Wire/EFT
Information"
sections on the Account Application
designating
a bank
account from which
funds may be drawn. Please note that
in order to
invest
using this
method, your bank must be a member of
the
Automated
Clearing House system
(ACH). The minimum investment under
this plan is
$50 per
month ($25 per
month for retirement plans).
Please remember to attach a voided
check to your
account
application.
2. At pre-specified intervals, your bank
account
will be
debited and the
proceeds will be credited to your
account.
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Class A shares of
the Fund
is the net
asset value
("NAV") per share plus a sales charge, which
may be
reduced or
eliminated in
certain circumstances. The purchase price per
share is
known as
the public
offering price. Your purchase price for Class
B and
Class I
shares of the Fund
is the net asset value per share.
Your purchase of shares will be made at
the next
determined
price after the
purchase order is received. The price is
effective for
orders
received by IMSC
or by your registered securities dealer prior
to the
time of the
determination
of the net asset value. Any orders received
after the
time of the
determination
of the net asset value will be entered at the
next
calculated
price.
Orders placed with a securities dealer
prior to the
time of
determination of
the net asset value and transmitted through
the
facilities of the
National
Securities Clearing Corporation on the same
day are
confirmed at
that day's
price. Any loss resulting from the dealer's
failure to
submit an
order by the
deadline will be borne by that dealer.
You will receive an account statement
after any
purchase,
exchange or full
liquidation. Statements related to
reinvestment of
dividends,
capital gains,
automatic investment plans (see the SAI for
further
explanation)
and/or
systematic withdrawal plans will be sent
quarterly.
HOW THE FUND VALUES ITS SHARES
The NAV per share is the value of one
share. The
NAV is
determined for each
Class of shares as of the close of the New
York Stock
Exchange on
each day the
Exchange is open by dividing the value of a
Fund's net
assets
attributable to a
class by the number of shares of that class
that are
outstanding,
adjusted to
the nearest cent.
The Trust's Board of Trustees has
established
procedures
to
value the Fund's
securities in order to determine the NAV. The
value of
a foreign
security is
determined as of the normal close of trading
on the
foreign
exchange on which it
is traded or as of the close of regular
trading on the
New York
Stock Exchange,
whichever is earlier. If no sale is reported
at that
time, the
average between
the current bid and asked price is used. All
other
securities for
which OTC
market quotations are readily available are
valued at
the average
between the
current bid and asked price. Securities and
other
assets for
which market prices
are not readily available are valued at fair
market
value as
determined by IMI
and approved in good faith by the Board.
Money market
instruments
are valued at
amortized cost, which approximates market
value.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A
SHARES
Shares are purchased at a public offering
price
equal to
their NAV per share
plus a sales charge, as set forth below.
<TABLE>
<CAPTION>
SALES CHARGE
----------------------- PORTION OF
AS A
AS A PUBLIC
PERCENTAGE PERCENTAGE OFFERING
OF
PUBLIC OF NET PRICE
OFFERING AMOUNT RETAINED
AMOUNT INVESTED
PRICE
INVESTED BY DEALER
-------------------------------------------------------
---------- ---------- ----------
<S>
<C>
<C> <C>
Less than
$25,000......................................
3.00%
3.09% 2.50%
$25,000 but less than
$250,000.........................
2.50%
2.56% 2.00%
$250,000 but less than
$500,000........................
2.00%
2.04% 1.65%
$500,000 and
over*.....................................
0.00%
0.00% 0.00%
</TABLE>
* A CDSC may apply to the redemption of Class
A shares
that are
purchased
without an initial sales charge. See
"Contingent
Deferred Sales
Charge --
Class A Shares."
With respect to purchases of $1,000,000
or more
made on or
after September
20, 1994 through dealers or agents, IMDI may,
at the
time of
purchase, pay such
dealers or agents, from its own resources, a
commission
to
compensate such
dealers or agents for their distribution
assistance in
connection
with such
purchases. The commission would be computed
at .75% of
the first
$3,000,000
invested; .50% of the next $2,000,000
invested; and
.25% of the
amount invested
in excess of $5,000,000. Dealers who receive
90% or
more of
11
<PAGE>
the sales charge may be deemed to be
underwriters as
that term is
defined in the
Securities Act of 1933.
Sales charges are not applied to any
dividends that
are
reinvested in
additional shares of the Fund. An investor
may be
charged a
transaction fee for
Class A and Class I shares purchased or
redeemed at net
asset
value through a
broker or agent other than IMDI.
IMDI compensates participating brokers
who sell
Class A
shares through the
initial sales charge. IMDI retains that
portion of the
initial
sales charge that
is not reallowed to the dealers, which it may
use to
distribute
the Fund's Class
A shares. Pursuant to separate distribution
plans for
the Fund's
Class A and
Class B shares, IMDI bears various
promotional and
sales related
expenses,
including the cost of printing and mailing
prospectuses
to
persons other than
shareholders. Pursuant to the Fund's
distribution plans
applicable to its Class
A and Class B shares, IMDI currently pays a
continuing
service
fee to qualified
dealers at an annual rate of 0.25% of
qualified
investments.
IMDI may from time to time pay a bonus or
other
incentive to
dealers (other
than IMDI) which employ a registered
representative who
sells a
minimum dollar
amount of the shares of the fund and/or other
funds
distributed
by IMDI during a
specified period of time. This bonus or other
incentive
may take
the form of
payment for travel expenses, including
lodging,
incurred in
connection with
trips taken by qualifying registered
representatives
and members
of their
families to places within or without the
United States
or other
bonuses such as
gift certificates or the cash equivalent of
such bonus
or
incentive.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A
SHARES
Purchases of $1,000,000 or more of Class
A shares
will be
made at net asset
value with no initial sales charge, but if
the shares
are
redeemed within 24
months after the end of the calendar month in
which the
purchase
was made (the
contingent deferred sales charge period), a
contingent
deferred
sales charge of
.75% will be imposed.
In order to recover commissions paid to
dealers on
NAV
transfers (as defined
in "Purchases of Class A Shares at Net Asset
Value"),
Class A
shares of the Fund
are subject to a contingent deferred sales
charge of
.75% for
certain
redemptions within 24 months after the date
of
purchase.
The charge will be assessed on an amount
equal to
the lesser
of the current
market value or the original purchase cost of
the Class
A shares
redeemed.
Accordingly, no CDSC will be imposed on
increases in
account
value above the
initial purchase price, including any
dividends which
have been
reinvested in
additional Class A shares.
In determining whether a CDSC applies to
a
redemption, the
calculation will
be determined in a manner that results in the
lowest
possible
rate being
charged. Therefore, it will be assumed that
the
redemption is
first made from
any shares in your account not subject to the
CDSC. The
CDSC is
waived in
certain circumstances. See the discussion
below under
the caption
"Waiver of
Contingent Deferred Sales Charge."
WAIVER OF CONTINGENT DEFERRED SALES
CHARGE: The
contingent
deferred sales
charge is waived for (i) redemptions in
connection with
distributions not
exceeding 12% annually of the initial account
balance
(i.e., the
value of the
shareholder's Class A Fund account at the
time of the
initial
distribution) (a)
following retirement under a tax qualified
retirement
plan, or
(b) upon
attaining age 59 1/2 in the case of an IRA, a
custodial
account
pursuant to
section 403(b)(7) of the Code or a Keogh
Plan; (ii)
redemption
resulting from
tax-free return of an excess contribution to
an IRA; or
(iii) any
partial or
complete redemption following the death or
disability
(as defined
in Section
72(m)(7) of the Code) of a shareholder from
an account
in which
the deceased or
disabled is named, provided that the
redemption is
requested
within one year of
death or disability. IMDI may require
documentation
prior to
waiver of the
contingent deferred sales charge.
Class A shareholders may exchange their
Class A
shares
subject to a
contingent deferred sales charge
("outstanding Class A
shares")
for Class A
shares of another Ivy or Mackenzie Fund ("new
Class A
shares") on
the basis of
the relative net asset value per Class A
share, without
the
payment of any
contingent deferred sales charge that would
be due upon
the
redemption of the
outstanding Class A shares. The original CDSC
rate that
would
have been charged
if the outstanding Class A shares were
redeemed will
carry over
to the new Class
A shares received in the exchange, and will
be charged
accordingly at the time
of redemption.
QUALIFYING FOR A REDUCED SALES CHARGE
RIGHTS OF ACCUMULATION (ROA): Rights of
Accumulation ("ROA")
is calculated
by determining the current market value of
all Class A
shares in
all Ivy or
Mackenzie fund accounts (except Ivy Money
Market Fund)
owned by
you, your
spouse, and your children under 21 years of
age. ROA is
also
applicable to
accounts under a trustee or other single
fiduciary
(including
retirement
accounts qualified under Section 401 of the
Code). The
current
market value of
each of your accounts as described above is
added
together and
then added to
your current purchase amount. If the combined
total is
equal or
greater than a
breakpoint amount for the Fund, then you
qualify for
the reduced
sales charge.
To reduce or eliminate the sales charge, you
must
complete
Section 4B of the
Account Application.
LETTER OF INTENT (LOI): A Letter of
Intent ("LOI")
is a
non-binding
agreement that states your intention to
invest in
additional
Class A shares,
within a thirteen month period after the
initial
purchase, an
amount equal to a
breakpoint amount for the Fund. The LOI may
be
backdated up to 90
days. To sign
an LOI, please complete Section 4B of the
Account
Application.
Should the LOI not be fulfilled within
the thirteen
month
period, your
account will be debited for the difference
between the
full sales
charge that
applies for the amount actually invested and
the
reduced sales
charge actually
paid on purchases placed under the terms of
the LOI.
PURCHASES OF CLASS A SHARES AT NET ASSET
VALUE: An
investor
who was a
shareholder of any Ivy Fund on December 31,
1991 or a
shareholder
of American
Investors Income Fund, Inc. or American
Investors
Growth Fund,
Inc. on October
31, 1988 and who became a shareholder of Ivy
Bond Fund
(formerly
Mackenzie Fixed
Income Trust) or Ivy Growth Fund as a result
of the
respective
reorganizations
of the funds will be exempt from sales
charges on the
purchase of
Class A shares
of any Ivy or Mackenzie Fund. This privilege
is also
available to
immediate
family members of a shareholder (i.e., the
shareholder's
children, the
shareholder's spouse and the children of the
shareholder's
spouse). This no-load
privilege terminates for the investor if the
investor
redeems all
shares owned.
Shareholders and their relatives as described
above
should call
1-800-235-3322
for information about additional purchases or
to
inquire about
their account.
Officers and Trustees of the Trust
(and their
relatives)
and
IMI, MIMI,
Mackenzie Financial Corporation (of which
MIMI is a
subsidiary)
and their
officers, directors, employees and retired
employees,
and legal
counsel and
independent accountants (and their relatives)
may buy
Class A
shares of the Fund
without an initial sales charge or a
contingent
deferred sales
charge.
12
<PAGE>
Directors, officers, partners,
registered
representatives,
employees and
retired employees (and their relatives) of
dealers
having a sales
agreement with
IMDI, or trustees or custodians of any
qualified
retirement plan
established for
the benefit of a person enumerated above, may
buy Class
A shares
of the Fund
without an initial sales charge or a
contingent
deferred sales
charge. In
addition, certain investment advisers and
financial
planners who
charge a
management, consulting or other fee for their
services
and who
place trades for
their own accounts or the accounts of their
clients may
purchase
Class A shares
of the Fund without an initial sales charge
or a
contingent
deferred sales
charge provided such purchases are placed
through a
broker or
agent who
maintains an omnibus account with the Fund.
Also,
clients of
these advisers and
planners may make purchases under the same
conditions
if the
purchases are
through the master account of such adviser or
planner
on the
books of such
broker or agent. THIS PROVISION APPLIES TO
ASSETS OF
RETIREMENT
AND DEFERRED
COMPENSATION PLANS AND TRUSTS USED TO FUND
THOSE PLANS
INCLUDING,
BUT NOT
LIMITED TO, THOSE DEFINED IN SECTION 401(A),
403(B) OR
457 OF THE
CODE AND
"RABBI TRUSTS" WHOSE ASSETS ARE USED TO
PURCHASE SHARES
OF THE
FUND THROUGH THE
AFOREMENTIONED CHANNELS.
Class A shares of the Fund may be
purchased at
net asset
value by retirement
plans qualified under section 401(a) or
403(b) of the
Code and
subject to the
Employee Retirement Income Security Act of
1974. A
contingent
deferred sales
charge of 0.75% will be imposed on such
purchases in
the event of
certain
redemption transactions within 24 months
following such
purchases.
If investments by retirement plans at
NAV are
made through
a
dealer who has
executed a dealer agreement with respect to
the Fund,
IMDI may,
at the time of
purchase, pay such dealer, out of IMDI's own
resources,
a
commission to
compensate such dealer for its distribution
assistance
in
connection with such
purchase. Commissions would be computed as
0.75% of the
first $3
million
invested; 0.50% of the next $2 million
invested; and
0.25% of the
amount
invested in excess of $5 million. Please
contact IMDI
for
additional
information.
Class A shares of the Fund may also be
purchased at
net asset
value, without
an initial sales charge, but subject to a
contingent
deferred
sales charge of
0.75% during the first 24 months after the
date of
purchase (see
"Contingent
Deferred Sales Charge -- Class A Shares"), by
any
state, county,
or city, or any
instrumentality, department, authority or
agency
thereof, which
is prohibited by
applicable investment laws from paying a
sales charge
or
commission in
connection with the purchase of shares of any
registered
management investment
company (an "Eligible Governmental
Authority"). If an
investment
by an Eligible
Governmental Authority is made at net asset
value
through a
dealer who has
executed a dealer agreement with respect to
the Fund,
IMDI may,
at the time of
purchase, pay such dealers, from its own
resources, a
commission
to compensate
such dealers for their distribution
assistance in
connection with
such
purchases. The commission would be computed
at .75% of
the first
$3,000,000
invested; .50% of the next $2,000,000
invested; and
.25% of the
amount invested
in excess of $5,000,000. Please contact IMDI
for
additional
information.
Class A shares can also be purchased
without an
initial sales
charge, but
subject to a contingent deferred sales charge
of .75%
in the
first 24 months, by
trust companies, bank trust departments,
credit unions,
savings
and loans and
other similar organizations in their
fiduciary capacity
or for
their own
accounts subject to any minimum requirements
set by
IMDI.
Currently, these
criteria require that the amount invested or
to be
invested in
the subsequent
13-month period totals at least $250,000.
IMDI may, at
the time
of any such
purchase, pay out of IMDI's own resources
commissions
to dealers
which provided
distribution assistance in connection with
the
purchase.
Commissions would be
computed at .75% of the first $3,000,000
invested, .50%
of the
next $2,000,000
invested, and .25% of the amount invested in
excess of
$5,000,000.
Class A shares of the Fund may also be
purchased
without a
sales charge in
connection with certain liquidation, merger
or
acquisition
transactions
involving other investment companies or
personal
holding
companies.
The Fund may, from time to time, waive
the initial
sales
charge on its Class
A shares sold to clients of various
broker-dealers with
which
IMDI has a selling
relationship. This privilege will apply only
to Class A
Shares of
the Fund that
are purchased using all or a portion of the
proceeds
obtained by
such clients
through redemptions of shares (on which a
commission
has been
paid) of an
investment company (other than Mackenzie
Series Trust
or the
Trust), unit
investment trust or limited partnership ("NAV
transfers"). Some
dealers may
elect not to participate in this program.
Those dealers
that do
elect to
participate in the program must complete
certain forms
required
by IMDI. The
normal service fee, as described in the
"Initial Sales
Charge
Alternative --
Class A Shares" and "Contingent Deferred
Sales Charge
Alternative
-- Class B
Shares" sections of this Prospectus, will be
paid to
dealers in
connection with
these purchases. Additional information on
reductions
or waivers
may be obtained
from IMDI at the address listed on the cover
of the
Prospectus.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE
-- CLASS B
SHARES
Class B shares are offered at net asset
value per
share
without a front end
sales charge. However, Class B shares
redeemed within
five years
of purchase
will be subject to a CDSC at the rates set
forth below.
This
charge will be
assessed on an amount equal to the lesser of
the
current market
value or the
original purchase cost of the shares being
redeemed.
Accordingly,
you will not
be assessed a CDSC on increases in account
value above
the
initial purchase
price, including shares derived from dividend
reinvestment. In
determining
whether a CDSC applies to a redemption, the
calculation
will be
determined in a
manner that results in the lowest possible
rate being
charged. It
will be
assumed that your redemption comes first from
shares
you have
held beyond the
5-year CDSC redemption period or those you
acquire
through
reinvestment of
dividends or distributions, and next from the
shares
you have
held the longest
during the 5-year period.
Proceeds from the contingent deferred
sales
charge are
paid
to IMDI. The
proceeds are used, in whole or in part, to
defray its
expenses
related to
providing the Fund with distribution services
in
connection with
the sale of
Class B shares, such as compensating selected
dealers
and agents
for selling
these shares. The combination of the
contingent
deferred sales
charge and the
distribution and service fees makes it
possible for the
Fund to
sell Class B
shares without deducting a sales charge at
the time of
the
purchase.
The amount of the contingent deferred
sales charge,
if any,
will vary
depending on the number of years from the
time you
purchase your
Class B shares
until the time you redeem them. Solely for
purposes of
determining this holding
period, any payments you make during the
quarter will
be
aggregated and deemed
to have been made on the last day of the
quarter.
13
<PAGE>
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED SALES
CHARGE AS A
CLASS B
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE
SUBJECT TO CHARGE
-----------------------------------------------------------------
------ -----------------
<S>
<C>
First............................................................
...... 3%
Second...........................................................
...... 2 1/2%
Third............................................................
...... 2%
Fourth...........................................................
...... 1 1/2%
Fifth............................................................
...... 1%
Sixth and
thereafter...................................................
0%
</TABLE>
IMDI currently intends to pay dealers a
sales
commission of
3% of the sale
price of Class B shares that they have sold.
IMDI will
retain
0.50% of the
continuing 0.75% service/distribution fee
assessed to
Class B
shareholders and
will receive the entire amount of the
contingent
deferred sales
charge paid by
shareholders on the redemption of Class B
shares to
finance the
3% commission
plus related marketing expenses.
CONVERSION OF CLASS B SHARES: Your Class
B shares
and an
appropriate
portion of both reinvested dividends and
capital gains
on those
shares will be
converted into Class A shares automatically
no later
than the
month following
eight years after the shares were purchased,
resulting
in no
annual distribution
fees. If you exchanged Class B shares into
the Fund
from another
Ivy or
Mackenzie Class B shares fund, the
calculation will be
based on
the time the
shares in the original fund were purchased.
WAIVER OF CONTINGENT DEFERRED SALES
CHARGE: The
contingent
deferred sales
charge is waived for (i) redemptions in
connection with
distributions not
exceeding 12% annually of the initial account
balance
(i.e., the
value of the
shareholder's Class B Fund account at the
time of the
initial
distribution) (a)
following retirement under a tax qualified
retirement
plan, or
(b) upon
attaining age 59 1/2 in the case of an IRA, a
custodial
account
pursuant to
section 403(b)(7) of the Code or a Keogh
Plan; (ii)
redemption
resulting from
tax-free return of an excess contribution to
an IRA; or
(iii) any
partial or
complete redemption following the death or
disability
(as defined
in Section
72(m)(7) of the Code) of a shareholder from
an account
in which
the deceased or
disabled is named, provided that the
redemption is
requested
within one year of
death or disability. The Distributor may
require
documentation
prior to waiver
of the contingent deferred sales charge.
ARRANGEMENTS WITH BROKER/DEALERS AND
OTHERS:
IMDI may, at
its own expense,
pay concessions in addition to those
described above to
dealers
which satisfy
certain criteria established from time to
time by IMDI.
These
conditions relate
to increasing sales of shares of the Fund
over
specified periods
and to certain
other factors. These payments may, depending
on the
dealer's
satisfaction of the
required conditions, be periodic and may be
up to (i)
0.25% of
the value of Fund
shares sold by such dealer during a
particular period,
and (ii)
0.10% of the
value of Fund shares held by the dealer's
customers for
more than
one year,
calculated on an annual basis.
HOW TO REDEEM SHARES
You may redeem your Fund shares through
your
registered
securities
representative, by mail, by telephone, or by
Federal
Funds wire.
A contingent deferred sales charge may
apply to
certain Class
A share
redemptions, and to Class B share redemptions
prior to
conversion. All
redemptions are made at the net asset value
next
determined after
a redemption
request has been received in good order.
Requests for
redemptions
must be
received by 4:00 p.m. Eastern time to be
processed at
the net
asset value for
that day. Any redemption request in good
order that is
received
after 4:00 p.m.
Eastern time will be processed at the price
determined
on the
following business
day. IF SHARES TO BE REDEEMED WERE PURCHASED
BY CHECK,
PAYMENT OF
THE REDEMPTION
MAY BE DELAYED UNTIL THE CHECK HAS CLEARED OR
FOR UP TO
15 DAYS
AFTER THE DATE
OF PURCHASE, WHICHEVER IS LESS. If you own
shares of
more than
one class of the
Fund, the Fund will redeem first the shares
having the
highest
12b-1 fees; any
shares subject to a contingent deferred sales
charge
will be
redeemed last
unless you specifically elect otherwise.
When shares are redeemed, the Fund
generally sends
you
payment on the next
business day. Under unusual circumstances,
the Fund may
suspend
redemptions or
postpone payment to the extent permitted by
federal
securities
laws. The
proceeds of the redemption may be more or
less than the
purchase
price of your
shares, depending upon, among other factors,
the market
value of
the Fund's
securities at the time of the redemption. If
the
redemption is
for over $50,000,
or the proceeds are to be sent to an address
other than
the
address of record,
or an address change has occurred in the last
30 days,
it must be
requested in
writing with a signature guarantee. See
"Signature
Guarantees,"
below.
If you are not certain of the
requirements for a
redemption,
please contact
IMSC at 1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES
DEALER: The
Dealer is
responsible for
promptly transmitting redemption orders.
Redemptions
requested by
dealers will
be made at the net asset value (less any
applicable
contingent
deferred sales
charge) determined at the close of regular
trading
(4:00 p.m.
Eastern time) on
the day that a redemption request is received
in good
order by
IMSC.
BY MAIL: Requests for redemption in
writing are
considered
to be in "proper
or good order" if they contain the following:
- Any outstanding certificate(s) for
shares being
redeemed.
- A letter of instruction, including the
fund name,
the
account number, the
account name(s), the address and the
dollar
amount or
number of shares to
be redeemed.
- Signatures of all registered owners
whose names
appear on
the account.
- Any required signature guarantees.
- Other supporting legal documentation,
if required
(in the
case of estates,
trusts, guardianships, corporations,
retirement
plans or
other
representative capacities).
The dollar amount or number of shares
indicated for
redemption must not
exceed the available shares or net asset
value of your
account at
the next-
determined prices. If your request exceeds
these
limits, then the
trade will be
rejected in its entirety.
BY TELEPHONE: Individual and joint
accounts may
redeem up to
$50,000 per
day over the telephone by contacting IMSC
Corp. at
1-800-777-6472. In times of
unusual economic or market changes, the
telephone
redemption
privilege may be
difficult to implement. If you are unable to
execute
your
transaction during
such times, you may want to consider placing
the order
in writing
and sending it
by mail or overnight courier.
Checks will be made payable to the
current account
registration and sent to
the address of record. If there has been a
change of
address in
the last 30
days, please use the instructions for
redemption
requests by mail
described
above. A signature guarantee would be
required.
14
<PAGE>
Requests for telephone redemptions will
be accepted
from the
registered
owner of the account, the designated
registered
representative or
his/her
assistant.
Shares held in certificate form cannot be
redeemed
by
telephone.
If Section 6E of the Account Application
is not
completed,
telephone
redemption privileges will be provided
automatically.
Although
telephone
redemptions may be a convenient feature, you
should
realize that
you may be
giving up a measure of security that you may
otherwise
have if
you terminated
the privilege and redeemed your shares in
writing. If
you do not
wish to make
telephone redemptions or let your registered
representative or
his/her assistant
do so on your behalf, you must notify IMSC in
writing.
The Fund employs reasonable procedures
that require
personal
identification
prior to acting on redemption instructions
communicated
by
telephone to confirm
that such instructions are genuine. In the
absence of
such
procedures, the Fund
may be liable for any losses due to
unauthorized or
fraudulent
telephone
instructions.
BY FEDERAL FUNDS WIRE: For shareholders
who
established this
feature at the
time they opened their account, telephone
instructions
will be
accepted for
redemption of amounts up to $50,000 ($1,000
minimum)
and proceeds
will be wired
on the next business day to a predesignated
bank
account.
In order to add this feature to an
existing account
or to
change existing
bank account information, please submit a
letter of
instructions
including your
bank information to IMSC at the address
provided above.
The
letter must be
signed by all registered owners, and their
signatures
must be
guaranteed.
Your account will be charged a fee of $10
each time
that
redemption proceeds
are wired to your bank.
Neither IMSC nor the Fund can be
responsible for
the
efficiency of the
Federal Funds wire system or the
shareholder's bank.
CHECK WRITING
Check writing is only available on Class
A shares.
Checks
must be written
for a minimum of $500. You may sign up for
this option
by
completing the Check
Writing Enrollment Form on the last page of
the Account
Application. IF THE
CLASS A SHARES TO BE REDEEMED HAVE BEEN
PURCHASED BY
CHECK,
AVAILABILITY OF THE
SHARES FOR REDEMPTION BY CHECK MAY BE DELAYED
UNTIL
YOUR CHECK
CLEARS OR FOR UP
TO 15 CALENDAR DAYS AFTER THE DATE OF
PURCHASE,
WHICHEVER IS
LESS.
In order to qualify for check writing,
Fund
shareholders must
maintain a
minimum average balance of $1,000. Class A
shares must
be
unissued (held at the
Fund) for any account requesting checkwriting
privileges.
Checks can be reordered by calling IMSC
at
1-800-777-6472.
Checking activity
is reported on your statement, and cancelled
check
copies are
returned to you
each month. There is no limitation on the
number of
checks a
shareholder may
write.
Checks written on the Fund are
redemptions of
shares and
considered taxable
events by the IRS. As such, they must be
reported on
your income
tax return.
When a check is presented for payment,
the Fund
redeems a
sufficient number
of Class A shares to cover the amount of the
check.
Checks
written on accounts
with insufficient shares will be returned to
the payee
marked
"non-sufficient
funds". There is a nominal charge for each
supply of
checks,
copies of cancelled
checks, stop payment orders, checks drawn for
amounts
less than
the Fund minimum
(see above) and checks returned for
"non-sufficient
funds". To
pay for these
charges, the Fund automatically redeems an
appropriate
number of
the
shareholder's Class A shares after the
charges are
incurred.
You may not close your Fund account by
writing a
check
because any earned
dividends will remain in your account. Check
writing is
not
available for
retirement accounts or accounts in Class B or
Class I
of the
Fund. The Fund
reserves the right to change, modify or
terminate the
check
writing service at
any time upon notification mailed to the
address of
record of the
shareholder(s).
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small
accounts
and
subject to state law
requirements, the Fund may redeem the
accounts of
shareholders
who have
maintained an investment, including sales
charges paid,
of less
than $1,000 for
more than 12 months. No redemption will be
made unless
the
shareholder has been
given at least 60 day's notice of the Fund's
intention
to redeem
the shares. No
redemption will be made if a shareholder's
account
falls below
the minimum due
to a reduction in the value of the Fund's
portfolio
securities.
This provision
does not apply to IRAs, other retirement
accounts and
UGMA/UTMA
accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent
fraudulent
redemptions,
we require a
signature guarantee in order to accommodate
the
following
requests:
- Redemption requests over $50,000.
- Requests for redemption proceeds to be
sent to
someone
other than the
registered shareholder.
- Requests for redemption proceeds to be
sent to an
address
other than the
address of record.
- Registration transfer requests.
- Requests for redemption proceeds to be
wired to
your bank
account (if this
option was not selected on your
original
application, or if
you are
changing the bank wire information).
A signature guarantee may be obtained
only from an
eligible
guarantor
institution as defined in Rule 17Ad-15 of the
Securities Exchange
Act of 1934,
as amended. An eligible guarantor institution
includes
banks,
brokers, dealers,
municipal securities dealers, government
securities
dealers,
government
securities brokers, credit unions, national
securities
exchanges,
registered
securities associations, clearing agencies
and savings
associations. The
signature guarantee must not be qualified in
any way.
Notarizations from notary
publics are not the same as signature
guarantees, and
are not
accepted.
Circumstances other than those described
above may
require a
signature
guarantee. Please contact IMSC at
1-800-777-6472 for
more
information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the
distribution
option that
best suits
your needs:
AUTOMATIC REINVESTMENT OPTION -- Both
dividends and
capital
gains are
automatically reinvested at net asset value
in
additional shares
of the same
class of the Fund unless you specify one of
the other
options.
15
<PAGE>
INVESTMENT IN ANOTHER IVY OR MACKENZIE
FUND -- Both
dividends
and capital
gains are automatically invested at net asset
value in
another
Ivy or Mackenzie
Fund of the same class.
DIVIDENDS IN CASH/CAPITAL GAINS
REINVESTED --
Dividends will
be paid in
cash. Capital gains will be reinvested at net
asset
value in
additional shares
of the same class of the fund or another Ivy
or
Mackenzie Fund of
the same
class.
DIVIDENDS AND CAPITAL GAINS IN CASH --
Both
dividends and
capital gains will
be paid in cash.
If you wish to have your cash
distributions
deposited
directly to your bank
account via electronic funds transfer, or if
you wish
to change
your
distribution option, please contact IMSC at
1-800-777-6472.
If you wish to have your cash
distributions go to
an address
other than the
address of record, a signature guarantee is
required.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a
31% U.S.
Federal
backup withholding
tax on dividends, capital gains distributions
and
redemption
proceeds, you must
furnish the Fund with your certified tax
identification
number
("TIN") and
certify that you are not subject to backup
withholding
due to
prior
underreporting of interest and dividends to
the IRS. If
you fail
to provide a
certified TIN or such other tax-related
certifications
as the
Fund may require,
within 30 days of opening your new account,
the Fund
reserves the
right to
involuntarily redeem your account and send
the proceeds
to your
address of
record.
You can avoid the above withholding
and/or
redemption by
correctly
furnishing your TIN, and making certain
certifications,
in
Section 2 of the
Account Application at the time you open your
new
account, unless
the IRS
requires that backup withholding be applied
to your
account.
Certain payees, such as corporations,
generally are
exempt
from backup
withholding. Please complete IRS Form W-9
with the new
account
application to
claim this exemption. If the registration is
for an
UGMA/UTMA
account, please
provide the social security number of the
minor.
Non-U.S.
investors who do not
have a TIN must provide, with their Account
Application, a
completed IRS Form
W-8.
CERTIFICATES
In order to facilitate transfers,
exchanges and
redemptions,
most
shareholders elect not to receive
certificates. Should
you wish
to have a
certificate issued, please contact IMSC at
1-800-777-6472 and
request that one
be sent to you. (Retirement plan accounts are
not
eligible for
this service.)
Please note that if you were to lose your
certificate,
you would
incur an
expense to replace it.
Certificates requested by telephone for
shares
valued up to
$50,000 will be
issued to the current registration and mailed
to the
address of
record. Should
you wish to have your certificates mailed to
a
different address,
or registered
differently from the current registration,
you must
provide a
letter of
instruction signed by all registered owners
with
signatures
guaranteed.
EXCHANGE PRIVILEGE
Shareholders of the Fund have an exchange
privilege
with
other Ivy and
Mackenzie funds. Class A shareholders may
exchange
their
outstanding Class A
shares for Class A shares of another Ivy or
Mackenzie
fund on the
basis of the
net asset value per Class A share, plus an
amount equal
to the
difference
between the sales charge previously paid on
the
outstanding Class
A shares and
the sales charge payable at the time of the
exchange on
the new
Class A shares.
Incremental sales charges are waived for
outstanding
Class A
shares that have
been invested for 12 months or longer.
Class B shareholders may exchange their
outstanding
Class B
shares for Class
B shares of another Ivy or Mackenzie Fund on
the basis
of the net
asset value
per Class B share, without the payment of any
contingent deferred
sales charge
that would otherwise be due upon the
redemption of
Class B
shares. Class B
shareholders who exercise the exchange
privilege would
continue
to be subject to
the Fund's contingent deferred sales charge
schedule
(or period)
following an
exchange if such schedule is higher (or
longer) than
the
contingent deferred
sales charge for the new Class B shares.
Class I shareholders may exchange their
outstanding
Class I
shares for Class
I shares of another Ivy or Mackenzie fund on
the basis
of the net
asset value
per Class I share.
Shares resulting from the reinvestment of
dividends
and other
distributions
will not be charged an initial sales charge
or a
contingent
deferred sales
charge when exchanged into another Ivy or
Mackenzie
fund.
Exchanges are considered to be taxable
events,
and may
result
in a capital
gain or a capital loss for tax purposes.
Prior to
executing an
exchange, you
should obtain and read the prospectus and
consider the
investment
objective of
the fund to be purchased. Shares must be
unissued in
order to
execute an
exchange. Exchanges are available only in
states where
they can
be legally made.
This privilege is not intended to provide
shareholders
a means by
which to
speculate on short-term movements in the
market The
Fund reserves
the right to
limit the frequency of exchanges. Exchanges
are
accepted only if
the
registrations of the two accounts are
identical.
Amounts to be
exchanged must
meet minimum investment requirements for the
Ivy or
Mackenzie
Fund into which
the exchange is made.
With respect to shares subject to a
contingent
deferred sales
charge, if
less than all of an investment is exchanged
out of the
Fund, the
shares
exchanged will reflect, pro rata, the cost,
capital
appreciation
and/or
reinvestment of distributions of the original
investment as well
as the original
purchase date, for purposes of calculating
any
contingent
deferred sales charge
for future redemptions of the exchanged
shares.
An investor who was a shareholder of
American
Investors
Income Fund, Inc. or
American Investors Growth Fund, Inc. prior to
October
31, 1988,
or a shareholder
of the Ivy Fund prior to December 31, 1991,
who became
a
shareholder of the Fund
as a result of a reorganization or merger
between the
Funds may
exchange between
funds without paying a sales charge. An
investor who
was a
shareholder of
American Investors Income Fund, Inc. or
American
Investors Growth
Fund, Inc. on
or after October 31, 1988, who became a
shareholder of
the Fund
as a result of
the reorganization between the Funds will
receive
credit toward
any applicable
sales charge imposed by any Ivy or Mackenzie
fund into
which an
exchange is
made.
In calculating the sales charge assessed
on an
exchange,
shareholders will
be allowed to use the Rights of Accumulation
privilege.
EXCHANGES BY TELEPHONE: When you fill
out the
application
for your purchase
of Fund shares, if Section 6D of the Account
Application is not
completed,
telephone exchange privileges will be
provided
automatically.
Although telephone
exchanges may be a convenient feature, you
should
realize that
you may be giving
up a measure of security that you may
otherwise have if
you
terminated the
privilege and exchanged your shares in
writing. If you
do not
16
<PAGE>
wish to make telephone exchanges or let your
registered
representative or
his/her assistant do so on your behalf, you
must notify
IMSC in
writing.
In order to execute an exchange, please
contact
IMSC at
1-800-777-6472. Have
the account number of your current fund and
the exact
name in
which it is
registered available to give to the telephone
representative.
The Fund employs reasonable procedures
that require
personal
identification
prior to acting on exchange instructions
communicated
by
telephone to confirm
that such instructions are genuine. In the
absence of
such
procedures, the Fund
may be liable for any losses due to
unauthorized or
fraudulent
telephone
instructions.
EXCHANGES IN WRITING: In a letter,
request an
exchange and
provide the
following information:
- The name and class of the fund whose
shares you
currently
own.
- Your account number.
- The name(s) in which the account is
registered.
- The name of the fund in which you wish
your
exchange to be
invested.
- The number of shares, all shares or the
dollar
amount you
wish to
exchange.
The request must be signed by all
registered
owners.
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A
shares of the
Fund have
the privilege of
reinvesting all or a part of the proceeds of
the
redemption back
into Class A
shares of the Fund at net asset value
(without a sales
charge)
within 24 months
after the date of redemption (with no limit
on the
number of
times this
privilege may be used). IN ORDER TO REINVEST
WITHOUT A
SALES
CHARGE,
SHAREHOLDERS OR THEIR BROKERS MUST INFORM
IMSC THAT
THEY ARE
EXERCISING THE
REINVESTMENT PRIVILEGE AT THE TIME OF
REINVESTMENT. The
tax
status of a gain
realized on a redemption generally will not
be affected
by the
exercise of the
reinvestment privilege, but a loss realized
on a
redemption
generally may be
disallowed by the IRS if the reinvestment
privilege is
exercised
within 30 days
after the redemption. In addition, upon a
reinvestment,
the
shareholder may not
be permitted to take into account sales
charges
incurred on the
original
purchase of shares in computing their taxable
gain or
loss.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal
Plan at any
time by
completing the
Account Application, which is attached to
this
Prospectus. You
can also obtain
this application by contacting your
registered
representative or
IMSC at
1-800-777-6472. To be eligible, you must have
at least
$5,000 in
your account.
Payments (minimum distribution amount -- $50)
from your
account
can be made
monthly, quarterly, semi-annually, annually
or on a
selected
monthly basis, to
yourself or any other designated payee. You
may elect
to have
your systematic
withdrawal paid directly to your bank account
via
electronic
funds transfer
("EFT"). Share certificates must be unissued
(held by
the Fund)
while the plan
is in effect. A Systematic Withdrawal Plan
may not be
established
if you are
currently participating in the Automatic
Investment
Method. For
more
information, please contact IMSC at
1-800-777-6472.
If payments you receive through the
Systematic
Withdrawal
Plan exceed the
dividends and capital appreciation of your
account, you
will be
reducing the
value of your account. Additional investments
made by
shareholders participating
in the Systematic Withdrawal Plan must equal
at least
$1,000
while the plan is
in effect. However, it may not be
advantageous to
purchase
additional Class A or
Class B shares when you have a Systematic
Withdrawal
Plan,
because you may be
subject to an initial sales charge on your
purchase of
Class A
shares or to a
contingent deferred sales charge imposed on
your
redemptions of
Class B shares.
In addition, redemptions are taxable events.
Amounts paid to you through the
Systematic
Withdrawal Plan
are derived from
the redemption of shares in your account. Any
applicable
contingent deferred
sales charge will be assessed upon the
redemptions. A
contingent
deferred sales
charge will not be assessed on withdrawals
not
exceeding 12%
annually of the
initial account balance when the Systematic
Withdrawal
Plan was
started.
Should you wish at any time to add a
Systematic
Withdrawal
Plan to an
existing account or change payee
instructions, you will
need to
submit a written
request, signed by all registered owners,
with
signatures
guaranteed.
Retirement accounts are eligible for
Systematic
Withdrawal
Plans. Please
contact IMSC at 1-800-777-6472 to obtain the
necessary
paperwork
to establish a
plan.
If the U.S. Postal Service cannot deliver
your
checks, or if
deposits to a
bank account are returned for any reason,
your
redemptions will
be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be
automatically
drawn
each month from
your bank for investment in Fund shares under
the
"Automatic
Investment Method"
and "Fed Wire/EFT" sections of the Account
Application.
There is
no charge to
you for this program.
You may terminate or suspend your
Automatic
Investment Method
by telephone
at any time by contacting IMSC at
1-800-777-6472.
If you have investments being withdrawn
from a bank
account
and we are
notified that the account has been closed,
your
Automatic
Investment Method will
be discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy or
Mackenzie Fund
accounts
will receive a
single quarterly account statement, unless
otherwise
specified.
This feature
consolidates the activity for each account
onto one
statement.
Requests for
quarterly consolidated statements for all
other
accounts must be
submitted in
writing and must be signed by all registered
owners.
RETIREMENT PLANS
The Ivy Mackenzie Funds offer several tax
sheltered
retirement plans that
may fit your needs:
- IRA (Individual Retirement Account)
- 401(k) Plan
Money Purchase Pension Plan
Profit Sharing Plan
- SEP-IRA (Simplified Employee Pension
Plan)
- 403(b)(7) Plan
Minimum initial and subsequent
investments for
retirement
plans are $25.00.
17
<PAGE>
Investors Bank & Trust, which serves as
custodian
or trustee
under the
retirement plan prototypes available from the
Fund,
charges
certain nominal fees
for annual maintenance. A portion of these
fees is
remitted to
MIMI, as
compensation for its services to the
retirement plan
accounts
maintained with
the Fund.
Distributions from retirement plans are
subject to
certain
requirements
under the Code, including withholding
requirements, and
various
documents
(available from IMSC), including IRS Form
W-4P, and
information
must be provided
before the distribution may be made. The Ivy
Mackenzie
Funds and
IMSC assume no
responsibility to determine whether a
distribution
satisfies the
conditions of
applicable tax laws, and will not be
responsible for
any
penalties assessed. For
additional information, please contact your
broker, tax
adviser
or IMSC.
Please call IMSC at 1-800-777-6472 for
complete
information
kits describing
the plans, their benefits, restrictions,
provisions and
fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Fund should be
directed to
IMSC at
1-800-777-6472.
18
<PAGE>
IVY SHORT-TERM
BOND FUND
________________________
ACCOUNT
APPLICATION
ACCOUNT NUMBER
USE THIS
APPLICATION FOR
CLASS A, CLASS B AND
CLASS I
Please mail applications and checks to:
Mackenzie Ivy
Investor
Services Corp.,
P.O. Box 3022, Boca
Raton, FL
33431-0922.
(This application should not be used for
retirement
accounts for
which Ivy is
custodian.)
<TABLE>
<S> <C>
<C>
-----------------------------------------------------------------
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--
IVY
SHORT-TERM BOND
FUND ACCOUNT APPLICATION
-----------------------------------------------------------------
-----------------------------------------------------------------
--
FUND
USE
101/
1 / 2 1 / 2 0
/ 1 0
/ X
ONLY ----------------------- ---------
---------
------------ -------- ----------
---------
---------
------------
Dealer # Branch #
Rep #
Acct
Type Soc Cd Div Cd CG Cd
Exc Cd
Red Cd
-----------------------------------------------------------------
-----------------------------------------------------------------
--
REGISTRATION
1 [ ] Individual
_________________________________________________________________
_______________________
[ ] Joint Tenant
Owner,
Custodian or
Trustee
[ ] Estate
_________________________________________________________________
_______________________
[ ] UGMA/UTMA
Co-owner or
Minor
[ ] Corporation
_________________________________________________________________
_______________________
[ ] Partnership
Minor's
State of
Residence
[ ] Sole Proprietor
_________________________________________________________________
_______________________
[ ] Trust
Street
__________________
_________________________________________________________________
_______________________
Date of Trust
[ ] Other ____________
_________________________________________________________________
_______/__/__/__/__/__/
__________________
City
State
Zip
Code
/__/__/__/-/__/__/__/-/__/__/__/__/
/__/__/__/-/__/__/__/-/__/__/__/__/
Phone Number
-- Day
Phone Number --
Evening
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
TAX ID #
2 /__/__/__/-/__/__/-/__/__/__/__/ of
/__/__/-/__/__/__/__/__/__/__/ Citizenship [
] U.S. [
] Other
_______________
Social Security Number
Tax
Identification Number
Under penalties of perjury, I
certify by
signing in
Section 9 below that: (1) the number shown in
this
section is my
correct taxpayer identification
number (TIN),
and (2) I
am not subject to backup withholding because:
(a) I
have not
been notified by the Internal
Revenue Service
(IRS)
that I am subject to backup withholding as a
result of
a failure
to report all interest or
dividends, or (b)
the IRS has
notified me that I am no longer subject to
backup
withholding. (Cross out item (2) if
you have
been
notified by the IRS that you are currently
subject to
backup
withholding because of
underreporting
interest or
dividends on your tax return.) Please see the
"Tax
Identification
Number" section of the Prospectus
for
additional
information on completing this section.
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
DEALER INFORMATION
3 The undersigned ("Dealer") agrees
to all
applicable
provisions in this Application, guarantees
the
signature and
legal
capacity of the Shareholder, and
agrees to
notify the
Manager of any purchases made under a Letter
of Intent
or Rights
of Accumulation.
__________________________________________________________
__________________________________________________________
Dealer Name
Representative's Name and Number
__________________________________________________________
__________________________________________________________
Branch Office Address
Representative's Phone Number
__________________________________________________________
__________________________________________________________
City State
Zip
Code
Authorized Signature of Dealer
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
INVESTMENTS
4 A. Enclosed is my check for
$__________________
($1,000 minimum, except $5,000,000 for Class
I) made
payable to
Ivy
Short-Term Bond Fund. Please
invest it
in Class A
[ ] Class B [ ] or Class I [ ] shares.
B. I qualify for an elimination of
the sales
charge
due to the following privilege (applies only
to Class A
shares):
[ ] New Letter of Intent (if
ROA or
90-day backdate
privilege is applicable, provide account(s)
information
below).
[ ] ROA with the account(s)
listed below.
[ ] Existing Letter of Intent
with
account(s)
listed below.
____________________________________
/__/__/__/__/__/__/__/__/__/__/ [ ] or
New
Fund Name
Account Number
____________________________________
/__/__/__/__/__/__/__/__/__/__/ [ ] or
New
Fund Name
Account Number
If establishing a Letter of
Intent, you
will need
to purchase Class A shares over a
thirteen-month period
in
accordance with the provisions
in the
Prospectus.
The aggregate amount of these purchases will
be at
least equal to
$500,000.
C. FOR DEALER USE ONLY
Confirmed trade orders:
/__/__/__/__/__/__/ /__/__/__/__/__/__/ -
/__/__/__/
/__/__/__/__/__/__/
Confirm
Number Number of Shares
Trade
Date
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
DISTRIBUTION OPTIONS
5 I would like to reinvest dividends
and
capital gains
into additional shares of the same class in
this
account at net
asset
value unless a different option is
checked
below.
A. [ ] Reinvest all dividends and
capital
gains into
additional shares in this Fund or a different
Ivy or
Mackenzie
fund.
_____________________________________
/__/__/__/__/__/__/__/ [ ] New Account
Fund Name
Account
Number
B. [ ] Pay all dividends in cash
and
reinvest capital
gains into additional shares of the same
class in this
account or
an account in a different
Mackenzie
or Ivy
fund.
_____________________________________
/__/__/__/__/__/__/__/ [ ] New Account
Fund Name
Account
Number
C. [ ] Pay all dividends and
capital gains
in cash.
I REQUEST THE
ABOVE CASH
DISTRIBUTION, SELECTED IN B OR C ABOVE, BE:
[ ] Sent to the address listed
in the
registration.
[ ] Sent to the special payee listed in
Section 7A [ ]
(By Mail)
7B [ ]
(By E.F.T.)
-----------------------------------------------------------------
-----------------------------------------------------------------
--
</TABLE>
<PAGE>
<TABLE>
<S> <C>
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--
OPTIONAL SPECIAL FEATURES
6 A. [ ] AUTOMATIC INVESTMENT METHOD
(AIM)
I wish to invest [ ] once per
month.
My bank account will be debited on or
about the
[ ] twice
______________ day of the month
[ ] 3 times
______________ day of the month
[ ] 4 times
______________ day of the month
______________ day of the
month(*)
Please invest $_____________ each
period
starting in
the month of _______ in Class A [ ] or Class
B [ ] of
Ivy
Short-Term
Dollar Amount
Month
Bond Fund.
[ ] I have attached a voided check
to ensure
my
correct bank account will be debited.
(*) There must be a period of at
least seven
calendar
days between each investment period.
B. [ ] SYSTEMATIC WITHDRAWAL PLANS*
I wish to automatically
withdraw funds
from my
[ ] Monthly [ ] Quarterly [ ]
Semiannually [
]Annually
account in Class A [ ] or
Class B [ ] of
Ivy
Short-Term
Bond Fund.
I request the distribution be:
[ ] Sent to the address listed in
the
registration.
[ ] Once [ ] Twice [ ] 3 times
[ ] 4
times per
month [ ] Sent to the special payee
listed in
Section
7.
[ ] Invested into additional
shares of the
same
class of a different Ivy or
Mackenzie
fund.
------
------------------------------------------------------
Fund Name
/_/_/_/_/_/_/_/_/_/_/
Account
Number
Amount $ _______________,
starting on or
about
the_______________day of
the________________________
Minimum $50
month
_______________day of
the________________________
month
_______________day of
the________________________
month(**)
(choose one)
NOTE: Account minimum: $5,000 in
shares at
current
offering price)
(**) There must be a period of at
least seven
calendar
days between each withdrawal period.
C. [ ] FEDERAL FUNDS WIRE FOR
REDEMPTION
PROCEEDS(*)
I authorize the Agent to honor
telephone
instructions for the redemption of Fund
shares up to
$50,000.
Proceeds may
be wire transferred to the bank
account
designated
($1,000 minimum, except $10,000 minimum for
Class I).
Shares
issued in certificate form may
not be
redeemed
under this privilege. (COMPLETE SECTION 7B)
D. [ ] TELEPHONE EXCHANGES(*) [ ] Yes
[ ] No
I authorize exchanges by
telephone among
The Ivy
and Mackenzie family of funds upon
instructions from
any person
as
more fully described in the
Prospectus.
To change
this option once established, written
instruction must
be
received
from the shareholder of record
or the
current
registered representative.
If neither box is checked, the
telephone
exchange
privilege will be provided automatically.
E. [ ] TELEPHONE REDEMPTIONS(*) [ ]
Yes [ ] No
The Fund or its agents are
authorized to
honor
telephone instructions from any person as
more fully
described in
the
Prospectus for the redemption
of Fund
shares. The
amount of the redemption shall not exceed
$50,000 and
the
proceeds
are to be payable to the
shareholder of
record and
mailed to the address of record. To change
this option
once
established, written
instruction must be
received
from the shareholder of record or the current
registered
representative.
If neither box is checked, the
telephone
exchange
privilege will be provided automatically.
*MAY NOT
BE USED IF
SHARES
ARE ISSUED IN CERTIFICATE FORM.
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
SPECIAL PAYEE
7 A. MAILING
ADDRESS
B. FED WIRE / E.F.T.
INFORMATION
-------------------------------------------------------
----------------------------------------------------
Please send all disbursements to
this
special payee
-------------------------------------------------------
----------------------------------------------------
Name of Bank or Individual
Financial
Institution
-------------------------------------------------------
----------------------------
---------------------
Account Number (if applicable)
ABA #
Account #
-------------------------------------------------------
----------------------------------------------------
Street
Street
-------------------------------------------------------
----------------------------------------------------
City/State/Zip
City/State/Zip
(Please attach a
voided
check)
-----------------------------------------------------------------
-----------------------------------------------------------------
--
(Remember to
Sign Section 9)
-----------------------------------------------------------------
-----------------------------------------------------------------
--
CHECK WRITING
IVY SHORT
TERM BOND FUND
ENROLLMENT FORM
(checks must
be written
for a minimum of $500)
8 Check writing privileges are available
to Class
A
shareholders only. Shares purchased in the
Fund may be
subject
to a
holding period of up to 15 calendar
days before
being
redeemed by check. Please see the Prospectus
for
details.
HOW TO ENROLL
1. ALL REGISTERED OWNERS MUST SIGN
THIS FORM
IN THE
SPACE PROVIDED BELOW.
2. Check the appropriate Number of
Signatures
Required
box to indicate the number of signatures
required when
writing
checks.
NUMBER OF SIGNATURES REQUIRED
[ ] All signatures are required
[ ] One signature is required
[ ] More than one signature is
required
--------------------------------------
number
of
signatures required
IF NONE OF THE ABOVE IS CHECKED THAN
ALL
SIGNATURES WILL
BE REQUIRED
-----------------------------------------------
--------------------
Authorized Signature
Date
-----------------------------------------------
--------------------
Authorized Signature
Date
-----------------------------------------------------------------
-----------------------------------------------------------------
--
-----------------------------------------------------------------
-----------------------------------------------------------------
--
SIGNATURES
9 Investors should be aware that failure
to check
"No" under
Section 6D or 6E above means that the
Telephone
Exchange/Redemptions Privileges will
be
provided. The Fund
employs reasonable procedures that require
personal
identification prior to acting on
exchange/redemption
instructions communicated by telephone to
confirm that
such
instructions are genuine. In the
absence of such
procedures, the Fund may be liable for any
losses due
to
unauthorized or
fraudulent telephone instructions.
Please see
"Exchange
Privilege" and "How to Redeem Shares" in the
Prospectus
for more
information on these privileges.
I certify to my legal capacity to
purchase or
redeem
shares of the Fund for my own account or for
the
account of the
organization named in Section 1. I
have received
a current
Prospectus and understand its terms are
incorporated in
this
application by reference. I am
certifying my
taxpayer
information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT
REQUIRE
YOUR CONSENT
TO ANY PROVISION OF THIS DOCUMENT OTHER THAN
THE
CERTIFICATE
REQUIRED TO AVOID BACKUP WITHHOLDING.
-----------------------------------------------------------------
---------- ------------------
Signature of Owner, Custodian, Trustee
or
Corporate
Officer Date
-----------------------------------------------------------------
---------- ------------------
Signature of Joint Owner, Co-Trustee
or
Corporate Officer
Date
-----------------------------------------------------------------
-----------------------------------------------------------------
--
</TABLE>
ISTBF-1-496
IVY BOND FUND
IVY EMERGING GROWTH FUND
IVY GROWTH FUND
IVY GROWTH WITH INCOME
FUND
series of
IVY FUND
Via Mizner Financial Plaza,
Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL
INFORMATION
April 30, 1996
_________________________________________________________________
Ivy Fund (the "Trust") is a diversified,
open-end
management
investment company that currently consists of
thirteen
fully
managed portfolios. This Statement of
Additional
Information
("SAI") describes four of the portfolios, Ivy
Bond
Fund, Ivy
Emerging Growth Fund, Ivy Growth Fund and Ivy
Growth
with Income
Fund (the "Funds," each a "Fund"). The
other nine
portfolios of
the Trust are described in separate
Statements of
Additional
Information.
This SAI is not a prospectus and should
be read in
conjunction with the prospectus for the Funds
dated
April 30,
1996 (the "Prospectus"), which may be
obtained upon
request and
without charge from the Trust at the
Distributor's
address and
telephone number listed below.
INVESTMENT MANAGER
Ivy Management, Inc.
("IMI")
Via Mizner Financial Plaza,
Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors,
Inc.
Via Mizner Financial Plaza,
Suite 300
700 South Federal Highway
Boca Raton, Florida
33432
Telephone: (800) 456-5111
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES . . . . .
. . . . .
. . . 3
U.S. GOVERNMENT SECURITIES . . . . . . .
. . . . .
. . . 6
MUNICIPAL SECURITIES . . . . . . . . . .
. . . . .
. . . 7
ADJUSTABLE RATE PREFERRED STOCKS . . . .
. . . . .
. . . 9
CONVERTIBLE SECURITIES . . . . . . . . .
. . . . .
. . . 9
SMALL COMPANY RISK . . . . . . . . . . .
. . . . .
. . . 10
COMMERCIAL PAPER . . . . . . . . . . . .
. . . . .
. . . 10
BANKING INDUSTRY AND SAVINGS AND LOAN
OBLIGATIONS
. . . 10
AMERICAN DEPOSITORY RECEIPTS . . . . . .
. . . . .
. . . 11
FOREIGN SECURITIES . . . . . . . . . . .
. . . . .
. . . 11
INVESTING IN EMERGING MARKETS . . . . .
. . . . .
. . . 11
FORWARD FOREIGN CURRENCY CONTRACTS . . .
. . . . .
. . . 13
FOREIGN CURRENCIES . . . . . . . . . . .
. . . . .
. . . 14
FIRM COMMITMENT AGREEMENTS AND
WHEN-ISSUED
SECURITIES . 15
LOANS OF PORTFOLIO SECURITIES . . . . .
. . . . .
. . . 16
RESTRICTED AND ILLIQUID SECURITIES . . .
. . . . .
. . . 16
REAL ESTATE INVESTMENT TRUSTS (REITS) .
. . . . .
. . . 17
OPTIONS TRANSACTIONS . . . . . . . . . .
. . . . .
. . . 17
GENERAL . . . . . . . . . . . . . .
. . . . .
. . . 17
WRITING OPTIONS ON INDIVIDUAL
SECURITIES . .
. . . 19
PURCHASING OPTIONS ON INDIVIDUAL
SECURITIES .
. . . 19
PURCHASING AND WRITING OPTIONS ON
SECURITIES
INDICES . . . . . . . . . . .
. . . . .
. . . 20
RISKS OF OPTIONS TRANSACTIONS . . .
. . . . .
. . . 21
FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS
. . . 22
GENERAL . . . . . . . . . . . . . .
. . . . .
. . . 22
INTEREST RATE FUTURES CONTRACTS . .
. . . . .
. . . 24
OPTIONS ON INTEREST RATE FUTURES
CONTRACTS .
. . . 25
FOREIGN CURRENCY FUTURES CONTRACTS AND
RELATED
OPTIONS . 25
RISKS ASSOCIATED WITH FUTURES AND
RELATED
OPTIONS . 26
SECURITIES INDEX FUTURES CONTRACTS . . .
. . . . .
. . . 27
RISKS OF SECURITIES INDEX FUTURES .
. . . . .
. . . 28
COMBINED TRANSACTIONS . . . . . . . . .
. . . . .
. . . 30
INVESTMENT GRADE DEBT SECURITIES . . . .
. . . . .
. . . 30
HIGH YIELD BONDS . . . . . . . . . . . .
. . . . .
. . . 30
INVESTMENT RESTRICTIONS . . . . . . . . . . .
. . . . .
. . . 31
ADDITIONAL RESTRICTIONS . . . . . . . . . . .
. . . . .
. . . 35
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . .
. . . . .
. . . 38
AUTOMATIC INVESTMENT METHOD . . . . . .
. . . . .
. . . 38
EXCHANGE OF SHARES . . . . . . . . . . .
. . . . .
. . . 39
INITIAL SALES CHARGE SHARES . . . .
. . . . .
. . . 39
CONTINGENT DEFERRED SALES CHARGE
SHARES.
CLASS A . 39
CLASS B SHARES . . . . . . . . . .
. . . . .
. . . 39
CLASS C SHARES . . . . . . . . . .
. . . . .
. . . 41
CLASS I SHARES . . . . . . . . . .
. . . . .
. . . 41
LETTER OF INTENT . . . . . . . . . . . .
. . . . .
. . . 42
RETIREMENT PLANS . . . . . . . . . . . .
. . . . .
. . . 43
INDIVIDUAL RETIREMENT ACCOUNTS . .
. . . . .
. . . 44
QUALIFIED PLANS . . . . . . . . . .
. . . . .
. . . 45
DEFERRED COMPENSATION FOR PUBLIC
SCHOOLS AND
CHARITABLE ORGANIZATIONS
("403(B)(7)
ACCOUNT") . . . . . . . . . .
. . . . .
. . . 46
SIMPLIFIED EMPLOYEE PENSION ("SEP")
IRAS . .
. . . 47
REINVESTMENT PRIVILEGE . . . . . . . . .
. . . . .
. . . 47
RIGHTS OF ACCUMULATION . . . . . . . . .
. . . . .
. . . 47
SYSTEMATIC WITHDRAWAL PLAN . . . . . . .
. . . . .
. . . 48
BROKERAGE ALLOCATION . . . . . . . . . . . .
. . . . .
. . . 49
TRUSTEES AND OFFICERS . . . . . . . . . . . .
. . . . .
. . . 52
COMPENSATION TABLE . . . . . . . . . . . . .
. . . . .
. . . 57
INVESTMENT ADVISORY AND OTHER SERVICES . . .
. . . . .
. . . 59
BUSINESS MANAGEMENT AND INVESTMENT
ADVISORY
SERVICES . . 59
DISTRIBUTION SERVICES . . . . . . . . .
. . . . .
. . . 62
RULE 18F-3 PLAN . . . . . . . . . .
. . . . .
. . . 64
RULE 12B-1 DISTRIBUTION PLANS . . .
. . . . .
. . . 65
CUSTODIAN . . . . . . . . . . . . . . .
. . . . .
. . . 69
FUND ACCOUNTING SERVICES . . . . . . . .
. . . . .
. . . 69
TRANSFER AGENT AND DIVIDEND PAYING AGENT
. . . . .
. . . 70
ADMINISTRATOR . . . . . . . . . . . . .
. . . . .
. . . 70
AUDITORS . . . . . . . . . . . . . . . .
. . . . .
. . . 71
CAPITALIZATION AND VOTING RIGHTS . . . . . .
. . . . .
. . . 71
NET ASSET VALUE . . . . . . . . . . . . . . .
. . . . .
. . . 74
PORTFOLIO TURNOVER . . . . . . . . . . . . .
. . . . .
. . . 75
REDEMPTIONS . . . . . . . . . . . . . . . . .
. . . . .
. . . 76
CONVERSION OF CLASS B SHARES . . . . . . . .
. . . . .
. . . 77
TAXATION . . . . . . . . . . . . . . . . . .
. . . . .
. . . 78
OPTIONS, FUTURES AND FOREIGN CURRENCY
FORWARD
CONTRACTS . . . . . . . . . . . . .
. . . . .
. . . 79
CURRENCY FLUCTUATIONS -- "SECTION 988"
GAINS OR
LOSSES . 80
INVESTMENT IN PASSIVE FOREIGN INVESTMENT
COMPANIES
. . . 81
DEBT SECURITIES ACQUIRED AT A DISCOUNT .
. . . . .
. . . 82
DISTRIBUTIONS . . . . . . . . . . . . .
. . . . .
. . . 83
DISPOSITION OF SHARES . . . . . . . . .
. . . . .
. . . 83
FOREIGN WITHHOLDING TAXES . . . . . . .
. . . . .
. . . 84
BACKUP WITHHOLDING . . . . . . . . . . .
. . . . .
. . . 85
PERFORMANCE INFORMATION . . . . . . . . . . .
. . . . .
. . . 86
YIELD . . . . . . . . . . . . . . . . .
. . . . .
. . . 86
AVERAGE ANNUAL TOTAL RETURN . . . . . .
. . . . .
. . . 87
OTHER QUOTATIONS, COMPARISONS AND
GENERAL
INFORMATION . 99
FINANCIAL STATEMENTS . . . . . . . . . . . .
. . . . .
. . . 100
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S
CORPORATION
("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
CORPORATE
BOND AND
COMMERCIAL PAPER RATINGS . . . . .
. . . . .
. . . 101
INVESTMENT OBJECTIVES AND
POLICIES
Each Fund has its own investment
objectives and
policies,
which are described more fully in the
Prospectus under
"Investment Objectives and Policies" and
"Risk Factors
and
Investment Techniques." The different types
of
securities and
investment techniques used by the Funds
involve varying
degrees
of risk.
IVY BOND FUND: Ivy Bond Fund seeks a
high level
of current
income by investing primarily in (i)
investment grade
corporate
bonds (i.e., those rated Aaa, Aa, A or Baa by
Moody's
Investors
Services, Inc. ("Moody's") or AAA, AA, A or
BBB by
Standard &
Poor's Corporation ("S&P"), or, if unrated,
are
considered by IMI
to be of comparable quality) and (ii) U.S.
Government
securities
(including mortgage-backed securities issued
by U.S.
Government
agencies or instrumentalities) that mature in
more than
13
months. As a fundamental policy, the Fund
normally
invests at
least 65% of its total assets in these fixed
income
securities.
For temporary defensive purposes, the Fund
may invest
without
limit in U.S. Government securities maturing
in 13
months or
less, certificates of deposit, bankers'
acceptances,
commercial
paper and repurchase agreements. The Fund may
also
invest up to
35% of its total assets in such money market
securities
in order
to meet redemptions or to maximize income to
the Fund
while it is
arranging longer-term investments. The Fund
currently
does not
intend to invest in bank obligations or
repurchase
agreements.
The Fund may invest up to 35% of its net
assets in
debt
securities rated Ba or below by Moody's or BB
or below
by S&P,
or, if unrated, are considered by IMI to be
of
comparable quality
(commonly referred to as "high yield" or
"junk" bonds).
The Fund
will not invest in debt securities rated less
than C by
either
Moody's or S&P.
The Fund may invest up to 5% of its
assets in
dividend
paying common and preferred stocks (including
adjustable rate
preferred stocks and securities convertible
into common
stocks),
municipal bonds, investment-grade zero coupon
bonds,
and
securities sold on a "when-issued" or firm
commitment
basis. The
Fund may also (but currently does not intend
to) lend
its
portfolio securities to increase current
income (so
long as the
aggregate value of all outstanding securities
loaned
does not
exceed 30% of the value of the Fund's total
assets),
and, as a
temporary measure for extraordinary or
emergency
purposes, may
borrow from banks (up to 10% of the value of
its total
assets).
The Fund may invest up to 20% of its net
assets in
debt
securities of foreign issuers, including
non-U.S.
dollar-
denominated debt securities, American
Depository
Receipts
("ADRs"), Eurodollar securities and debt
securities
issued,
assumed or guaranteed by foreign governments
or
political
subdivisions or instrumentalities thereof.
The Fund
does not
currently intend, however, to invest in
ADR's. The
Fund may also
enter into forward foreign currency
contracts, but not
for
speculative purposes. The Fund may not invest
more than
10% of
the value of its net assets in illiquid
securities,
such as
securities subject to legal or contractual
restrictions
on resale
("restricted securities"), repurchase
agreements
maturing in more
than seven days and other securities that are
not
readily
marketable, and in any case may not invest
more than 5%
of its
net assets in restricted securities. The
Fund
currently does not
intend to invest in restricted securities.
The Fund may purchase put and call
options,
provided the
premium paid for such options does not exceed
10% of
the Fund's
net assets. The Fund may also sell covered
put options
with
respect to up to 50% of the value of its net
assets,
and my
write covered call options so long as not
more than 20%
of the
Fund's net assets is subject to being
purchased upon
the exercise
of the calls. For hedging purposes only, the
Fund may
engage in
transactions in interest rate futures
contracts,
currency futures
contracts and options on interest rate
futures and
currency
futures contracts. The Fund currently does
not intend
to
purchase options on securities or options on
foreign
currencies
and does not currently intend to engage in
transactions
in
foreign currency futures contracts or options
on
foreign currency
futures contracts.
IVY EMERGING GROWTH FUND, IVY GROWTH
FUND AND IVY
GROWTH
WITH INCOME FUND: Each Fund's principal
investment
objective is
long-term capital growth primarily through
investment
in equity
securities, with current income being a
secondary
consideration.
Ivy Growth with Income Fund has tended to
emphasize
dividend-
paying stocks more than the other two Funds.
Under
normal
conditions, each Fund invests at least 65% of
its total
assets in
common stocks and securities convertible into
common
stocks. Ivy
Growth Fund and Ivy Growth with Income Fund
invest
primarily in
common stocks of domestic corporations with
low
price-earnings
ratios and rising earnings, focusing on
established,
financially
secure firms with capitalizations over $100
million and
more than
three years of operating history. Ivy
Emerging Growth
Fund
invests primarily in common stocks (or
securities with
similar
characteristics) of small and medium-sized
companies,
both
domestic and foreign, that are in the early
stages of
their life
cycle and that IMI believes have the
potential to
become major
enterprises.
All of the Funds may invest up to 25% of
their
assets in
foreign equity securities, primarily those
traded in
European,
Pacific Basin and Latin American markets,
some of which
may be
emerging markets involving special risks, as
described
below.
However, each of Ivy Emerging Growth Fund and
Ivy
Growth with
Income Fund currently does not intend to
invest in
emerging
markets. Individual foreign securities are
selected
based on
value indicators, such as a low
price-earnings ratio,
and are
reviewed for fundamental financial strength.
When circumstances warrant, each Fund
may invest
without
limit in investment-grade debt securities
(e.g., U.S.
Government
securities or other corporate debt securities
rated at
least Baa
by Moody's or BBB by S&P, or, if unrated, are
considered by IMI
to be of comparable quality), preferred
stocks, or cash
or cash
equivalents such as bank obligations
(including
certificates of
deposit and bankers' acceptances), commercial
paper,
short-term
notes and repurchase agreements. Each Fund
currently
does not,
however, intend to invest in bank
obligations. Ivy
Emerging
Growth Fund currently does not intend to
invest in
investment-
grade debt securities.
Ivy Growth with Income Fund may invest
less than
35% of its
net assets in debt securities rated Ba or
below by
Moody's or BB
or below by S&P, or if unrated, are
considered by IMI
to be of
comparable quality (commonly referred to as
"high
yield" or
"junk" bonds). Ivy Growth Fund may invest up
to 5% of
its net
assets in these low-rated debt securities.
Neither Fund
will
invest in debt securities rated less than C
by either
Moody's or
S&P.
As a fundamental policy, each Fund may
borrow up
to 10% of
the value of its total assets, but only for
temporary
purposes
where it would be advantageous to do so from
an
investment
standpoint. Each of Ivy Emerging Growth Fund
and Ivy
Growth with
Income Fund currently does not intend to
borrow. All
of the
Funds may invest up to 5% of their net assets
in
warrants. Ivy
Growth with Income Fund currently does not,
however,
intend to
invest in warrants. Each Fund may not invest
more than
10% of
the value of its net assets in illiquid
securities,
such as
securities subject to legal or contractual
restrictions
on a
resale ("restricted securities"), repurchase
agreements
maturing
in more than seven days and other securities
that are
not readily
marketable. Ivy Growth with Income Fund
currently does
not
intend to invest in restricted or illiquid
securities.
None of
the Funds may invest more than 5% of their
net assets
in
restricted securities. Ivy Growth with Income
Fund and
Ivy Growth
Fund each may also invest in equity real
estate
investment
trusts, and all of the Funds may enter into
forward
foreign
currency contracts. Each of Ivy Emerging
Growth Fund
and Ivy
Growth with Income Fund do not currently
intend to
enter into
forward foreign currency contracts or to
invest in
foreign
currencies.
Each of the Funds may write put options,
with
respect to not
more than 10% of the value of its net assets,
on securities and stock indices, and may
write covered
call options with respect to not more than
25% of the
value of
its net assets. Each Fund may
purchase
options, provided the aggregate premium paid
for all
options held
does not exceed 5% of its net assets. For
hedging
purposes only,
each Fund may enter into stock index futures
contracts
as a means
of regulating its exposure to equity markets.
A Fund's
equivalent exposure in stock index futures
contracts
does not
exceed 15% of its total assets. Each Fund
currently
does not
intend to purchase options on securities, and
Ivy
Growth with
Income Fund currently does not intend to
enter into
stock index
futures contracts.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are
obligations of, or
guaranteed
by, the U.S. Government, its agencies or
instrumentalities.
Securities guaranteed by the U.S. Government
include:
(1) direct
obligations of the U.S. Treasury (such as
Treasury
bills, notes,
and bonds) and (2) Federal agency obligations
guaranteed as to
principal and interest by the U.S. Treasury
(such as
GNMA
certificates, which are mortgage-backed
securities).
In these
securities, the payment of principal and
interest is
unconditionally guaranteed by the U.S.
Government, and
thus they
are of the highest possible credit quality.
Such
securities are
subject to variations in market value due to
fluctuations in
interest rates, but, if held to maturity,
will be paid
in full.
Mortgage-backed securities are
securities
representing part
ownership of a pool of mortgage loans. For
example,
GNMA
certificates are such securities in which the
timely
payment of
principal and interest is guaranteed by the
full faith
and credit
of the U.S. Government. Although the
mortgage loans in
the pool
will have maturities of up to 30 years, the
actual
average life
of the GNMA certificates typically will be
substantially less
because the mortgages will be subject to
normal
principal
amortization and may be prepaid prior to
maturity.
Prepayment
rates vary widely and may be affected by
changes in
market
interest rates. In periods of falling
interest rates,
the rate
of prepayment tends to increase, thereby
shortening the
actual
average life of the GNMA certificates.
Conversely,
when interest
rates are rising, the rate of prepayments
tends to
decrease,
thereby lengthening the actual average life
of the GNMA
certificates. Accordingly, it is not
possible to
predict
accurately the average life of a particular
pool.
Reinvestment
of prepayment may occur at higher or lower
rates than
the
original yield on the certificates. Due to
the
prepayment
feature and the need to reinvest prepayments
of
principal at
current rates, GNMA certificates can be less
effective
than
typical bonds of similar maturities at
"locking in"
yields during
periods of declining interest rates. GNMA
certificates
may
appreciate or decline in market value during
periods of
declining
or rising interest rates, respectively.
Securities issued by U.S. Government
instrumentalities and
certain federal agencies are neither directly
obligations of nor
guaranteed by the U.S. Treasury. However,
they involve
Federal
sponsorship in one way or another; some are
backed by
specific
types of collateral; some are supported by
the issuer's
right to
borrow from the Treasury; some are supported
by the
discretionary
authority of the Treasury to purchase certain
obligations of the
issuer; others are supported only by the
credit of the
issuing
government agency or instrumentality. These
agencies
and
instrumentalities include, but are not
limited to,
Federal Land
Banks, Farmers Home Administration, Central
Bank for
Cooperatives, Federal Intermediate Credit
Banks,
Federal Home
Loan Banks, Federal National Mortgage
Association, and
Student
Loan Marketing Association.
MUNICIPAL SECURITIES
Municipal securities are debt
obligations that
generally
have a maturity at the time of issue in
excess of one
year and
are issued to obtain funds for various public
purposes.
The two
principal classifications of municipal bonds
are
"general
obligation" and "revenue" bonds. General
obligation
bonds are
secured by the issuer's pledge of its full
faith,
credit and
taxing power for the payment of principal and
interest.
Revenue
bonds are payable only from the revenues
derived from a
particular facility or class of facilities,
or, in some
cases,
from the proceeds of a special excise of a
specific
revenue
source. Industrial development bonds or
private
activity bonds
are issued by or on behalf of public
authorities to
obtain funds
for privately-operated facilities and are in
most cases
revenue
bonds that generally do not carry the pledge
of the
full faith
and credit of the issuer of such bonds, but
depend for
payment on
the ability of the industrial user to meet
its
obligations (or on
any property pledged as security).
The market prices of municipal
securities, like
those of
taxable debt securities, go up and down when
interest
rates
change. Thus, the net asset value per share
can be
expected to
fluctuate and shareholders may receive more
or less
than their
purchase price for shares they redeem.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations
issued
without any
requirement for the periodic payment of
interest. Zero
coupon
bonds are issued at a significant discount
from face
value. The
discount approximates the total amount of
interest the
bonds
would accrue and compound over the period
until
maturity at a
rate of interest reflecting the market rate
at the time
of
issuance. If a Fund holds zero coupon bonds
in its
portfolio,
however, it would recognize income currently
for
Federal income
tax purposes in the amount of the unpaid,
accrued
interest and
generally would be required to distribute
dividends
representing
such income to shareholders currently, even
though
funds
representing such income would not have been
received
by the
Fund. Cash to pay dividends representing
unpaid,
accrued
interest may be obtained from sales proceeds
of
portfolio
securities and Fund shares and from loan
proceeds. The
potential
sale of portfolio securities to pay cash
distributions
from
income earned on zero coupon bonds may result
in a
Fund's being
forced to sell portfolio securities at a time
when the
Fund might
otherwise choose not to sell these securities
and when
the Fund
might incur a capital loss on such sales.
Because
interest on
zero coupon obligations is not distributed to
a Fund on
a current
basis, but is in effect compounded, the value
of the
securities
of this type is subject to greater
fluctuations in
response to
changing interest rates than the value of
debt
obligations that
distribute income regularly.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts
under which a
Fund buys
a money market instrument and obtains a
simultaneous
commitment
from the seller to repurchase the instrument
at a
specified time
and at an agreed-upon yield. A Fund may not
enter into
a repur-
chase agreement with more than seven days to
maturity
if, as a
result, more than 10% of that Fund's net
assets would
be invested
in illiquid securities, including such
repurchase
agreements.
Under guidelines approved by the Trust's
Board of
Trustees (the
"Board"), a Fund is permitted to enter into
repurchase
agreements
only if the repurchase agreements are at
least fully
collateralized with U.S. Government
securities or other
securities that the Fund's investment adviser
has
approved for
use as collateral for repurchase agreements
and the
collateral
must be marked-to-market daily. A Fund will
enter into
repurchase agreements only with banks and
broker-dealers deemed
to be creditworthy by that Fund's investment
adviser
under
guidelines approved by the Board. In the
unlikely
event of
failure of the executing bank or
broker-dealer, a Fund
could
experience some delay in obtaining direct
ownership of
the
underlying collateral and might incur a loss
if the
value of the
security should decline, as well as costs in
disposing
of the
security.
WARRANTS
A Fund's investments in warrants, valued
at the
lower of
cost or market, will not exceed 5% of the
value of its
net
assets. Included within that amount, but not
to exceed
2% of a
Fund's net assets, may be warrants that are
not listed
on either
the New York or the American Stock Exchanges.
Warrants
acquired
by a Fund in units or attached to securities
will be
deemed to be
without value for purposes of this
restriction.
The holder of a warrant has the right to
purchase
a given
number of shares of a particular issuer at a
specified
price
until expiration of the warrant. Such
investments can
provide a
greater potential for profit or loss than an
equivalent
investment in the underlying security.
Prices of
warrants do not
necessarily move in a tandem with the prices
of the
underlying
securities, and are speculative investments.
Warrants
pay no
dividends and confer no rights other than a
purchase
option. If
a warrant is not exercised by the date of its
expiration, the
particular Fund will lose its entire
investment in such
warrant.
ADJUSTABLE RATE PREFERRED STOCKS
Adjustable rate preferred stocks have a
variable
dividend,
generally determined on a quarterly basis
according to
a formula
based upon a specified premium or discount to
the yield
on a
particular U.S. Treasury security rather than
a
dividend which is
set for the life of the issue. Although the
dividend
rates on
these stocks are adjusted quarterly and their
market
value should
therefore be less sensitive to interest rate
fluctuations than
are other fixed income securities and
preferred stocks,
the
market values of adjustable rate preferred
stocks have
fluctuated
and can be expected to continue to do so in
the future.
CONVERTIBLE SECURITIES
Convertible debt securities and
convertible
preferred
stocks, until converted, have general
characteristics
similar to
both debt and equity securities. Although to
a lesser
extent
than with debt securities generally, the
market value
of
convertible securities tends to decline as
interest
rates
increase and, conversely, tends to increase
as interest
rates
decline. In addition, because of the
conversion or
exchange
feature, the market value of convertible
securities
typically
changes as the market value of the underlying
common
stocks
changes, and, therefore, also tends to follow
movements
in the
general market for equity securities. As the
market
price of the
underlying common stock declines, convertible
securities tend to
trade increasingly on a yield basis, and so
may not
experience
market value declines to the same extent as
the
underlying common
stock. When the market price of the
underlying common
stock
increases, the prices of the convertible
securities
tend to rise
as a reflection of the value of the
underlying common
stock,
although typically not as much as the
underlying common
stock.
While no securities investments are without
risk,
investments in
convertible securities generally entail less
risk than
investments in common stock of the same
issuer. As
debt
securities, convertible securities are
investments
which provide
for a stream of income (or in the case of
zero coupon
securities,
accretion of income) with generally higher
yields than
common
stocks. Like all debt securities, however,
there can
be no
assurance of income or principal payments
because the
issuers of
the convertible securities may default on
their
obligations.
Convertible securities generally offer lower
yields
than non-
convertible securities of similar quality
because of
their
conversion or exchange features.
SMALL COMPANY RISK
Investors should recognize that
investing in
smaller company
stocks involves certain special
considerations and
risks,
including those set forth below and in the
Funds'
Prospectus
under "Risk Factors and Investment
Techniques," which
are not
customarily associated with investing in
larger, more
established
companies. For example, smaller companies
may be more
susceptible to losses and risks of
bankruptcy. Also,
the
securities of smaller companies may be thinly
traded
(and
therefore have to be sold at a discount from
current
market
prices sold in small lots over an extended
period of
time).
Transaction costs in smaller company stocks
may be
higher than
those of larger companies.
COMMERCIAL PAPER
Commercial paper represents short-term
unsecured
promissory
notes issued in bearer form by bank holding
companies,
corporations and finance companies. A Fund
may invest
in
commercial paper that, at the date of
investment, is
rated A-1 by
Standard & Poor's Corporation ("S&P") or
Prime-1 by
Moody's
Investors Service, Inc. ("Moody's") or, if
not rated by
Moody's
or S&P, issued by companies having an
outstanding debt
issue
rated AAA or AA by S&P or Aaa or Aa by
Moody's.
BANKING INDUSTRY AND SAVINGS AND LOAN
OBLIGATIONS
Certificates of deposit are negotiable
certificates issued
against funds deposited in a commercial bank
for a
definite
period of time and earning a specified
return.
Bankers'
acceptances are negotiable drafts or bills of
exchange,
normally
drawn by an importer or exporter to pay for
specific
merchandise,
which are "accepted" by a bank, meaning, in
effect,
that the bank
unconditionally agrees to pay the face value
of the
instrument on
maturity. In addition to investing in
certificates of
deposit
and bankers' acceptances, a Fund may invest
in time
deposits in
banks or savings and loan associations. Time
deposits
are
generally similar to certificates of deposit,
but are
uncertificated. A Fund's investments in
certificates of
deposit,
time deposits, and bankers' acceptances are
limited to
obligations of (i) banks having total assets
in excess
of $1
billion, (ii) U.S. banks which do not meet
the $1
billion asset
requirement, if the principal amount of such
obligation
(currently $100,000) is fully insured by the
Federal
Deposit
Insurance Corporation (the "FDIC"), (iii)
savings and
loan
associations which have total assets in
excess of $1
billion and
which are members of the FDIC, and (iv)
foreign banks
if the
obligation is, in IMI's opinion, of an
investment
quality
comparable to other debt securities which may
be
purchased by a
Fund.
AMERICAN DEPOSITORY RECEIPTS
A Fund may purchase sponsored or
unsponsored ADRs.
ADRs are
dollar-denominated receipts issued generally
by U.S.
banks that
represent the deposit with the bank of a
foreign
company's
security. ADRs are publicly traded on
exchanges or
over-the-
counter ("OTC") in the United States.
Ownership of
unsponsored
ADRs may not entitle a Fund to financial or
other
reports from
the issuer to which it would be entitled as
the owner
of
sponsored ADRs.
FOREIGN SECURITIES
A Fund may invest in debt securities of
foreign
issuers,
including non-U.S. dollar-denominated
securities,
Eurodollar
securities and debt securities issued,
assumed or
guaranteed by
foreign governments or political subdivisions
or the
instrumentalities thereof. Investors should
consider
carefully
the substantial risks involved in investing
in
securities issued
by companies and governments of foreign
nations, which
are in
addition to the usual risks inherent in the
domestic
investments.
Although a Fund intends to invest only in
nations that
IMI
considers to have relatively stable and
friendly
governments,
there is the possibility of expropriation,
nationalization or
confiscatory taxation, taxation of income
earned in a
foreign
country and other foreign taxes, foreign
exchange
controls (which
may include suspension of the ability to
transfer
currency from a
given country), default in foreign government
securities,
political or social instability or diplomatic
developments which
could affect investments in securities of
issuers in
those
nations. In addition, in many countries
there is less
publicly
available information about issuers than is
available
in reports
about companies in the United States. For
example,
ownership of
unsponsored ADRs may not entitle the owner to
financial
or other
reports from the issuer to which it might
otherwise be
entitled
as the owner of a sponsored ADR. Moreover,
foreign
companies are
not generally subject to uniform accounting,
auditing
and
financial reporting standards, and auditing
practices
and
requirements may not be comparable to those
applicable
to U.S.
companies. In many foreign countries, there
is less
government
supervision and regulation of business and
industry
practices,
stock exchanges, brokers, and listed
companies than in
the United
States. Foreign securities transactions may
be subject
to higher
brokerage costs than domestic securities
transactions.
The
foreign securities markets of many of the
countries in
which a
Fund may invest may also be smaller, less
liquid and
subject to
greater price volatility than those in the
United
States.
Further, a Fund may encounter difficulties or
be unable
to pursue
legal remedies and obtain judgment in foreign
courts.
INVESTING IN EMERGING MARKETS
Investors should recognize that
investing in
certain foreign
securities involves certain special
considerations,
including
those set forth below, that are not typically
associated with
investing in United States securities and
that may
affect a
Fund's performance favorably or unfavorably.
(See also
"Foreign
Securities" under the caption "Risk Factors
and
Investment
Techniques" in the Prospectus.)
Foreign stock markets have different
clearance and
settlement procedures and in certain markets
there have
been
times when settlements have been unable to
keep pace
with the
volume of securities transactions, making it
difficult
to conduct
such transactions. Delays in settlement
could result
in
temporary periods when assets of a Fund are
uninvested
and no
return is earned thereon. The inability of a
Fund to
make
intended security purchases due to settlement
problems
could
cause that Fund to miss attractive investment
opportunities.
Further, the inability to dispose of
portfolio
securities due to
settlement problems could result either in
losses to a
Fund
because of subsequent declines in the value
of the
portfolio
security or, if a Fund has entered into a
contract to
sell the
security, in possible liability to the
purchaser.
Fixed
commissions on some foreign securities
exchanges are
generally
higher than negotiated commissions on U.S.
exchanges,
although
IMI will endeavor to achieve the most
favorable net
results on a
Fund's portfolio transactions. In addition,
a Fund may
encounter
difficulties or be unable to pursue legal
remedies and
obtain
judgment in foreign courts. It may be more
difficult
for a
Fund's agents to keep currently informed
about
corporate actions
such as stock dividends or other matters that
may
affect the
prices of portfolio securities.
Communications between
the
United States and foreign countries may be
less
reliable than
within the United States, thus increasing the
risk of
delayed
settlements of portfolio transactions or loss
of
certificates for
portfolio securities. Moreover, individual
foreign
economies may
differ favorably or unfavorably from the
United States
economy in
such respects as growth of gross national
product, rate
of
inflation, capital reinvestment, resource
self-sufficiency and
balance of payments position. IMI seeks to
mitigate
the risks to
a Fund associated with the foregoing
considerations
through
investment variation and continuous
professional
management.
Investments in companies domiciled in
developing
countries
may be subject to potentially higher risks
than
investments in
developed countries. These risks include (i)
less
social,
political and economic stability; (ii) the
small
current size of
the markets for such securities and the
currently low
or
nonexistent volume of trading, which result
in a lack
of
liquidity and in greater price volatility;
(iii)
certain national
policies that may restrict a Fund's
investment
opportunities,
including restrictions on investment in
issuers or
industries
deemed sensitive to national interests; (iv)
foreign
taxation;
(v) the absence of developed structures
governing
private or
foreign investment or allowing for judicial
redress for
injury to
private property; (vi) the absence, until
relatively
recently in
certain Eastern European countries, of a
capital market
structure
or market-oriented economy; (vii) the
possibility that
recent
favorable economic developments in Eastern
Europe may
be slowed
or reversed by unanticipated political or
social events
in such
countries; and (viii) the possibility that
currency
devaluations
could adversely affect the value of a Fund's
investments.
Despite the dissolution of the Soviet
Union, the
Communist
Party may continue to exercise a significant
role in
certain
Eastern European countries. To the extent of
the
Communist
Party's influence, investments in such
countries will
involve
risks of nationalization, expropriation and
confiscatory
taxation. The communist governments of a
number of
Eastern
European countries expropriated large amounts
of
private property
in the past, in many cases without adequate
compensation, and
there can be no assurance that such
expropriation will
not occur
in the future. In the event of such
expropriation, a
Fund could
lose a substantial portion of any investment
it has
made in the
affected countries. Further, few (if any)
accounting
standards
exist in Eastern European countries.
Finally, even
though
certain Eastern European currencies may be
convertible
into U.S.
dollars, the conversion rates may be
artificial in
relation to
the actual market values and may be adverse
to a Fund's
Shareholders.
Certain Eastern European countries that
do not
have market
economies are characterized by an absence of
developed
legal
structures governing private and foreign
investments
and private
property. In addition, certain countries
require
governmental
approval prior to investments by foreign
persons, or
limit the
amount of investment by foreign persons in a
particular
company,
or limit the investment of foreign persons to
only a
specific
class of securities of a company that may
have less
advantageous
terms than securities of the company
available for
purchase by
nationals.
Authoritarian governments in certain
Eastern
European
countries may require that a governmental or
quasi-governmental
authority act as custodian of a Fund's assets
invested
in such
country. To the extent such governmental or
quasi-governmental
authorities do not satisfy the requirements
of the
Investment
Company Act of 1940, as amended (the "1940
Act"), to
act as
foreign custodians of a Fund's cash and
securities,
that Fund's
investment in such countries may be limited
or may be
required to
be affected through intermediaries. The risk
of loss
through
governmental confiscation may be increased in
such
countries.
FORWARD FOREIGN CURRENCY CONTRACTS
A Fund may enter into forward foreign
currency
contracts (a
"forward contract"). A forward contract is
an
obligation to
purchase or sell a specific currency for an
agreed
price at a
future date (usually less than a year), which
is
individually
negotiated and privately traded by currency
traders and
their
customers. A forward contract generally has
no deposit
requirement, and no commissions are charged
at any
stage for
trades. Although foreign exchange dealers do
not
charge a fee
for commissions, they do realize a profit
based on the
difference
between the price at which they are buying
and selling
various
currencies. Although these contracts are
intended to
minimize
the risk of loss due to a decline in the
value of the
hedged
currencies, at the same time, they tend to
limit any
potential
gain which might result should the value of
such
currencies
increase.
While a Fund may enter into forward
contracts to
reduce
currency exchange risks, changes in currency
exchange
rates may
result in poorer overall performance for a
Fund than if
it had
not engaged in such transactions. Moreover,
there may
be an
imperfect correlation between a Fund's
portfolio
holdings of
securities denominated in a particular
currency and
forward
contracts entered into by that Fund. Such
imperfect
correlation
may prevent the particular Fund from
achieving the
intended hedge
or expose the Fund to the risk of currency
exchange
loss.
A Fund will not enter into forward
contracts or
maintain a
net exposure to such contracts where the
consummation
of the
contracts would obligate that Fund to deliver
an amount
of
currency in excess of the value of that
Fund's
portfolio securi-
ties or other assets denominated in that
currency.
Further, a
Fund generally will not enter into a forward
contract
with a term
of greater than one year.
To the extent required by applicable
law, a Fund
will hold
liquid assets, such as cash, U.S. Government
securities, or other
appropriate high grade debt obligations in a
segregated
account
with its Custodian in an amount equal (on a
daily
marked-to-
market basis) to the amount of the
commitments under
these
contracts. At the maturity of a forward
contract, a
Fund may
either accept or make delivery of the
currency
specified in the
contract, or, prior to maturity, enter into a
closing
purchase
transaction involving the purchase or sale of
an
offsetting
contract. Closing purchase transactions with
respect
to forward
contracts are usually affected with the
currency trader
who is a
party to the original forward contract.
FOREIGN CURRENCIES
Investment in foreign securities usually
will
involve
currencies of foreign countries. Moreover, a
Fund may
temporarily hold funds in bank deposits in
foreign
currencies
during the completion of investment programs
and may
purchase
forward contracts. Because of these factors,
the value
of the
assets of a Fund as measured in U.S. dollars
may be
affected
favorably or unfavorably by changes in
foreign currency
exchange
rates and exchange control regulations, and
the Fund
may incur
costs in connection with conversions between
various
currencies.
Although a Fund's custodian values the Fund's
assets
daily in
terms of U.S. dollars, a Fund does not intend
to
convert its
holdings of foreign currencies into U.S.
dollars on a
daily
basis. A Fund may do so from time to time,
and
investors should
be aware of the costs of currency conversion.
Although
foreign
exchange dealers do not charge a fee for
conversion,
they do
realize a profit based on the difference (the
"spread")
between
the prices at which they are buying and
selling various
currencies. Thus, a dealer may offer to sell
a foreign
currency
to a Fund at one rate, while offering a
lesser rate of
exchange
should the Fund desire to resell that
currency to the
dealer. A
Fund will conduct its foreign currency
exchange
transactions
either on a spot (i.e., cash) basis at the
spot rate
prevailing
in the foreign currency exchange market, or
through
entering into
forward contracts to purchase or sell foreign
currencies.
Because a Fund normally will be invested
in both
U.S. and
foreign securities markets, changes in the
Fund's share
price may
have a low correlation with movements in the
U.S.
markets. A
Fund's share price will reflect the movements
of both
the
different stock and bond markets in which it
is
invested and of
the currencies in which the investments are
denominated; the
strength or weakness of the U.S. dollar
against foreign
currencies may account for part of a Fund's
investment
performance. U.S. and foreign securities
markets do
not always
move in step with each other, and the total
returns
from
different markets may vary significantly.
BORROWING
All borrowing will be repaid before any
additional
investments are made. Borrowing may
exaggerate the
effect on a
Fund's net asset value of any increase or
decrease in
the value
of the Fund's portfolio securities. Money
borrowed
will be
subject to interest costs (which may include
commitment
fees
and/or the cost of maintaining minimum
average
balances).
Although the principal of a Fund's borrowing
will be
fixed, the
Fund's assets may change in value during the
time a
borrowing is
outstanding, thus increasing exposure to
capital risk.
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED
SECURITIES
A Fund may purchase securities on a firm
commitment or when-
issued basis. New issues of certain debt
securities
are often
offered on a when-issued basis; that is, the
payment
obligation
and the interest rate are fixed at the time
the buyer
enters into
the commitment, but delivery and payment for
the
securities
normally take place after the date of the
commitment to
purchase.
Firm commitment agreements call for the
purchase of
securities at
an agreed-upon price on a specified future
date. The
transactions are entered into in order to
secure what
is
considered to be an advantageous price and
yield to a
Fund and
not for purposes of leveraging the Fund's
assets. A
Fund will
maintain in a segregated account with its
custodian
liquid
assets, such as cash, U.S. Government
securities, or
other
appropriate high grade debt obligations equal
(on a
daily marked-
to-market basis) to the amount of its
commitment to
purchase the
securities on a when-issued or firm
commitment basis.
LOANS OF PORTFOLIO SECURITIES
A Fund may lend its investment
securities to
brokers,
dealers and financial institutions for the
purpose of
realizing
additional income. Loans of securities by a
Fund will
be
collateralized by cash, letters of credit, or
securities issued
or guaranteed by the U.S. Government or its
agencies or
instrumentalities. The collateral will equal
(on a
daily marked-
to-market basis) at least 100% of the current
market
value of the
loaned securities. The risks in lending
portfolio
securities, as
with other extensions of credit, involve a
possible
loss of
rights in the collateral should the borrower
fail
financially.
In determining whether to lend securities,
IMI will
consider all
relevant facts and circumstances, including
the
creditworthiness
of the borrower.
RESTRICTED AND ILLIQUID SECURITIES
Issuers of restricted securities may not
be
subject to the
disclosure and other investor protection
requirements
that would
be applicable if their securities were
publicly traded.
Restricted securities may be sold only in
privately
negotiated
transactions or in a public offering with
respect to
which a
registration statement is in effect under the
Securities Act of
1933. Where a registration statement is
required, a
Fund may be
required to bear all or part of the
registration
expenses. There
may be a lapse of time between a Fund's
decision to
sell a
restricted or illiquid security and the point
at which
the Fund
is permitted or able to sell such security.
If, during
such a
period, adverse market conditions were to
develop, a
Fund might
obtain a price less favorable than the price
that
prevailed when
it decided to sell. Since it is not possible
to
predict with
assurance that the market for securities
eligible for
resale
under Rule 144A will continue to be liquid, a
Fund may
carefully
monitor each of its investments in these
securities,
focussing on
such important factors, among others, as
valuation,
liquidity and
availability of information. This investment
practice
could have
the effect of increasing the level of
illiquidity in a
Fund to
the extent that qualified institutional
buyers become,
for a
time, uninterested in purchasing these
restricted
securities.
REAL ESTATE INVESTMENT TRUSTS (REITS)
A Fund may invest in equity real estate
investment
trusts
("REITs"). Equity REITs are dependent upon
management
skill, may
not be diversified and are subject to the
risks of
financing
projects. Such trusts are also subject to
heavy cash
flow
dependency, defaults by borrowers,
self-liquidation and
the
possibility of failing to qualify for
tax-free
pass-through of
income under the Internal Revenue Code of
1986, as
amended (the
"Code") and to maintain exemption from the
1940 Act.
Changes in
interest rates may also affect the value of
the debt
securities
in a Fund's portfolio. By investing in REITs
indirectly through
a fund, a shareholder will bear not only his
or her
proportionate
share of the expenses of the Fund, but also,
indirectly, similar
expenses of the REITs.
OPTIONS TRANSACTIONS
GENERAL. A Fund may engage in
transactions in
options on
securities and stock indices in accordance
with the
Fund's stated
investment objective and policies. A Fund
may also
purchase put
options on securities and may purchase and
sell (write)
put and
call options on stock indices. Options on
securities
and stock
indices purchased or written by a Fund will
be limited
to options
traded on national securities exchanges,
boards of
trade or
similar entities, or in the OTC markets.
A call option is a short-term contract
(having a
duration of
less than one year) pursuant to which the
purchaser, in
return
for the premium paid, has the right to buy
the security
underlying the option at the specified
exercise price
at any time
during the term of the option. The writer of
the call
option,
who receives the premium, has the obligation,
upon
exercise of
the option, to deliver the underlying
security against
payment of
the exercise price. A put option is a
similar contract
pursuant
to which the purchaser, in return for the
premium paid,
has the
right to sell the security underlying the
option at the
specified
exercise price at any time during the term of
the
option. The
writer of the put option, who receives the
premium, has
the
obligation, upon exercise of the option, to
buy the
underlying
security at the exercise price. The premium
paid by
the
purchaser of an option will reflect, among
other
things, the
relationship of the exercise price to the
market price
and
volatility of the underlying security, the
time
remaining to
expiration of the option, supply and demand,
and
interest rates.
If the writer of an option wishes to
terminate the
obligation, the writer may affect a "closing
purchase
transaction." This is accomplished by buying
an option
of the
same series as the option previously written.
The
effect of the
purchase is that the writer's position will
be canceled
by the
Options Clearing Corporation. However, a
writer may
not affect a
closing purchase transaction after it has
been notified
of the
exercise of an option. Likewise, an investor
who is
the holder
of an option may liquidate his or her
position by
effecting a
"closing sale transaction." This is
accomplished by
selling an
option of the same series as the option
previously
purchased.
There is no guarantee that either a closing
purchase or
a closing
sale transaction can be effected at any
particular time
or at any
acceptable price. If any call or put option
is not
exercised or
sold, it will become worthless on its
expiration date.
A Fund will realize a gain (or a loss)
on a
closing purchase
transaction with respect to a call or a put
previously
written by
the Fund if the premium, plus commission
costs, paid by
the Fund
to purchase the call or the put is less (or
greater)
than the
premium, less commission costs, received by
the Fund on
the sale
of the call or the put. A gain also will be
realized
if a call
or a put that a Fund has written lapses
unexercised,
because the
Fund would retain the premium. Any such
gains (or
losses) are
considered short-term capital gains (or
losses) for
Federal
income tax purposes. Net short-term capital
gains,
when
distributed by a Fund, are taxable as
ordinary income.
See
"Taxation."
A Fund will realize a gain (or a loss)
on a
closing sale
transaction with respect to a call or a put
previously
purchased
by the Fund if the premium, less commission
costs,
received by
the Fund on the sale of the call or the put
is greater
(or less)
than the premium, plus commission costs, paid
by the
Fund to
purchase the call or the put. If a put or a
call
expires
unexercised, it will become worthless on the
expiration
date, and
a Fund will realize a loss in the amount of
the premium
paid,
plus commission costs. Any such gain or loss
will be
long-term
or short-term gain or loss, depending upon a
Fund's
holding
period for the option.
Exchange-traded options generally have
standardized terms
and are issued by a regulated clearing
organization
(such as the
Options Clearing Corporation), which, in
effect,
guarantees the
completion of every exchange-traded option
transaction.
In
contrast, the terms of OTC options are
negotiated by a
Fund and
its counterparty (usually a securities dealer
or a
financial
institution) with no clearing organization
guarantee.
When a
Fund purchases an OTC option, it relies on
the party
from whom it
has purchased the option (the "counterparty")
to make
delivery of
the instrument underlying the option. If the
counterparty fails
to do so, a Fund will lose any premium paid
for the
option, as
well as any expected benefit of the
transaction.
Accordingly,
IMI will assess the creditworthiness of each
counterparty to
determine the likelihood that the terms of
the OTC
option will be
satisfied.
WRITING OPTIONS ON INDIVIDUAL
SECURITIES. A Fund
may write
(sell) covered call options on the Fund's
securities in
an
attempt to realize a greater current return
than would
be
realized on the securities alone. A Fund may
also
write covered
call options to hedge a possible stock or
bond market
decline
(only to the extent of the premium paid to
the Fund for
the
options). In view of the investment
objectives of a
Fund, the
Fund generally would write call options only
in
circumstances
where the investment adviser to the Fund does
not
anticipate
significant appreciation of the underlying
security in
the near
future or has otherwise determined to dispose
of the
security.
A Fund may write covered call options as
described
in the
Fund's Prospectus. A "covered" call option
means
generally that
so long as the Fund is obligated as the
writer of a
call option,
the Fund will (i) own the underlying
securities subject
to the
option, or (ii) have the right to acquire the
underlying
securities through immediate conversion or
exchange of
convertible preferred stocks or convertible
debt
securities owned
by the Fund. Although a Fund receives
premium income
from these
activities, any appreciation realized on an
underlying
security
will be limited by the terms of the call
option. A
Fund may
purchase call options on individual
securities only to
effect a
"closing purchase transaction."
As the writer of a call option, a Fund
receives a
premium
for undertaking the obligation to sell the
underlying
security at
a fixed price during the option period, if
the option
is
exercised. So long as a Fund remains
obligated as a
writer of a
call option, it forgoes the opportunity to
profit from
increases
in the market price of the underlying
security above
the exercise
price of the option, except insofar as the
premium
represents
such a profit (and retains the risk of loss
should the
value of
the underlying security decline).
PURCHASING OPTIONS ON INDIVIDUAL
SECURITIES. A
Fund may
purchase a put option on an underlying
security owned
by the Fund
as a defensive technique in order to protect
against an
anticipated decline in the value of the
security. A
Fund, as the
holder of the put option, may sell the
underlying
security at the
exercise price regardless of any decline in
its market
price. In
order for a put option to be profitable, the
market
price of the
underlying security must decline sufficiently
below the
exercise
price to cover the premium and transaction
costs that a
Fund must
pay. These costs will reduce any profit a
Fund might
have
realized had it sold the underlying security
instead of
buying
the put option. The premium paid for the put
option
would reduce
any capital gain otherwise available for
distribution
when the
security is eventually sold. The purchase of
put
options will
not be used by a Fund for leverage purposes.
A Fund may also purchase a put option on
an
underlying
security that it owns and at the same time
write a call
option on
the same security with the same exercise
price and
expiration
date. Depending on whether the underlying
security
appreciates
or depreciates in value, a Fund would sell
the
underlying
security for the exercise price either upon
exercise of
the call
option written by it or by exercising the put
option
held by it.
A Fund would enter into such transactions in
order to
profit from
the difference between the premium received
by the Fund
for the
writing of the call option and the premium
paid by the
Fund for
the purchase of the put option, thereby
increasing the
Fund's
current return.
A Fund will purchase put options only to
the
extent
permitted by the policies of state securities
authorities in
states where shares of the Fund are qualified
for offer
and sale.
Such authorities may impose further
limitations on the
ability of
a Fund to purchase options. A Fund may write
(sell)
put options
on individual securities only to effect a
"closing sale
transaction."
PURCHASING AND WRITING OPTIONS ON
SECURITIES
INDICES. A
Fund may purchase and sell (write) put and
call options
on
securities indices. An index assigns
relative values
to the
securities included in the index and the
index
fluctuates with
changes in the market values of the
securities so
included.
Options on indices are similar to options on
individual
securities, except that, rather than giving
the
purchaser the
right to take delivery of an individual
security at a
specified
price, they give the purchaser the right to
receive
cash. The
amount of cash is equal to the difference
between the
closing
price of the index and the exercise price of
the
option,
expressed in dollars, times a specified
multiple (the
"multiplier"). The writer of the option is
obligated,
in return
for the premium received, to make delivery of
this
amount.
The multiplier for an index option
performs a
function
similar to the unit of trading for a stock
option. It
determines
the total dollar value per contract of each
point in
the
difference between the exercise price of an
option and
the
current level of the underlying index. A
multiplier of
100 means
that a one-point difference will yield $100.
Options
on
different indices have different multipliers.
When a Fund writes a call or put option
on a stock
index,
the option is "covered", in the case of a
call, or
"secured", in
the case of a put, if the Fund maintains in a
segregated account
with the Custodian liquid assets, such as
cash, U.S.
Government
securities, or other appropriate high grade
debt
obligations
equal to the contract value. A call option
is also
covered if a
Fund holds a call on the same index as the
call written
where the
exercise price of the call held is (i) equal
to or less
than the
exercise price of the call written or (ii)
greater than
the
exercise price of the call written, provided
that the
Fund
maintains in a segregated account with the
Custodian
the
difference in liquid assets, such as cash,
U.S.
Government
securities, or other appropriate high grade
debt
obligations. A
put option is also "secured" if a Fund holds
a put on
the same
index as the put written where the exercise
price of
the put held
is (i) equal to or greater than the exercise
price of
the put
written or (ii) less than the exercise price
of the put
written,
provided that the Fund maintains in a
segregated
account with the
Custodian the difference in liquid assets,
such as
cash, U.S.
Government securities, or other appropriate
high grade
debt
obligations.
RISKS OF OPTIONS TRANSACTIONS. The
purchase and
writing of
options involves certain risks. During the
option
period, the
covered call writer has, in return for the
premium on
the option,
given up the opportunity to profit from a
price
increase in the
underlying securities above the exercise
price, but, as
long as
its obligation as a writer continues, has
retained the
risk of
loss should the price of the underlying
security
decline. The
writer of an option has no control over the
time when
it may be
required to fulfill its obligation as a
writer of the
option.
Once an option writer has received an
exercise notice,
it cannot
effect a closing purchase transaction in
order to
terminate its
obligation under the option and must deliver
the
underlying
securities (or cash in the case of an index
option) at
the
exercise price. If a put or call option
purchased by a
Fund is
not sold when it has remaining value, and if
the market
price of
the underlying security (or index), in the
case of a
put, remains
equal to or greater than the exercise price
or, in the
case of a
call, remains less than or equal to the
exercise price,
a Fund
will lose its entire investment in the
option. Also,
where a put
or call option on a particular security (or
index) is
purchased
to hedge against price movements in a related
security
(or
securities), the price of the put or call
option may
move more or
less than the price of the related security
(or
securities). In
this regard, there are differences between
the
securities and
options markets that could result in an
imperfect
correlation
between these markets, causing a given
transaction not
to achieve
its objective.
There can be no assurance that a liquid
market
will exist
when a Fund seeks to close out an option
position.
Furthermore,
if trading restrictions or suspensions are
imposed on
the options
markets, a Fund may be unable to close out a
position.
Finally,
trading could be interrupted, for example,
because of
supply and
demand imbalances arising from a lack of
either buyers
or
sellers, or the options exchange could
suspend trading
after the
price has risen or fallen more than the
maximum amount
specified
by the exchange. Closing transactions can be
made for
OTC
options only by negotiating directly with the
counterparty or by
a transaction in the secondary market, if any
such
market exists.
There is no assurance that a Fund will be
able to close
out an
OTC option position at a favorable price
prior to its
expiration.
In the event of insolvency of the
counterparty, a Fund
might be
unable to close out an OTC option position at
any time
prior to
its expiration. Although a Fund may be able
to offset
to some
extent any adverse effects of being unable to
liquidate
an option
position, the Fund may experience losses in
some cases
as a
result of such inability.
A Fund's options activities also may
have an
impact upon the
level of its portfolio turnover and brokerage
commissions. See
"Portfolio Turnover."
A Fund's success in using options
techniques
depends, among
other things, on IMI's ability to predict
accurately
the
direction and volatility of price movements
in the
options
markets as well as the securities markets and
on IMI's
ability to
select the proper type, time and duration of
options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS
GENERAL. A Fund may enter into futures
contracts
and
options on futures contracts. When a
purchase or sale
of a
futures contract is made by a Fund, that Fund
is
required to
deposit with its custodian (or broker, if
legally
permitted) a
specified amount of cash or U.S. Government
securities
("initial
margin"). The margin required for a futures
contract
is set by
the exchange on which the contract is traded
and may be
modified
during the term of the contract. The initial
margin is
in the
nature of a performance bond or good faith
deposit on
the futures
contract which is returned to the particular
Fund upon
termination of the contract, assuming all
contractual
obligations
have been satisfied. A futures contract held
by a Fund
is valued
daily at the official settlement price of the
exchange
on which
it is traded. Each day a Fund pays or
receives cash,
called
"variation margin," equal to the daily change
in value
of the
futures contract. This process is known as
"marking
to market."
Variation margin does not represent a
borrowing or loan
by a Fund
but is instead a settlement between that Fund
and the
broker of
the amount one would owe the other if the
futures
contract
expired. In computing daily net asset value,
a Fund
will mark-
to-market its open futures position.
A Fund is also required to deposit and
maintain
margin with
respect to put and call options on futures
contracts
written by
it. Such margin deposits will vary depending
on the
nature of
the underlying futures contract (and the
related
initial margin
requirements), the current market value of
the option,
and other
futures positions held by a Fund.
Although some futures contracts call for
making or
taking
delivery of the underlying securities,
generally these
obligations are closed out prior to delivery
of
offsetting
purchases or sales of matching futures
contracts (same
exchange,
underlying security or index, and delivery
month). If
an
offsetting purchase price is less than the
original
sale price, a
Fund generally realizes a capital gain, or if
it is
more, the
Fund generally realizes a capital loss.
Conversely, if
an
offsetting sale price is more than the
original
purchase price, a
Fund generally realizes a capital gain, or if
it is
less, the
Fund generally realizes a capital loss. The
transaction costs
must also be included in these calculations.
When purchasing a futures contract, a
Fund will
maintain
with its Custodian (and mark-to-market on a
daily
basis) cash,
U.S. Government securities, or other high
grade debt
securities
that, when added to the amounts deposited
with a
futures
commission merchant ("FCM") as margin, are
equal to the
market
value of the futures contract.
Alternatively, a Fund
may "cover"
its position by purchasing a put option on
the same
futures
contract with a strike price as high as or
higher than
the price
of the contract held by the Fund.
When selling a futures contact, a Fund
will
maintain with
its custodian in a segregated account (and
mark-to-market on a
daily basis) liquid assets, such as cash,
U.S.
Government
securities, or other appropriate high grade
debt
obligations
that, when added to the amounts deposited
with an FCM
as margin,
are equal to the market value of the
instruments
underlying the
contract. Alternatively, a Fund may "cover"
its
position by
owning the instruments underlying the
contract (or, in
the case
of an index futures contract, a portfolio
with a
volatility
substantially similar to that of the index on
which the
futures
contract is based), or by holding a call
option
permitting the
Fund to purchase the same futures contract at
a price
no higher
than the price of the contract written by
that Fund (or
at a
higher price if the difference is maintained
in liquid
assets
with the Fund's custodian).
When selling a call option on a futures
contract,
a Fund
will maintain with its custodian in a
segregated
account (and
mark-to-market on a daily basis) liquid
assets, such as
cash,
U.S. Government securities, or other
appropriate high
grade debt
obligations that, when added to the amounts
deposited
with an FCM
as margin, equal the total market value of
the futures
contract
underlying the call option. Alternatively, a
Fund may
cover its
position by entering into a long position in
the same
futures
contract at a price no higher than the strike
price of
the call
option, by owning the instruments underlying
the
futures
contract, or by holding a separate call
option
permitting the
Fund to purchase the same futures contract at
a price
not higher
than the strike price of the call option sold
by that
Fund.
When selling a put option on a futures
contract, a
Fund will
maintain with its custodian (and
mark-to-market on a
daily basis)
cash, U.S. Government securities, or other
highly
liquid debt
securities that equal the purchase price of
the futures
contract
less any margin on deposit. Alternatively, a
Fund may
cover the
position either by entering into a short
position in
the same
futures contract, or by owning a separate put
option
permitting
it to sell the same futures contract so long
as the
strike price
of the purchased put option is the same or
higher than
the strike
price of the put option sold by the Fund.
The requirements for qualification as a
regulated
investment
company also may limit the extent to which a
Fund may
enter into
futures and futures options.
INTEREST RATE FUTURES CONTRACTS. A Fund
may
engage in
interest rate futures contracts transactions
for
hedging purposes
only. An interest rate futures contract is
an
agreement between
parties to buy or sell a specified debt
security at a
set price
on a future date. The financial instruments
that
underlie
interest rate futures contracts include
long-term U.S.
Treasury
bonds, U.S. Treasury notes, GNMA
certificates, and
three-month
U.S. Treasury bills. In the case of futures
contracts
traded on
U.S. exchanges, the exchange itself or an
affiliated
clearing
corporation assumes the opposite side of each
transaction (i.e.,
as buyer or seller). A futures contract may
be
satisfied or
closed out by delivery or purchase, as the
case may be
in the
cash financial instrument or by payment of
the change
in the cash
value of the index. Frequently, using
futures to
effect a
particular strategy instead of using the
underlying or
related
security will result in lower transaction
costs being
incurred.
A Fund may sell interest rate futures
contracts in
order to
hedge its portfolio securities whose value
may be
sensitive to
changes in interest rates. In addition, a
Fund could
purchase
and sell these futures contracts in order to
hedge its
holdings
in certain common stocks (such as utilities,
banks and
savings
and loans) whose value may be sensitive to
changes in
interest
rates. A Fund could sell interest rate
futures
contracts in
anticipation of or during a market decline to
attempt
to offset
the decrease in market value of its
securities that
might
otherwise result. When a Fund is not fully
invested in
securities, it could purchase interest rate
futures in
order to
gain rapid market exposure that may in part
or entirely
offset
increases in the cost of securities that it
intends to
purchase.
As such purchases are made, an equivalent
amount of
interest rate
futures contracts will be terminated by
offsetting
sales. In a
substantial majority of these transactions, a
Fund
would purchase
such securities upon termination of the
futures
position whether
the futures position results from the
purchase of an
interest
rate futures contract or the purchase of a
call option
on an
interest rate futures contract, but under
unusual
market
conditions, a futures position may be
terminated
without the
corresponding purchase of securities.
OPTIONS ON INTEREST RATE FUTURES
CONTRACTS. For
hedging
purposes, a Fund may also purchase and write
put and
call options
on interest rate futures contracts which are
traded on
a U.S.
exchange or board of trade and sell or
purchase such
options to
terminate an existing position. Options on
interest
rate futures
give the purchaser the right (but not the
obligation),
in return
for the premium paid, to assume a position in
an
interest rate
futures contract at a specified exercise
price at a
time during
the period of the option.
Transactions in options on interest rate
futures
would
enable a Fund to hedge against the
possibility that
fluctuations
in interest rates and other factors may
result in a
general
decline in prices of debt securities owned by
the Fund.
Assuming
that any decline in the securities being
hedged is
accomplished
by a rise in interest rates, the purchase of
put
options and sale
of call options on the futures contracts may
generate
gains which
can partially offset any decline in the value
of the
particular
Fund's portfolio securities which have been
hedged.
However, if
after a Fund purchases or sells an option on
a futures
contract,
the value of the securities being hedged
moves in the
opposite
direction from that contemplated, the Fund
may
experience losses
in the form of premiums on such options which
would
partially
offset gains the Fund would have.
FOREIGN CURRENCY FUTURES CONTRACTS AND
RELATED
OPTIONS. A
Fund may engage in foreign currency futures
contracts
and related
options transactions for hedging purposes. A
foreign
currency
futures contract provides for the future sale
by one
party and
purchase by another party of a specified
quantity of a
foreign
currency at a specified price and time.
An option on a foreign currency futures
contract
gives the
holder the right, in return for the premium
paid, to
assume a
long position (call) or short position (put)
in a
futures
contract at a specified exercise price at any
time
during the
period of the option. Upon the exercise of a
call
option, the
holder acquires a long position in the
futures contract
and the
writer is assigned the opposite short
position. In the
case of a
put option, the opposite is true.
A Fund may purchase call and put options
on
foreign
currencies as a hedge against changes in the
value of
the U.S.
dollar (or another currency) in relation to a
foreign
currency in
which portfolio securities of the Fund may be
denominated. A
call option on a foreign currency gives the
buyer the
right to
buy, and a put option the right to sell, a
certain
amount of
foreign currency at a specified price during
a fixed
period of
time. A Fund may invest in options on
foreign currency
which are
either listed on a domestic securities
exchange or
traded on a
recognized foreign exchange.
In those situations where foreign
currency options
may not
be readily purchased (or where such options
may be
deemed
illiquid) in the currency in which the hedge
is
desired, the
hedge may be obtained by purchasing an option
on a
"surrogate"
currency, i.e., a currency where there is
tangible
evidence of a
direct correlation in the trading value of
the two
currencies. A
surrogate currency's exchange rate movements
parallel
that of the
primary currency. Surrogate currencies are
used to
hedge an
illiquid currency risk, when no liquid hedge
instruments exist in
world currency markets for the primary
currency.
A Fund will only enter into futures
contracts and
futures
options which are standardized and traded on
a U.S. or
foreign
exchange, board of trade, or similar entity
or quoted
on an
automated quotation system. A Fund will not
enter into
a futures
contract or purchase an option thereon if,
immediately
thereafter, the aggregate initial margin
deposits for
futures
contracts held by the Fund plus premiums paid
by it for
open
futures option positions, less the amount by
which any
such
positions are "in-the-money," would exceed 5%
of the
liquidation
value of that Fund's portfolio (or the Fund's
net asset
value),
after taking into account unrealized profits
and
unrealized
losses on any such contracts the Fund has
entered into.
A call
option is "in-the-money" if the value of the
futures
contract
that is the subject of the option exceeds the
exercise
price. A
put option is "in the money" if the exercise
price
exceeds the
value of the futures contract that is the
subject of
the option.
For additional information about margin
deposits
required with
respect to futures contracts and options
thereon, see
"Futures
Contracts and Options on Futures Contracts."
RISKS ASSOCIATED WITH FUTURES AND
RELATED OPTIONS.
There
are several risks associated with the use of
futures
contracts
and futures options as hedging techniques. A
purchase
or sale of
a futures contract may result in losses in
excess of
the amount
invested in the futures contract. There can
be no
guarantee that
there will be a correlation between price
movements in
the
hedging vehicle and in a Fund's portfolio
securities
being
hedged. In addition, there are significant
differences
between
the securities and futures markets that could
result in
an
imperfect correlation between the markets,
causing a
given hedge
not to achieve its objectives. The degree of
imperfection of
correlation depends on circumstances such as
variations
in
speculative market demand for futures and
futures
options on
securities, including technical influences in
futures
trading and
futures options, and differences between the
financial
instruments being hedged and the instruments
underlying
the
standard contracts available for trading in
such
respects as
interest rate levels, maturities, and
creditworthiness
of
issuers. A decision as to whether, when and
how to
hedge
involves the exercise of skill and judgment,
and even a
well-
conceived hedge may be unsuccessful to some
degree
because of
market behavior or unexpected interest rate
trends.
Futures exchanges may limit the amount
of
fluctuation
permitted in certain futures contract prices
during a
single
trading day. The daily limit establishes the
maximum
amount that
the price of a futures contract may vary
either up or
down from
the previous day's settlement price at the
end of the
current
trading session. Once the daily limit has
been reached
in a
futures contract subject to the limit, no
more trades
may be made
on that day at a price beyond that limit.
The daily
limit
governs only price movements during a
particular
trading day and
therefore does not limit potential losses
because the
limit may
work to prevent the liquidation of
unfavorable
positions. For
example, futures prices have occasionally
moved to the
daily
limit for several consecutive trading days
with little
or no
trading, thereby preventing prompt
liquidation of
positions and
subjecting some holders of futures contracts
to
substantial
losses.
There can be no assurance that a liquid
market
will exist at
a time when a Fund seeks to close out a
futures or a
futures
option position, and the Fund would remain
obligated to
meet
margin requirements until the position is
closed. In
addition,
there can be no assurance that an active
secondary
market will
continue to exist.
Currency futures contracts and options
thereon may
be traded
on foreign exchanges. Such transactions may
not be
regulated as
effectively as similar transactions in the
United
States; may not
involve a clearing mechanism and related
guarantees;
and are
subject to the risk of governmental actions
affecting
trading in,
or the prices of, foreign securities. The
value of
such position
also could be adversely affected by (i) other
complex
foreign
political, legal and economic factors, (ii)
lesser
availability
than in the United States of data on which to
make
trading
decisions, (iii) delays in a Fund's ability
to act upon
economic
events occurring in foreign markets during
non business
hours in
the United States, (iv) the imposition of
different
exercise and
settlement terms and procedures and margin
requirements
than in
the United States, and (v) lesser trading
volume.
SECURITIES INDEX FUTURES CONTRACTS
A Fund may enter into securities index
futures
contracts as
an efficient means of regulating the Fund's
exposure to
the
equity markets. An index futures contract is
a
contract to buy
or sell units of an index at a specified
future date at
a price
agreed upon when the contract is made.
Entering into a
contract
to buy units of an index is commonly referred
to as
purchasing a
contract or holding a long position in the
index.
Entering into
a contract to sell units of an index is
commonly
referred to as
selling a contract or holding a short
position. The
value of a
unit is the current value of the stock index.
For
example, the
S&P 500 Index is composed of 500 selected
common
stocks, most of
which are listed on the New York Stock
Exchange (the
"Exchange").
The S&P 500 Index assigns relative weightings
to the
500 common
stocks included in the Index, and the Index
fluctuates
with
changes in the market values of the shares of
those
common
stocks. In the case of the S&P 500 Index,
contracts
are to buy
or sell 500 units. Thus, if the value of the
S&P 500
Index were
$150, one contract would be worth $75,000
(500 units x
$150).
The index futures contract specifies that no
delivery
of the
actual securities making up the index will
take place.
Instead,
settlement in cash must occur upon the
termination of
the
contract, with the settlement being the
difference
between the
contract price and the actual level of the
stock index
at the
expiration of the contract. For example, if
a Fund
enters into a
futures contract to buy 500 units of the S&P
500 Index
at a
specified future date at a contract price of
$150 and
the S&P 500
Index is at $154 on that future date, a Fund
will gain
$2,000
(500 units x gain of $4). If a Fund enters
into a
futures
contract to sell 500 units of the stock index
at a
specified
future date at a contract price of $150 and
the S&P 500
Index is
at $154 on that future date, the Fund will
lose $2,000
(500 units
x loss of $4).
RISKS OF SECURITIES INDEX FUTURES. A
Fund's
success in
using hedging techniques depends, among other
things,
on IMI's
ability to predict correctly the direction
and
volatility of
price movements in the futures and options
markets as
well as in
the securities markets and to select the
proper type,
time and
duration of hedges. The skills necessary for
successful use of
hedges are different from those used in the
selection
of
individual stocks.
A Fund's ability to hedge effectively
all or a
portion of
its securities through transactions in index
futures
(and
therefore the extent of its gain or loss on
such
transactions)
depends on the degree to which price
movements in the
underlying
index correlate with price movements in the
Fund's
securities.
Inasmuch as such securities will not
duplicate the
components of
an index, the correlation probably will not
be perfect.
Consequently, a Fund will bear the risk that
the prices
of the
securities being hedged will not move in the
same
amount as the
hedging instrument. This risk will increase
as the
composition
of a Fund's portfolio diverges from the
composition of
the
hedging instrument.
Although a Fund intends to establish
positions in
these
instruments only when there appears to be an
active
market, there
is no assurance that a liquid market will
exist at a
time when
the Fund seeks to close a particular option
or futures
position.
Trading could be interrupted, for example,
because of
supply and
demand imbalances arising from a lack of
either buyers
or
sellers. In addition, the futures exchanges
may
suspend trading
after the price has risen or fallen more than
the
maximum amount
specified by the exchange. In some cases, a
Fund may
experience
losses as a result of its inability to close
out a
position, and
it may have to liquidate other investments to
meet its
cash
needs.
Although some index futures contracts
call for
making or
taking delivery of the underlying securities,
generally
these
obligations are closed out prior to delivery
by
offsetting
purchases or sales of matching futures
contracts (same
exchange,
underlying security or index, and delivery
month). If
an
offsetting purchase price is less than the
original
sale price, a
Fund generally realizes a capital gain, or if
it is
more, the
Fund generally realizes a capital loss.
Conversely, if
an
offsetting sale price is more than the
original
purchase price, a
Fund generally realizes a capital gain, or if
it is
less, the
Fund generally realizes a capital loss. The
transaction costs
must also be included in these calculations.
A Fund will only enter into index
futures
contracts or
futures options that are standardized and
traded on a
U.S. or
foreign exchange or board of trade, or
similar entity,
or quoted
on an automated quotation system. A Fund
will use
futures
contracts and related options only for "bona
fide
hedging"
purposes, as such term is defined in
applicable
regulations of
the CFTC.
When purchasing an index futures
contract, a Fund
will
maintain with its custodian (and
mark-to-market on a
daily basis)
cash, U.S. Government securities, or other
highly
liquid debt
securities that, when added to the amounts
deposited
with a
futures commission merchant ("FCM") as
margin, are
equal to the
market value of the futures contract.
Alternatively, a
Fund may
"cover" its position by purchasing a put
option on the
same
futures contract with a strike price as high
as or
higher than
the price of the contract held by a Fund.
When selling an index futures contract,
a Fund
will maintain
with its custodian (and mark-to-market on a
daily
basis) liquid
assets that, when added to the amounts
deposited with
an FCM as
margin, are equal to the market value of the
instruments
underlying the contract. Alternatively, a
Fund may
"cover" its
position by owning the instruments underlying
the
contract (or,
in the case of an index futures contract, a
portfolio
with a
volatility substantially similar to that of
the index
on which
the futures contract is based), or by holding
a call
option
permitting a Fund to purchase the same
futures contract
at a
price no higher than the price of the
contract written
by the
Fund (or at a higher price if the difference
is
maintained in
liquid assets with the Fund's custodian).
COMBINED TRANSACTIONS. A Fund may enter
into
multiple
transactions, including multiple options
transactions,
multiple
futures transactions, multiple currency
transactions
(including
forward currency contracts) and multiple
interest rate
transactions and any combination of futures,
options,
currency
and interest rate transactions ("component"
transactions),
instead of a single transaction, as part of a
single or
combined
strategy when, in the opinion of IMI, it is
in the best
interests
of a Fund to do so. A combined transaction
will
usually contain
elements of risk that are present in each of
its
component
transactions. Although combined transactions
are
normally
entered into based on IMI's judgment that the
combined
strategies
will reduce risk or otherwise more
effectively achieve
the
desired portfolio management goal, it is
possible that
the
combination will instead increase such risks
or hinder
achievement of the management objective.
INVESTMENT GRADE DEBT SECURITIES
Bonds rated Aaa by Moody's and AAA by
S&P are
judged to be
of the best quality (i.e., capacity to pay
interest and
repay
principal is extremely strong). Bonds rated
Aa/AA are
considered
to be of high quality (i.e., capacity to pay
interest
and repay
interest is very strong and differs from the
highest
rated issues
only to a small degree). Bonds rated A are
viewed as
having many
favorable investment attributes, but elements
may be
present that
suggest a susceptibility to the adverse
effects of
changes in
circumstances and economic conditions than
debt in
higher rated
categories. Bonds rated Baa/BBB (considered
by Moody's
to be
"medium grade" obligations) are considered to
have an
adequate
capacity to pay interest and repay principal,
but
certain
protective elements may be lacking (i.e.,
such bonds
lack
outstanding investment characteristics and
have some
speculative
characteristics).
HIGH YIELD BONDS
Ivy Bond Fund, Ivy Growth Fund and Ivy
Growth with
Income
Fund may invest in corporate debt securities
rated Ba
or lower by
Moody's, BB or lower by S&P. None of the
Funds will
invest in
securities that, at the time of investment,
are rated
lower than
C by either Moody's or S&P. Securities rated
Baa or
BBB (and
comparable unrated securities) are considered
by major
credit-
rating organizations to have speculative
elements as
well as
investment-grade characteristics. Securities
rated
lower than
Baa or BBB (and comparable unrated
securities) are
commonly
referred to as "high yield" or "junk" bonds
and are
considered to
be predominantly speculative with respect to
the
issuer's
continuing ability to meet principal and
interest
payments. The
lower the ratings of corporate debt
securities, the
more their
risks render them like equity securities.
(See
Appendix A for a
more complete description of the ratings
assigned by
Moody's and
S&P and their respective characteristics.)
While IMI may refer to ratings issued by
established credit
rating agencies, it is not IMI's policy to
rely
exclusively on
such ratings, but rather to supplement such
ratings
with its own
independent and ongoing review of credit
quality. A
Fund's
achievement of its investment objective may,
to the
extent of its
investment in high yield bonds, be more
dependent upon
IMI's
credit analysis than would be the case if the
Funds
were
investing in higher quality bonds. Should
the rating
of a
portfolio security be downgraded, IMI will
determine
whether it
is in the relevant Fund's best interest to
retain or
dispose of
the security. However, should any individual
bond held
by a Fund
be downgraded below a rating of C, IMI
currently
intends to
dispose of such bond based on then existing
market
conditions.
The secondary market on which high yield
bonds are
traded
may be less liquid than the market for higher
grade
bonds. Less
liquidity in the secondary trading market
could
adversely affect
the price at which a Fund could sell a high
yield bond,
and could
adversely affect and cause large fluctuations
in the
daily net
asset value of each the Fund's shares.
Adverse
publicity and
investor perceptions, whether or not based on
fundamental
analysis, may decrease the value and
liquidity of high
yield
bonds, especially in a thinly traded market.
When
secondary
markets for high yield securities are less
liquid than
the
markets for higher grade securities, it may
be more
difficult to
value the securities because such valuation
may require
more
research, and elements of judgment may play a
greater
role in the
valuation because there is less reliable,
objective
data
available.
Furthermore, prices for high yield bonds
may be
affected by
legislative and regulatory developments. For
example,
federal
rules require savings and loan institutions
to reduce
gradually
their holdings of this type of security.
INVESTMENT RESTRICTIONS
A Fund's investment objective, as set
forth in the
Prospectus under "Investment Objectives and
Policies,"
and the
investment restrictions set forth below are
fundamental
policies
of the Fund and may not be changed with
respect to that
Fund
without the approval of a majority (as
defined in the
1940 Act)
of the outstanding voting shares of that
Fund. Under
these
restrictions, each of Ivy Emerging Growth
Fund, Ivy
Growth Fund
and Ivy Growth with Income Fund may not:
(i) purchase or sell real estate
or
commodities and
commodity contracts;
(ii) purchase securities on margin;
(iii) sell securities short;
(iv) participate in an underwriting
or
selling group in
connection with the public
distribution
of
securities except for its own
capital
stock;
(v) purchase from or sell to any
of its
officers or
trustees, or firms of which
any of them
are
members or which they control,
any
securities
(other than capital stock of
the Fund),
but such
persons or firms may act as
brokers for
the Fund
for customary commissions to
the extent
permitted
by the Investment Company Act
of 1940;
(vi) make an investment in
securities of
companies in
any one industry (except
obligations of
domestic
banks or the U.S. Government,
its
agencies,
authorities, or
instrumentalities) if
such
investment would cause
investments in
such
industry to exceed 25% of the
market
value of the
Fund's total assets at the
time of such
investment;
(vii) issue senior securities,
except as
appropriate to
evidence indebtedness which it
is
permitted to
incur, and except to the
extent that
shares of the
separate classes or series of
the Trust
may be
deemed to be senior
securities; provided
that
collateral arrangements with
respect to
currency-
related contracts, futures
contracts,
options or
other permitted investments,
including
deposits of
initial and variation margin,
are not
considered
to be the issuance of senior
securities
for
purposes of this restriction;
(viii) lend any funds or other
assets, except
that this
restriction shall not prohibit
(a) the
entry into
repurchase agreement or (b)
the purchase
of
publicly distributed bonds,
debentures
and other
securities of a similar type,
or
privately placed
municipal or corporate bonds,
debentures
and other
securities of a type
customarily
purchased by
institutional investors or
publicly
traded in the
securities markets;
(ix) borrow money, except for
temporary
purposes where
investment transactions might
advantageously
require it. Any such loan may
not be
for a period
in excess of 60 days, and the
aggregate
amount of
all outstanding loans may not
at any
time exceed
10% of the value of the total
assets of
the Fund
at the time any such loan is
made.
Under the 1940 Act, a Fund is permitted,
subject
to each
Fund's investment restrictions, to borrow
money only
from banks.
The Trust has no current intention of
borrowing amounts
in excess
of 5% of each the Fund's assets. Each of Ivy
Emerging
Growth
Fund, Ivy Growth Fund and Ivy Growth with
Income Fund
will
continue to interpret fundamental investment
restriction (i)
above to prohibit investment in real estate
limited
partnership
interests; this restriction shall not,
however,
prohibit
investment in readily marketable securities
of
companies that
invest in real estate or interests therein,
including
REITs.
Further, as a matter of fundamental policy,
each of Ivy
Growth
Fund and Ivy Growth with Income Fund may not:
(i) invest more than 5% of the
value of its
total
assets in the securities of
any one
issuer (except
obligations of domestic banks
or the
U.S.
Government, its agencies,
authorities
and
instrumentalities);
(ii) purchase the securities of any
other
open-end
investment company, except as
part of a
plan of
merger or consolidation; or
(iii) hold more than 10% of the
voting
securities of any
one issuer (except obligations
of
domestic banks
or the U.S. Government, its
agencies,
authorities
and instrumentalities).
Further, as a matter of fundamental policy,
each of Ivy
Bond Fund
and Ivy Emerging Growth Fund may not:
(i) purchase securities of any one
issuer
(except U.S.
Government securities) if as a
result
more than 5%
of the Fund's total assets
would be
invested in
such issuer or the Fund would
own or
hold more
than 10% of the outstanding
voting
securities of
that issuer; provided,
however, that up
to 25% of
the value of the Fund's total
assets may
be
invested without regard to
these
limitations.
Further, as a matter of fundamental policy,
Ivy Bond
Fund may
not:
(i) Make investments in securities
for the
purpose of
exercising control over or
management of
the
issuer;
(ii) Borrow amounts in excess of
10% of its
total
assets, taken at the lower of
cost or
market
value, and then only from
banks as a
temporary
measure for extraordinary or
emergency
purposes.
(iii) Purchase the securities of
issuers
conducting
their principal business
activities in
the same
industry if immediately after
such
purchase the
value of the Fund's
investments in such
industry
would exceed 25% of the value
of the
total assets
of the Fund;
(iv) Act as an underwriter of
securities;
(v) Issue senior securities,
except insofar
as the
Fund may be deemed to have
issued a
senior
security in connection with
any
repurchase
agreement or any permitted
borrowing.
(vi) Invest in real estate, real
estate
mortgage loans,
commodities, commodity futures
contracts
or
interests in oil, gas and/or
mineral
exploration
or development programs,
although a Fund
may
purchase and sell (a)
securities which
are secured
by real estate, (b) securities
of
issuers which
invest or deal in real estate,
and (c)
futures
contracts as described in a
Fund's
Prospectus;
(vii) Participate on a joint or a
joint and
several
basis in any trading account
in
securities. The
"bunching" of orders of the
Fund--or of
the Fund
and of other accounts under
the
investment
management of the persons
rendering
investment
advice to the Fund--for the
sale or
purchase of
portfolio securities shall not
be
considered
participation in a joint
securities
trading
account;
(viii) Purchase securities on margin,
except
such short-
term credits as are necessary
for the
clearance of
transactions. The deposit or
payment by
a Fund of
initial or variation margin in
connection with
futures contracts or related
options
transactions
is not considered the purchase
of a
security on
margin;
(ix) Make loans, except that this
restriction
shall not
prohibit (a) the purchase and
holding of
a portion
of an issue of publicly
distributed debt
securities, (b) the lending of
portfolio
securities (provided that the
loan is
secured
continuously by collateral
consisting of
U.S.
Government securities or cash
or cash
equivalents
maintained on daily
marked-to-market
basis in an
amount at least equal to the
current
market value
of the securities loaned), or
(c) entry
into
repurchase agreements with
banks or
broker-
dealers;
(x) Mortgage, pledge, hypothecate
or in any
manner
transfer, as security for
indebtedness,
any
securities owned or held by
the Fund
(except as
may be necessary in connection
with
permitted
borrowings and then not in
excess of 20%
of the
Fund's total assets);
provided, however,
this does
not prohibit escrow,
collateral or
margin
arrangements in connection
with its use
of
options, short sales, futures
contracts
and
options on future contracts;
or
(xi) Make short sales of securities
or
maintain a short
position.
ADDITIONAL RESTRICTIONS
Unless otherwise indicated, each Fund
has adopted
the
following additional restrictions, which are
not
fundamental and
which may be changed without shareholder
approval, to
the extent
permitted by applicable law, regulation or
regulatory
policy.
Under these restrictions, each Fund may not:
(i) purchase any security if, as a
result,
the Fund
would then have more than 5%
of its
total assets
(taken at current value)
invested in
securities of
companies (including
predecessors) less
than three
years old.
Further, as a matter of non-fundamental
policy, each of
Ivy
Emerging Growth Fund, Ivy Growth Fund and Ivy
Growth
with Income
Fund may not:
(i) invest in oil, gas or other
mineral
leases or
exploration or development
programs;
(ii) engage in the purchase and
sale of puts,
calls,
straddles or spreads (except
to the
extent
described in the Prospectus
and in this
SAI);
(iii) invest in companies for the
purpose of
exercising
control of management; or
(iv) invest more than 5% of its
total assets
in
warrants, valued at the lower
of cost or
market,
or more than 2% of its total
assets in
warrants,
so valued, which are not
listed on
either the New
York or American Stock
Exchanges.
Further, as a matter of non-fundamental
policy, each of
Ivy Bond
Fund, Ivy Emerging Growth Fund and Ivy Growth
with
Income Fund
may not:
(i) purchase or retain securities
of any
company if
officers and Trustees of the
Trust and
officers
and directors of Ivy
Management, Inc.
(the
Manager, with respect to Ivy
Bond Fund),
MIMI or
Mackenzie Financial
Corporation who
individually
own more than 1/2 of 1% of the
securities of that
company together own
beneficially more
than 5% of
such securities.
Further, as a matter of non-fundamental
policy, each of
Ivy
Growth Fund and Ivy Growth with Income Fund
may not:
(i) invest more than 5% of the
value of its
total
assets in the securities of
issuers
which are not
readily marketable.
Further, as a matter of non-fundamental
policy, each of
Ivy Bond
Fund and Ivy Emerging Growth Fund may not:
(i) invest more than 10% of its
net assets
taken at
market value at the time of
investment
in
"illiquid securities."
Illiquid
securities may
include securities subject to
legal or
contractual
restrictions on resale
(including
private
placements), repurchase
agreements
maturing in
more than seven days, certain
options
traded over
the counter that the Fund has
purchased,
securities being used to cover
certain
options
that a fund has written,
securities for
which
market quotations are not
readily
available, or
other securities which legally
or in
IMI's
opinion, subject to the
Board's
supervision, may
be deemed illiquid, but shall
not
include any
instrument that, due to the
existence of
a trading
market, to the Fund's
compliance with
certain
conditions intended to provide
liquidity, or to
other factors, is liquid.
Further, as a matter of non-fundamental
policy, Ivy
Emerging
Growth Fund may not:
(i) purchase securities of other
investment
companies,
except in connection with a
merger,
consolidation
or sale of assets, and except
that it
may purchase
shares of other investment
companies
subject to
such restrictions as may be
imposed by
the 1940
Act and rules thereunder or by
any state
in which
its shares are registered.
Further, as a matter of non-fundamental
policy, Ivy
Bond Fund may
not:
(i) purchase or sell real estate
limited
partnership
interests; or
(ii) purchase or sell interests in
oil, gas
or mineral
leases (other than securities
of
companies that
invest in or sponsor such
programs).
In addition to the above restrictions,
so long as
it remains
a policy of the California Department of
Corporations,
each of
Ivy Emerging Growth Fund, Ivy Growth Fund and
Ivy
Growth with
Income Fund may not purchase and sell OTC
options on
stock
indices unless (a) exchange-traded options
are not
available, (b)
an active OTC market exists that establishes
pricing
and
liquidity, and (c) the broker-dealers with
whom each
Fund enters
into such transactions have a minimum net
worth of $20
million.
Moreover, so long as it remains a restriction
of the
Ohio
Division of Securities, Ivy Bond Fund will
treat
securities
eligible for resale under Rule 144A of the
Securities
Act of 1933
as subject to the Fund's restriction on
investing in
restricted
securities, unless the Board determines that
such
securities are
liquid. Further, with respect to the
nonfundamental
investment
restrictions for Ivy Bond Fund relating to
investing in
the
securities of unseasoned issuers, purchasing
the
securities of
other investment companies and investing in
illiquid
securities,
the Fund will notify shareholders 30 days
before
changing its
investment policies with respect to any of
the
investment
practices described therein.
In addition, as a matter of
nonfundamental policy,
each Fund
may not purchase securities of any open-end
investment
company,
or securities of closed-end companies, except
by
purchase in the
open market where no commission or profit to
a sponsor
or dealer
results from such purchases, or except when
such
purchase is part
of a merger, consolidation, reorganization or
sale of
assets, and
except that the Fund may purchase shares of
other
investment
companies subject to such restrictions as may
be
imposed by the
1940 Act and rules thereunder or by any state
in which
shares of
the Fund are registered.
Whenever an investment objective, policy
or
restriction set
forth in the Prospectus or this SAI states a
maximum
percentage
of assets that may be invested in any
security or other
asset or
describes a policy regarding quality
standards, such
percentage
limitation or standard shall, unless
otherwise
indicated, apply
to a Fund only at the time a transaction is
entered
into.
Accordingly, if a percentage limitation is
adhered to
at the time
of investment, a later increase or decrease
in the
percentage
which results from circumstances not
involving any
affirmative
action by a Fund, such as a change in market
conditions
or a
change in the Fund's asset level or other
circumstances
beyond
that Fund's control, will not be considered a
violation.
ADDITIONAL RIGHTS AND
PRIVILEGES
The Trust offers to investors, and
(except as
noted below)
bears the cost of providing, the following
rights and
privileges.
The Trust reserves the right to amend or
terminate any
one or
more of such rights and privileges. Notice
of
amendments to or
terminations of rights and privileges will be
provided
to
shareholders in accordance with applicable
law.
Certain of the rights and privileges
described
below
reference other funds distributed by Ivy
Mackenzie
Distributors,
Inc. ("IMDI")(formerly known as Mackenzie Ivy
Funds
Distribution,
Inc.), which funds are not described in this
SAI.
These funds
are: Ivy Canada Fund, Ivy China Region Fund,
Ivy
Global Fund,
Ivy International Fund, Ivy Latin America
Strategy
Fund, Ivy New
Century Fund, Ivy International Bond Fund,
Ivy
Short-Term Bond
Fund and Ivy Money Market Fund, the other
nine series
of the
Trust; and Mackenzie California Municipal
Fund,
Mackenzie Florida
Limited Term Municipal Fund, Mackenzie
Limited Term
Municipal
Fund, Mackenzie National Municipal Fund and
Mackenzie
New York
Municipal Fund, the five series of Mackenzie
Series
Trust
(collectively, with the Funds, the "Ivy
Mackenzie
Funds").
Investors should obtain a current prospectus
before
exercising
any right or privilege that may relate to
these funds.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method is
available for
all classes
of shares, except Class I. The minimum
initial and
subsequent
investment pursuant to this plan is $50 per
month,
except in the
case of a tax qualified retirement plan for
which the
minimum
initial and subsequent investment is $25 per
month.
The
Automatic Investment Method may be
discontinued at any
time upon
receipt by The Ivy Mackenzie Services Corp.
("IMSC")
(formerly of
telephone instructions or written notice to
IMSC from
the
investor. See "Automatic Investment Method"
in the
Account
Application.
EXCHANGE OF SHARES
As described in the Prospectus,
shareholders of
each Fund
have an exchange privilege with certain other
Ivy and
Mackenzie
Funds. Before effecting an exchange,
shareholders of
each Fund
should obtain and read the currently
effective
prospectus for the
Ivy or Mackenzie Fund into which the exchange
is to be
made.
INITIAL SALES CHARGE SHARES. Class A
shareholders
may
exchange their Class A shares ("outstanding
Class A
shares") for
Class A shares of another Ivy or Mackenzie
Fund (or for
shares of
another Ivy or Mackenzie Fund that currently
offers
only a single
class of shares) ("new Class A Shares") on
the basis of
the
relative net asset value per Class A share,
plus an
amount equal
to the difference, if any, between the sales
charge
previously
paid on the outstanding Class A shares and
the sales
charge
payable at the time of the exchange on the
new Class A
shares.
(The additional sales charge will be waived
for
outstanding
Class A shares that have been invested for a
period of
12 months
or longer.) Class A shareholders may also
exchange
their Class A
shares for Class A shares of Ivy Money Market
Fund (no
initial
sales charge will be assessed at the time of
such an
exchange).
CONTINGENT DEFERRED SALES CHARGE SHARES.
CLASS A:
Class A
shareholders may exchange their Class A
shares that are
subject
to a contingent deferred sales charge
("CDSC"), as
described in
the Prospectus ("outstanding Class A
shares"), for
Class A shares
of another Ivy or Mackenzie Fund (or for
shares of
another Ivy or
Mackenzie Fund that currently offers only a
single
class of
shares) ("new Class A shares") on the basis
of the
relative net
asset value per Class A share, without the
payment of
any CDSC
that would otherwise be due upon the
redemption of the
outstanding Class A shares. Class A
shareholders of a
Fund
exercising the exchange privilege will
continue to be
subject to
that Fund's CDSC period following an exchange
if such
period is
longer than the CDSC period, if any,
applicable to the
new
Class A shares.
For purposes of computing the CDSC that
may be
payable upon
the redemption of the new Class A shares, the
holding
period of
the outstanding Class A shares is "tacked"
onto the
holding
period of the new Class A shares.
CLASS B SHARES: Class B shareholders
may exchange
their
Class B shares ("outstanding Class B shares")
for Class
B shares
of another Ivy or Mackenzie Fund ("new Class
B shares")
on the
basis of the relative net asset value per
Class B
share, without
the payment of any CDSC that would otherwise
be due
upon the
redemption of the outstanding Class B shares.
Class B
shareholders of a Fund exercising the
exchange
privilege will
continue to be subject to that Fund's CDSC
schedule (or
period)
following an exchange if such schedule is
higher (or
such period
is longer) than the CDSC schedule (or period)
applicable to the
new Class B shares.
Class B shares of a Fund acquired
through an
exchange of
Class B shares of another Ivy or Mackenzie
Fund will be
subject
to that Fund's CDSC schedule (or period) if
such
schedule is
higher (or such period is longer) than the
CDSC
schedule (or
period) applicable to the Ivy or Mackenzie
Fund from
which the
exchange was made.
For purposes of both the conversion
feature and
computing
the CDSC that may be payable upon the
redemption of the
new
Class B shares (prior to conversion), the
holding
period of the
outstanding Class B shares is "tacked" onto
the holding
period of
the new Class B shares.
The following CDSC table ("Table 1")
applies to
Class B
shares of Ivy Global Fund, Ivy Growth Fund,
Ivy Growth
with
Income Fund, Ivy Emerging Growth Fund, Ivy
International Fund,
Ivy China Region Fund, Ivy Latin America
Strategy Fund,
Ivy New
Century Fund, Ivy International Bond Fund,
Ivy Bond
Fund, Ivy
Canada Fund, Mackenzie California Municipal
Fund,
Mackenzie
National Municipal Fund, Mackenzie New York
Municipal
Fund
("Table 1 Funds"):
CONTINGENT
DEFERRED
SALES
CHARGE AS
A
PERCENTAGE OF
DOLLAR
AMOUNT
SUBJECT TO
YEAR SINCE PURCHASE CHARGE
First
5%
Second
4%
Third
3%
Fourth
3%
Fifth
2%
Sixth
1%
Seventh and thereafter
0%
The following CDSC table ("Table 2")
applies to
Class B
shares of Ivy Short-Term Bond Fund, Mackenzie
Florida
Limited
Term Municipal Fund and Mackenzie Limited
Term
Municipal Fund
("Table 2 Funds"):
CONTINGENT
DEFERRED
SALES
CHARGE AS
A
PERCENTAGE OF
DOLLAR
AMOUNT
SUBJECT TO
YEAR SINCE PURCHASE CHARGE
First
3%
Second
2.5%
Third
2%
Fourth
1.5%
Fifth
1%
Sixth and thereafter
0%
The CDSC schedule for Table 1 Funds is
higher (and
the
period is longer) than the CDSC schedule (and
period)
for Table 2
Funds.
If a shareholder exchanges Class B
shares of a
Table 1 Fund
for Class B shares of a Table 2 Fund, Table 1
will
continue to
apply to the Class B shares following the
exchange.
For example,
an investor may decide to exchange Class B
shares of a
Table 1
Fund ("outstanding Class B shares") for Class
B shares
of a Table
2 Fund ("new Class B shares") after having
held the
outstanding
Class B shares for two years. The 4% CDSC
that
generally would
apply to a redemption of outstanding Class B
shares
held for two
years would not be deducted at the time of
the
exchange. If,
three years later, the investor redeems the
new Class B
shares, a
2% CDSC will be assessed upon the redemption
because by
"tacking"
the two year holding period of the
outstanding Class B
shares
onto the three year holding period of the new
Class B
shares, the
investor will be deemed to have held the new
Class B
shares for
five years.
If a shareholder exchanges Class B
shares of a
Table 2 Fund
for Class B shares of a Table 1 Fund, Table 1
will
apply to the
Class B shares following the exchange. For
example, an
investor
may decide to exchange Class B shares of a
Table 2 Fund
("outstanding Class B shares") for Class B
shares of a
Table 1
Fund ("new Class B shares") after having held
the
outstanding
Class B shares for two years. The 2.5% CDSC
that
generally would
apply to a redemption of outstanding Class B
shares
held for two
years would not be deducted at the time of
the
exchange. If,
three years later, the investor redeems the
new Class B
shares, a
2% CDSC will be assessed upon the redemption
because by
"tacking"
the two year holding period of the
outstanding Class B
shares
onto the three year holding period of the new
Class B
shares, the
investor will be deemed to have held the new
Class B
shares for
five years.
CLASS C SHARES. Class C shareholders
may exchange
their
Class C shares ("outstanding Class C shares")
for Class
C shares
of another Ivy or Mackenzie Fund ("new Class
C shares")
on the
basis of the relative net asset value per
Class C
share, without
the payment of any CDSC that would otherwise
be due
upon
redemption. (Class C shares are subject to a
CDSC of
1% if
redeemed within one year of the date of
purchase.)
CLASS I SHARES. Class I shareholders
may exchange
their
Class I shares for Class I shares of another
Ivy or
Mackenzie
Fund on the basis of the relative net asset
value per
Class I
share.
The minimum amount which may be
exchanged into a
fund of the
Ivy Mackenzie Funds in which shares are not
already
held is
$1,000 ($5,000,000 in the case of Class I of
a Fund).
No
exchange out of a Fund (other than by a
complete
exchange of all
the shares of the Fund) may be made if it
would reduce
the
shareholder's interest in that Fund to less
than $1,000
($5,000,000 in the case of Class I of a
Fund).
Exchanges are
available only in states where the exchange
can be
legally made.
Each exchange will be made on the basis
of the
relative net
asset values per share of each fund of the
Ivy
Mackenzie Funds
next computed following receipt of telephone
instructions by IMSC
or a properly executed request by IMSC.
Exchanges,
whether
written or telephonic, must be received by
IMSC by the
close of
regular trading on the Exchange (normally
4:00 p.m.,
eastern
time) to receive the price computed on the
day of
receipt;
exchange requests received after that time
will receive
the price
next determined following receipt of the
request. This
exchange
privilege may be modified or terminated at
any time,
upon at
least 60 days' notice when such noticed is
required by
SEC rules.
See "Redemptions."
An exchange of shares in any fund of the
Ivy
Mackenzie Funds
for shares in another fund will result in a
taxable
gain or loss.
Generally, any such taxable gain or loss will
be a
capital gain
or loss (long-term or short-term, depending
on the
holding period
of the shares) in the amount of the
difference between
the net
asset value of the shares surrendered and the
shareholder's tax
basis for those shares. However, in certain
circumstances,
shareholders will be ineligible to take sales
charges
into
account in computing taxable gain or loss on
an
exchange. See
"Taxation."
With limited exceptions, gain realized
by a
tax-deferred
retirement plan will not be taxable to the
plan and
will not be
taxed to the participant until distribution.
Each
investor
should consult his or her tax adviser
regarding the tax
consequences of an exchange transaction.
LETTER OF INTENT
Reduced sales charges apply to initial
investments
in
Class A shares of each Fund made pursuant to
a
non-binding Letter
of Intent. A Letter of Intent may be
submitted by an
individual,
his or her spouse and children under the age
of 21, or
a trustee
or other fiduciary of a single trust estate
or single
fiduciary
account. See the Account Application in the
Prospectus. Any
investor may submit a Letter of Intent
stating that he
or she
will invest, over a period of 13 months, at
least
$50,000
($100,000 for Ivy Bond Fund) in Class A
shares of a
Fund. A
Letter of Intent may be submitted at the time
of an
initial
purchase of Class A shares of a Fund or
within 90 days
of the
initial purchase, in which case the Letter of
Intent
will be back
dated. A shareholder may include the value
(at the
applicable
offering price) of all Class A shares of Ivy
Global
Fund, Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
Emerging
Growth
Fund, Ivy International Bond Fund, Ivy
Short-Term Bond
Fund, Ivy
Bond Fund, Mackenzie National Municipal Fund,
Mackenzie
Florida
Limited Term Municipal Fund, Mackenzie
Limited Term
Municipal
Fund, Mackenzie California Municipal Fund and
Mackenzie
New York
Municipal Fund (and shares that have been
exchanged
into Ivy
Money Market Fund from any of the other funds
in the
Ivy
Mackenzie Funds) held of record by him or her
as of the
date of
his or her Letter of Intent as an
accumulation credit
toward the
completion of such Letter. During the term
of the
Letter of
Intent, the Transfer Agent will hold Class A
shares
representing
5% of the indicated amount (less any
accumulation
credit value)
in escrow. The escrowed Class A shares will
be
released when the
full indicated amount has been purchased. If
the full
indicated
amount is not purchased during the term of
the Letter
of Intent,
the investor is required to pay IMDI an
amount equal to
the
difference between the dollar amount of sales
charge
that he or
she has paid and that which he or she would
have paid
on his or
her aggregate purchases if the total of such
purchases
had been
made at a single time. Such payment will be
made by an
automatic
liquidation of Class A shares in the escrow
account. A
Letter of
Intent does not obligate the investor to buy
or the
Trust to sell
the indicated amount of Class A shares, and
the
investor should
read carefully all the provisions thereof
before
signing.
RETIREMENT PLANS
Shares may be purchased in connection
with several
types of
tax-deferred retirement plans. Shares of
more than one
fund
distributed by IMDI may be purchased in a
single
application
establishing a single plan account, and
shares held in
such an
account may be exchanged among the funds in
the Ivy
Mackenzie
Funds in accordance with the terms of the
applicable
plan and the
exchange privilege available to all
shareholders.
Initial and
subsequent purchase payments in connection
with
tax-deferred
retirement plans must be at least $25 per
participant.
The following fees will be charged to
individual
shareholder
accounts as described in the retirement
prototype plan
document:
Retirement Plan New Account Fee
no fee
Retirement Plan Annual Maintenance Fee
$10.00
per account
For shareholders whose retirement accounts
are
diversified across
several funds of the Ivy Mackenzie Funds, the
annual
maintenance
fee will be limited to not more than $20.
The following discussion describes the
tax
treatment of
certain tax-deferred retirement plans under
current
Federal
income tax law. State income tax
consequences may
vary. An
individual considering the establishment of a
retirement plan
should consult with an attorney and/or an
accountant
with respect
to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares
of the
Trust may be
used as a funding medium for an Individual
Retirement
Account
("IRA"). Eligible individuals may establish
an IRA by
adopting a
model custodial account available from IMSC,
who may
impose a
charge for establishing the account.
Individuals
should consult
their tax advisers before investing IRA
assets in a
Fund that
primarily distributes exempt-interest
dividends.
An individual who has not reached age
70-1/2 and
who
receives compensation or earned income is
eligible to
contribute
to an IRA, whether or not he or she is an
active
participant in a
retirement plan. An individual who receives
a
distribution from
another IRA, a qualified retirement plan, a
qualified
annuity
plan or a tax-sheltered annuity or custodial
account
("403(b)
plan") that qualifies for "rollover"
treatment is also
eligible
to establish an IRA by rolling over the
distribution
either
directly or within 60 days after its receipt.
Tax
advice should
be obtained in connection with planning a
rollover
contribution
to an IRA.
In general, an eligible individual may
contribute
up to the
lesser of $2,000 or 100% of his or her
compensation or
earned
income to an IRA each year. If a husband and
wife are
both
employed, and both are under age 70-1/2, each
may set
up his or
her own IRA within these limits. If both
earn at least
$2,000
per year, the maximum potential contribution
is $4,000
per year
for both. However, if one spouse has (or
elects to be
treated as
having) no earned income for IRA purposes for
a year,
the other
spouse may contribute to an IRA on his or her
behalf.
In such a
case, the working spouse may contribute up to
the
lesser of
$2,250 or 100% or his or her compensation or
earned
income for
the year to IRAs for both spouses, provided
that no
more than
$2,000 is contributed to the IRA of one
spouse.
Rollover
contributions are not subject to these
limits.
An individual may deduct his or her
annual
contributions to
an IRA in computing his or her Federal income
tax
within the
limits described above, provided he or she
(or his or
her spouse,
if they file a joint Federal income tax
return) is not
an active
participant in a qualified retirement plan
(such as a
qualified
corporate, sole proprietorship, or
partnership pension,
profit
sharing, 401(k) or stock bonus plan),
qualified annuity
plan,
403(b) plan, simplified employee pension, or
governmental plan.
If he or she (or his or her spouse) is an
active
participant, a
full deduction is only available if he or she
has
adjusted gross
income that is less than a specified level
($40,000 for
married
couples filing a joint return, $25,000 for
single
individuals,
and $0 for a married individual filing a
separate
return). The
deduction is phased out ratably for active
participants
with
adjusted gross income between certain levels
($40,000
and $50,000
for married individuals filing a joint
return, $25,000
and
$35,000 for single individuals, and $0 and
$10,000 for
married
individuals filing separate returns).
Individuals who
are active
participants with income above the specified
phase-out
level may
not deduct their IRA contributions. Rollover
contributions are
not includible in income for Federal income
tax
purposes and
therefore are not deductible from it.
Generally, earnings on an IRA are not
subject to
current
Federal income tax until distributed.
Distributions
attributable
to tax-deductible contributions and to IRA
earnings are
taxed as
ordinary income. Distributions of
non-deductible
contributions
are not subject to Federal income tax. In
general,
distributions
from an IRA to an individual before he or she
reaches
age 59-1/2
are subject to a nondeductible penalty tax
equal to 10%
of the
taxable amount of the distribution. The 10%
penalty
tax does not
apply to amounts withdrawn from an IRA after
the
individual
reaches age 59-1/2, becomes disabled or dies,
or if
withdrawn in
the form of substantially equal payments over
the life
or life
expectancy of the individual and his or her
designated
benefi-
ciary, if any, or rolled over into another
IRA.
Distributions
must begin to be withdrawn not later than
April 1 of
the calendar
year following the calendar year in which the
individual reaches
age 70-1/2. Failure to take certain minimum
required
distribu-
tions will result in the imposition of a 50%
non-deductible
penalty tax. Extremely large distributions
in any one
year from
an IRA (or from an IRA and other retirement
plans) may
also
result in a penalty tax.
QUALIFIED PLANS: For those
self-employed
individuals who
wish to purchase shares of one or more of the
funds in
the Ivy
Mackenzie Funds through a qualified
retirement plan, a
Custodial
Agreement and a Retirement Plan are available
from
IMSC. The
Retirement Plan may be adopted as a profit
sharing plan
or a
money purchase pension plan. A profit
sharing plan
permits an
annual contribution to be made in an amount
determined
each year
by the self-employed individual within
certain limits
prescribed
by law. A money purchase pension plan
requires annual
contributions at the level specified in the
Custodial
Agreement.
There is no set-up fee for qualified plans
and the
annual
maintenance fee is $20.00 per account.
In general, if a self-employed
individual has any
common law
employees, employees who have met certain
minimum age
and service
requirements must be covered by the
Retirement Plan. A
self-
employed individual generally must contribute
the same
percentage
of income for common law employees as for
himself or
herself.
A self-employed individual may
contribute up to
the lesser
of $30,000 or 25% of compensation or earned
income to a
money
purchase pension plan or to a combination
profit
sharing and
money purchase pension plan arrangement each
year on
behalf of
each participant. To be deductible, total
contributions to a
profit sharing plan generally may not exceed
15% of the
total
compensation or earned income of all
participants in
the plan,
and total contributions to a combination
money
purchase-profit
sharing arrangement generally may not exceed
25% of the
total
compensation or earned income of all
participants. The
amount of
compensation or earned income of any one
participant
that may be
included in computing the deduction is
limited
(generally to
$150,000 for benefits accruing in plan years
beginning
after
1993, with annual inflation adjustments). A
self-employed
individual's contributions to a retirement
plan on his
or her own
behalf must be deducted in computing his or
her earned
income.
Corporate employers may also adopt the
Custodial
Agreement
and Retirement Plan for the benefit of their
eligible
employees.
Similar contribution and deduction rules
apply to
corporate
employers.
Distributions from the Retirement Plan
generally
are made
after a participant's separation from
service. A 10%
penalty tax
generally applies to distributions to an
individual
before he or
she reaches age 59-1/2, unless the individual
(1) has
reached age
55 and separated from service; (2) dies; (3)
becomes
disabled;
(4) uses the withdrawal to pay tax-deductible
medical
expenses;
(5) takes the withdrawal as part of a series
of
substantially
equal payments over his or her life
expectancy or the
joint life
expectancy of himself or herself and a
designated
beneficiary; or
(6) rolls over the distribution.
The Transfer Agent will furnish
custodial services
to the
employer and any participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS
AND
CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT"): Section
403(b)(7)
of the
Code permits public school systems and
certain
charitable
organizations to use mutual fund shares held
in a
custodial
account to fund deferred compensation
arrangements with
their
employees. A custodial account agreement is
available
for those
employers whose employees wish to purchase
shares of
the Trust in
conjunction with such an arrangement. The
sales charge
for
purchases of less than $10,000 of Class A
shares is set
forth
under "Retirement Plans" in the Prospectus.
Sales
charges for
purchases of $10,000 or more of Class A
shares are the
same as
those set forth under "Initial Sales Charge
Alternative
--
Class A Shares" in the Prospectus. The
special
application for a
403(b)(7) Account is available from IMSC.
Distributions from the 403(b)(7) Account
may be
made only
following death, disability, separation from
service,
attainment
of age 59-1/2, or incurring a financial
hardship. A
10% penalty
tax generally applies to distributions to an
individual
before he
or she reaches age 59-1/2, unless the
individual (1)
has reached
age 55 and separated from service; (2) dies
or becomes
disabled;
(3) uses the withdrawal to pay tax-deductible
medical
expenses;
(4) takes the withdrawal as part of a series
of
substantially
equal payments over his or her life
expectancy or the
joint life
expectancy of himself or herself and a
designated
beneficiary; or
(5) rolls over the distribution. There is no
set-up
fee for
403(b)(7) Accounts and the annual maintenance
fee is
$20.00 per
account.
SIMPLIFIED EMPLOYEE PENSION ("SEP")
IRAS: An
employer may
deduct contributions to a SEP up to the
lesser of
$30,000 or 15%
of compensation. SEP accounts generally are
subject to
all rules
applicable to IRA accounts, except the
deduction
limits, and are
subject to certain employee participation
requirements.
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A
shares of a
Fund may
reinvest all or a part of the proceeds of the
redemption back
into Class A shares of the Fund at net asset
value
(without a
sales charge) within 60 days from the date of
redemption. This
privilege may be exercised only once. The
reinvestment
will be
made at the net asset value next determined
after
receipt by IMSC
of the reinvestment order accompanied by the
funds to
be
reinvested. No compensation will be paid to
any sales
personnel
or dealer in connection with the transaction.
Any redemption is a taxable event. A
loss
realized on a
redemption generally may be disallowed for
tax purposes
if the
reinvestment privilege is exercised within 30
days
after the
redemption. In certain circumstances,
shareholders
will be
ineligible to take sales charges into account
in
computing
taxable gain or loss on a redemption if the
reinvestment
privilege is exercised. See "Taxation."
RIGHTS OF ACCUMULATION
A scale of reduced sales charges applies
to any
investment
of $50,000 ($100,000 for Ivy Bond Fund) or
more in
Class A shares
of a Fund. See "Initial Sales Charge
Alternative --
Class A
Shares" in the Prospectus. The reduced sales
charge is
applicable to investments made at one time by
an
individual, his
or her spouse and children under the age of
21, or a
trustee or
other fiduciary of a single trust estate or
single
fiduciary
account (including a pension, profit sharing
or other
employee
benefit trust created pursuant to a plan
qualified
under Section
401 of the Code). It is also applicable to
current
purchases of
all of the funds in the Ivy Mackenzie Funds
(except Ivy
Money
Market Fund) by any of the persons enumerated
above,
where the
aggregate quantity of Class A shares of Ivy
Global
Fund, Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
Emerging
Growth
Fund, Ivy China Region Fund, Ivy Latin
America Strategy
Fund, Ivy
New Century Fund, Ivy International Bond
Fund, Ivy
International
Fund, Ivy Bond Fund, Ivy Short-Term Bond
Fund, Ivy
Canada Fund,
Mackenzie National Municipal Fund, Mackenzie
California
Municipal
Fund, Mackenzie Florida Limited Term
Municipal Fund,
Mackenzie
Limited Term Municipal Fund and Mackenzie New
York
Municipal Fund
(and shares that have been exchanged into Ivy
Money
Market Fund
from any of the other funds in the Ivy
Mackenzie Funds)
and of
any other investment company distributed by
IMDI,
previously
purchased or acquired and currently owned,
determined
at the
higher of current offering price or amount
invested,
plus the
Class A shares being purchased, amounts to
$50,000 or
more for
Ivy Global Fund, Ivy Growth Fund, Ivy Growth
with
Income Fund,
Ivy Emerging Growth Fund, Ivy International
Fund, Ivy
China
Region Fund, Ivy Latin America Strategy Fund,
Ivy New
Century
Fund and Ivy Canada Fund; $100,000 or more
for
International Bond
Fund, Ivy Bond Fund, Mackenzie National
Municipal Fund,
Mackenzie
California Municipal Fund and Mackenzie New
York
Municipal Fund;
or $25,000 or more for Mackenzie Florida
Limited Term
Municipal
Fund and Mackenzie Limited Term Municipal
Fund; or
$1,000,000 or
more for Ivy Short-Term Bond Fund.
At the time an investment takes place,
IMSC must
be notified
by the investor or his or her dealer that the
investment
qualifies for the reduced sales charge on the
basis of
previous
investments. The reduced sales charge is
subject to
confirmation
of the investor's holdings through a check of
the
particular
Fund's records.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a Systematic
Withdrawal Plan
(the "Withdrawal Plan") (except shareholders
with
accounts in
Class I of Ivy Bond Fund) by telephone
instructions to
IMSC or by
delivery to IMSC of a written election to so
redeem,
accompanied
by a surrender to IMSC of all share
certificates then
outstanding
in the name of such shareholder, properly
endorsed by
him. A
Withdrawal Plan may not be established if the
investor
is
currently participating in the Automatic
Investment
Method. The
Withdrawal Plan may involve the use of
principal and,
to the
extent that it does, depending on the amount
withdrawn,
the
investor's principal may be depleted.
A redemption under the Withdrawal Plan
is a
taxable event.
Investors contemplating participation in the
Withdrawal
Plan
should consult their tax advisers.
Additional investments in a Fund made by
investors
participating in the Withdrawal Plan must
equal at
least $1,000
each while the Withdrawal Plan is in effect.
Making
additional
purchases while the Withdrawal Plan is in
effect may be
disadvantageous to the investor because of
applicable
initial
sales charges or CDSCs.
An investor may terminate his
participation in the
Withdrawal Plan at any time by delivering
written
notice to IMSC.
If all shares held by the investor are
liquidated at
any time,
the Withdrawal Plan will terminate
automatically. The
Trust or
MIMI may terminate the Withdrawal Plan at any
time
after
reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares of each Fund (except Ivy Bond
Fund) may be
purchased
in connection with investment programs
established by
employee or
other groups using systematic payroll
deductions or
other
systematic payment arrangements. The Trust
does not
itself
organize, offer or administer any such
programs.
However, it
may, depending upon the size of the program,
waive the
minimum
initial and additional investment
requirements for
purchases by
individuals in conjunction with programs
organized and
offered by
others. Unless shares of a Fund are
purchased in
conjunction
with IRAs (see "How to Buy Shares" in the
Prospectus),
such group
systematic investment programs are not
entitled to
special tax
benefits under the Code. The Trust reserves
the right
to refuse
any purchase or suspend the offering of
shares in
connection with
group systematic investment programs at any
time and to
restrict
the offering of shareholder privileges, such
as Check
writing,
Simplified Redemptions and other optional
privileges,
as
described in the Prospectus, to shareholders
using
group
systematic investment programs.
With respect to each shareholder account
established on or
after September 15, 1972 under a group
systematic
investment
program, the Trust and IMI each currently
charge a
maintenance
fee of $3.00 (or portion thereof) for each
twelve-month
period
(or portion thereof) the account is
maintained. The
Trust may
collect such fee (and any fees due to IMI)
through a
deduction
from distributions to the shareholders
involved or by
causing on
the date the fee is assessed a redemption in
each such
shareholder account sufficient to pay such
fee. The
Trust
reserves the right to change these fees from
time to
time without
advance notice.
BROKERAGE ALLOCATION
Subject to the overall supervision of
the
President and the
Board, IMI places orders for the purchase and
sale of
each Fund's
portfolio securities. All portfolio
transactions are
effected at
the best price and execution obtainable.
Purchases and
sales of
debt securities are usually principal
transactions and
therefore,
brokerage commissions are usually not
required to be
paid by the
particular Fund for such purchases and sales,
although
the price
paid generally includes undisclosed
compensation to the
dealer.
The prices paid to underwriters of
newly-issued
securities
usually include a concession paid by the
issuer to the
underwriter, and purchases of after-market
securities
from
dealers normally reflect the spread between
the bid and
asked
prices. In connection with OTC transactions,
IMI
attempts to
deal directly with the principal market
makers, except
in those
circumstances where IMI believes that a
better price
and
execution are available elsewhere.
IMI selects broker-dealers to execute
transactions
and
evaluates the reasonableness of commissions
on the
basis of
quality, quantity, and the nature of the
firms'
professional
services. Commissions to be charged and the
rendering
of
investment services, including statistical,
research,
and
counseling services by brokerage firms, are
factors to
be
considered in the placing of brokerage
business. The
types of
research services provided by brokers may
include
general
economic and industry data, and information
on
securities of
specific companies. Research services
furnished by
brokers
through whom the Trust effects securities
transactions
may be
used by IMI in servicing all of its accounts.
In
addition, not
all of these services may be used by IMI in
connection
with the
services it provides to a particular Fund or
the Trust.
IMI may
consider sales of shares of a Fund as a
factor in the
selection
of broker-dealers and may select
broker-dealers who
provide it
with research services. IMI will not,
however, execute
brokerage
transactions other than at the best price and
execution.
During the fiscal year ended June 30,
1993 and
1994, during
the six-month period ended December 31, 1994
and during
the
fiscal year ended December 31, 1995, Ivy Bond
Fund paid
brokerage
commissions of $39,498, $175,688, $42,425 and
$20,912,
respectively.
During the period from March 3, 1993
(commencement
of
operations) to December 31, 1993, and during
the
fiscal years
ended December 31, 1994 and 1995, Ivy
Emerging Growth
Fund paid
brokerage commissions of $94,628, $83,831 and
$302,892,
respectively.
During the fiscal years ended December
31, 1993,
1994 and
1995, Ivy Growth Fund paid brokerage
commissions of
$1,071,036,
$265,471 and $666,385, respectively.
During the fiscal years ended December
31, 1993,
1994 and
1995, Ivy Growth with Income Fund paid
brokerage
commissions of
$97,896, $34,028 and $192,913, respectively.
Each Fund may, under some circumstances,
accept
securities
in lieu of cash as payment for Fund shares.
Each of
these Funds
will consider accepting securities only to
increase its
holdings
in a portfolio security or to take a new
portfolio
position in a
security that IMI deems to be a desirable
investment
for each the
Fund. While no minimum has been established,
it is
expected that
each the Fund will not accept securities
having an
aggregate
value of less than $1 million. The Trust may
reject in
whole or
in part any or all offers to pay for the Fund
shares
with
securities and may discontinue accepting
securities as
payment
for the Fund shares at any time without
notice. The
Trust will
value accepted securities in the manner and
at the same
time
provided for valuing portfolio securities of
each the
Fund, and
the Fund shares will be sold for net asset
value
determined at
the same time the accepted securities are
valued. The
Trust will
accept only securities which are delivered in
proper
form and
will not accept securities subject to legal
restrictions on
transfer. The acceptance of securities by
the Trust
must comply
with the applicable laws of certain states.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of
the Trust,
their
business addresses and principal occupations
during the
past five
years are:
POSITION
WITH THE
BUSINESS
AFFILIATIONS
NAME, ADDRESS, AGE TRUST AND
PRINCIPAL
OCCUPATIONS
John S. Anderegg, Jr. Trustee
Chairman,
Dynamics
60 Concord Street
Research Corp.
instruments
Wilmington, MA 01887 and
controls);
Director,
Age: 72
Burr-Brown Corp.
(operational
amplifiers);
Director,
Metritage
Incorporated
(level
measuring
instruments);
Trustee
of
Mackenzie Series
Trust
(1992-present).
Paul H. Broyhill Trustee
Chairman, BMC
Fund, Inc.
800 Hickory Blvd.
(1983-present);
Chairman,
Golfview Park
Broyhill Family
Foundation,
Lenoir, NC 28645 Inc.
(1983-Present);
Age: 72
Chairman and
President,
Broyhill
Investments, Inc.
(1983-present);
Chairman,
Broyhill Timber
Resources
(1983-present);
Management
of a
personal
portfolio of
fixed-income and
equity
investments
(1983-present);
Trustee
of
Mackenzie Series
Trust
(1988-present);
Director of The
Mackenzie
Funds
Inc.
(1988-1995).
Stanley Channick Trustee
President, The
Whitestone
11 Bala Avenue
Corporation
(insurance
Bala Cynwyd, PA 19004
agency);
President, Scott
Age: 71
Management
Company
(administrative
services
for
insurance
companies);
President, The
Channick
Group
(consultants to
insurance
companies and
national trade
associations);
Trustee of
Ivy
Fund
(1984-1993);
Director of The
Mackenzie
Funds
Inc.
(1994-1995).
Frank W. DeFriece, Jr. Trustee
Director, Manager
and Vice
The Landmark Centre
President,
Massengill-
113 Landmark Lane,
DeFriece
Foundation
Suite B
(charitable
organization)
Bristol, TN 37625
(1950-present);
Trustee and
Age: 75 Second
Vice
Chairman, East
Tennessee Public
Communications
Corp. (WSJK-
TV)
(1984-present); Trustee
of
Mackenzie
Series Trust
(1985-present);
Director of
The
Mackenzie
Funds Inc.
(1987-1995).
Roy J. Glauber Trustee
Mallinckrodt
Professor of
Lyman Laboratory
Physics, Harvard
of Physics
University (since
1974);
Harvard University Trustee
of Ivy
Fund (1961
Cambridge, MA 02138 -1991);
Trustee
of
Age: 70
Mackenzie Series
Trust
(1994-present).
Michael G. Landry Trustee
President,
Chairman and
700 South Federal Hwy. and
Director of
Mackenzie
Suite 300 President
Investment
Management
Boca Raton, FL 33432 Inc.
(1987-present);
Age: 49
President and
Director
[*Deemed to be an of Ivy
Management, Inc.
"interested person"
(1992-present);
Chairman
of the Trust, as and
Director of
defined under the
Mackenzie Ivy
Investor
1940 Act.]
Services Corp.
(1993-
present);
Director and
President of
Mackenzie Ivy
Funds
Distribution, Inc.
(1993-1994);
Chairman and
Director of
Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present);
Director
and
President of
The
Mackenzie Funds
Inc. (1987-
1995);
Trustee
and
President of
Mackenzie
Series
Trust
(1987-
present).
Michael R. Peers Trustee
Chairman of the
Board,
737 Periwinkle Way and Ivy
Management,
Inc.
Sanibel, FL 33957 Chairman
(1984-1991);
Chairman
Age: 66 of the of the
Board, Ivy
Fund
[*Deemed to be an Board
(1974-present);
Private
"interested person"
Investor.
of the Trust, as
defined under the
1940 Act.]
Joseph G. Rosenthal Trustee
Chartered
Accountant
110 Jardin Drive
(1958-present);
Trustee
Unit #12 of
Mackenzie
Series
Concord, Ontario Canada Trust
(1985-present);
L4K 2T7
Director of The
Mackenzie
Age: 61 Funds
Inc.
(1987-1995).
Richard N. Silverman Trustee
Formerly
President,
18 Bonnybrook Road Hy-Sil
Manufacturing
Waban, MA 02168
Company, a
division of
Age: 71 Van
Leer, U.S.A.,
Inc.
(gift
packaging
materials
and
metalized
film
products);
Formerly
Director, Waters
Manufacturing Co.
(manufacturer of
electronic
parts);
Director,
Panorama
Television
Network.
J. Brendan Swan Trustee
President,
Airspray
4701 North Federal Hwy.
International,
Inc.;
Suite 465 Joint
Managing
Director,
Pompano Beach, FL 33064
Airspray
International
Age: 65 B.V.
(an
environmentally
sensitive
packaging
company);
Director, The
Mackenzie Funds
Inc. (1992-
1995);
Trustee of
Mackenzie
Series
Trust
(1992-
present).
Keith J. Carlson Vice Senior
Vice
President
700 South Federal Hwy. President and
Director of
Mackenzie
Suite 300
Investment
Management,
Boca Raton, FL 33432 Inc.
(1994-present);
Age: 39 Senior
Vice
President,
Secretary and
Treasurer of
Mackenzie
Investment
Management Inc.
(1985-
1994);
Senior
Vice
President and
Director of
Ivy
Management,
Inc. (1994-
present); Senior
Vice
President,
Treasurer and
Director of Ivy
Management,
Inc.
(1992-1994);
Vice
President of The
Mackenzie
Funds
Inc.
(1987-1995);
President and
Director of
Mackenzie Ivy
Investor
Services Corp.
(1993-1996);
Vice
President of
Mackenzie
Series
Trust
(1994-
present);
Treasurer of
Mackenzie Series
Trust
(1985-1994);
President and
Director of
Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present);
Executive
Vice
President
and Director
of
Mackenzie Ivy
Funds
Distribution,
Inc. (1993-
1994).
C. William Ferris Secretary/ Senior
Vice
President,
700 South Federal Hwy. Treasurer
Secretary/Treasurer
Suite 300 and
Director of
Boca Raton, FL 33432
Mackenzie
Investment
Age: 51
Management Inc.
(1994-
present); Senior
Vice
President,
Finance and
Administration/Compliance
Officer
of
Mackenzie
Investment
Management Inc.
(1989-1994);
Senior Vice
President,
Secretary/
Treasurer and
Clerk of Ivy
Management, Inc.
(1994-
present); Senior
Vice
President,
Finance and
Administration/Compliance
Officer
of Ivy
Management,
Inc.
(1992-1994);
Senior
Vice
President,
Secretary/
Treasurer and
Clerk of Ivy
Management, Inc.
(1989-
1994);
Senior
Vice
President,
Secretary/
Treasurer of
Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present);
Secretary/
Treasurer and
Director of
Mackenzie Ivy
Funds
Distribution,
Inc. (1993-
1994);
Secretary/Treasurer
and
Director of
Mackenzie
Ivy
Investor
Services Corp.
(1993-1996);
President and
Director of
Mackenzie Ivy
Investor Services
Corp.
(1996-present);
Secretary/
Treasurer of The
Mackenzie
Funds
Inc.
(1993-1995);
Secretary/Treasurer of
Mackenzie Series
Trust
(1994-present).
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
Employees of IMI are permitted to make
personal
securities
transactions, subject to requirements and
restrictions
set forth
in IMI's Code of Ethics. The Code of Ethics
contains
provisions
and requirements designed to identify and
address
certain
conflicts of interest between personal
investment
activities and
the interests of investment advisory clients
such as
the Funds.
Among other things, the Code of Ethics, which
generally
complies
with standards recommended by the Investment
Company
Institute's
Advisory Group on Personal Investing,
prohibits certain
types of
transactions absent prior approval, imposes
time
periods during
which personal transactions may not be made
in certain
securities, and requires the submission of
duplicate
broker
confirmations and monthly reporting of
securities
transactions.
Additional restrictions apply to portfolio
managers,
traders,
research analysts and others involved in the
investment
advisory
process. Exceptions to these and other
provisions of
the Code of
Ethics may be granted in particular
circumstances after
review by
appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31,
1995)
TOTAL
PENSION OR
COMPENSA-
RETIREMENT
TION FROM
BENEFITS
ESTIMATED
TRUST AND
AGGREGATE ACCRUED AS
ANNUAL
FUND COM-
COMPENSA- PART OF
BENEFITS
PLEX PAID
NAME, TION FUND UPON
TO
POSITION FROM TRUST EXPENSES
RETIREMENT
TRUSTEES
John S. 7,112 N/A N/A
8,000
Anderegg, Jr.
(Trustee)
Paul H. 7,112 N/A N/A
8,000
Broyhill
(Trustee)
Stanley -0- N/A N/A
8,000
Channick[*]
(Trustee)
Frank W. 7,112 N/A N/A
8,000
DeFriece, Jr.
(Trustee)
Roy J. -0- N/A N/A
8,000
Glauber[*]
(Trustee)
Michael G. -0- N/A N/A
-0-
Landry
(Trustee and
President)
Michael R. -0- N/A N/A
-0-
Peers
(Trustee and
Chairman of
the Board)
Joseph G. 7,112 N/A N/A
8,000
Rosenthal
(Trustee)
Richard N. 8,000 N/A N/A
8,000
Silverman
(Trustee)
J. Brendan 7,112 N/A N/A
8,000
Swan
(Trustee)
Keith J. -0- N/A N/A
-0-
Carlson
(Vice President)
C. William -0- N/A N/A
-0-
Ferris
(Secretary/Treasurer)
[*] Appointed as a Trustee of the Trust at a
meeting
of the
Board of Trustees held on February 10,
1996.
As of February 26, 1996, the Officers
and Trustees
of the
Trust as a group owned beneficially or of
record less
than 1% of
the outstanding Class A, Class B, Class C and
Class I
shares of
any of the Funds.
INVESTMENT ADVISORY AND OTHER
SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY
SERVICES
IMI currently provides business
management and
investment
advisory services to each Fund pursuant to a
Business
Management
and Investment Advisory Agreement (the
"Agreement").
The
Agreement was approved by the respective sole
shareholder of Ivy
Bond Fund on December 31, 1994 and of Ivy
Emerging
Growth Fund on
April 30, 1993 and by the respective
shareholders of
Ivy Growth
Fund and Ivy Growth with Income Fund on
December 30,
1991. Prior
to the approval by the respective
shareholders or sole
shareholder of each Fund, the Agreement was
approved on
September
29, 1994 with respect to Ivy Bond Fund, on
February 19,
1993 with
respect to Ivy Emerging Growth Fund and
October 28,
1991 with
respect to Ivy Growth Fund and Ivy Growth
with Income
Fund by the
Board, including a majority of the Trustees
who are
neither
"interested persons" (as defined in the 1940
Act) of
the Trust
nor have any direct or indirect financial
interest in
the
operation of the distribution plan (see
"Distribution
Services")
or in any related agreement (the "Independent
Trustees").
Until December 31, 1994, MIMI served as
the
investment
adviser to Ivy Bond Fund, which Fund was a
series of
Mackenzie
Series Trust until it was reorganized as a
series of
the Trust on
December 31, 1994. On December 31, 1994,
MIMI's
interest in the
Agreement with respect to Ivy Bond Fund was
assigned by
MIMI to
IMI, which is a wholly owned subsidiary of
MIMI. The
provisions
of the Agreement remain unchanged by IMI's
succession
to MIMI
thereunder. MIMI is a subsidiary of
Mackenzie
Financial
Corporation ("MFC"), 150 Bloor Street West,
Toronto,
Ontario,
Canada, a public corporation organized under
the laws
of Ontario
whose shares are listed for trading on The
TSE. MFC is
registered in Ontario as a mutual fund dealer
and
advises Ivy
Canada Fund. IMI currently acts as manager
and
investment
adviser to the following investment companies
registered under
the 1940 Act (other than the Funds): Ivy
China Region
Fund, Ivy
Global Fund, Ivy International Fund, Ivy
Latin America
Strategy
Fund, Ivy New Century Fund, Ivy International
Bond
Fund, Ivy
Short-Term Bond Fund and Ivy Money Market
Fund.
The Agreement obligates IMI to make
investments
for the
accounts of each Fund in accordance with its
best
judgment and
within the investment objectives and
restrictions set
forth in
the Prospectus, the 1940 Act and the
provisions of the
Code
relating to regulated investment companies,
subject to
policy
decisions adopted by the Board. IMI also
determines
the
securities to be purchased or sold by these
Funds and
places
orders with brokers or dealers who deal in
such
securities.
Under the Agreement, IMI also provides
certain
business
management services. IMI is obligated to (1)
coordinate with
each Fund's Custodian and monitor the
services it
provides to
that Fund; (2) coordinate with and monitor
any other
third
parties furnishing services to each Fund; (3)
provide
each Fund
with necessary office space, telephones and
other
communications
facilities as are adequate for the particular
Fund's
needs;
(4) provide the services of individuals
competent to
perform
administrative and clerical functions that
are not
performed by
employees or other agents engaged by the
particular
Fund or by
IMI acting in some other capacity pursuant to
a
separate
agreement or arrangements with the Fund; (5)
maintain
or
supervise the maintenance by third parties of
such
books and
records of the Trust as may be required by
applicable
Federal or
state law; (6) authorize and permit IMI's
directors,
officers and
employees who may be elected or appointed as
trustees
or officers
of the Trust to serve in such capacities; and
(7) take
such other
action with respect to the Trust, after
approval by the
Trust as
may be required by applicable law, including
without
limitation
the rules and regulations of the SEC and of
state
securities
commissions and other regulatory agencies.
Ivy Bond Fund pays IMI a monthly fee for
providing
business
management and investment advisory services
at an
annual rate of
0.75% of the first $500 million of the Fund's
average
daily net
assets, reduced to 0.60% of the next $500
million and
0.40% of
average daily net assets over $1 billion.
Each of the
other Funds
pays IMI a monthly fee for providing business
management and
investment advisory serves at an annual rate
of 0.85%
of each the
Fund's average daily net assets.
For the fiscal years ended June 30, 1993
and 1994,
for the
six-month period ended December 31, 1994 and
for the
fiscal year
ended December 31, 1995, Ivy Bond Fund paid
IMI of
$887,211,
$984,110, $445,111 and $848,778, respectively
(of which
IMI
reimbursed $0, $0, $10,764 and $2,615,
respectively,
pursuant to
required expense limitations).
For the period from March 3, 1993
(commencement of
operations) to December 31, 1993 and during
the fiscal
years
ended December 31, 1994 and 1995, Ivy
Emerging Growth
Fund paid
IMI $37,707, $168,819 and $318,186,
respectively (of
which IMI
reimbursed $18,141, $3,923 and $0,
respectively,
pursuant to
voluntary expense limitations).
For the fiscal years ended December 31,
1993, 1994
and 1995,
Ivy Growth Fund paid IMI $2,203,771,
$2,133,471 and
$2,278,390,
respectively (of which IMI reimbursed
$323,541,
$285,510 and
$11,680, respectively, pursuant to voluntary
expense
limitations).
For the fiscal years ended December 31,
1993, 1994
and 1995,
Ivy Growth with Income Fund paid IMI
$185,897, $277,991
and
$515,787, respectively.
Under the Agreement, the Trust pays the
following
expenses:
(1) the fees and expenses of the Trust's
Independent
Trustees;
(2) the salaries and expenses of any of the
Trust's
officers or
employees who are not affiliated with IMI;
(3) interest
expenses;
(4) taxes and governmental fees, including
any original
issue
taxes or transfer taxes applicable to the
sale or
delivery of
shares or certificates therefor; (5)
brokerage
commissions and
other expenses incurred in acquiring or
disposing of
portfolio
securities; (6) the expenses of registering
and
qualifying shares
for sale with the SEC and with various state
securities
commissions; (7) accounting and legal costs;
(8)
insurance
premiums; (9) fees and expenses of the
Trust's
Custodian and
Transfer Agent and any related services; (10)
expenses
of
obtaining quotations of portfolio securities
and of
pricing
shares; (11) expenses of maintaining the
Trust's legal
existence
and of shareholders' meetings; (12) expenses
of
preparation and
distribution to existing shareholders of
periodic
reports, proxy
materials and prospectuses; and (13) fees and
expenses
of
membership in industry organizations.
The Agreement provides that if a Fund's
total
expenses in
any fiscal year (other than interest, taxes,
distribution
expenses, brokerage commissions and other
portfolio
transaction
expenses, other expenditures which are
capitalized in
accordance
with generally accepted accounting principles
and any
extraor-
dinary expenses including, without
limitation,
litigation and
indemnification expenses) exceed the
permissible limits
appli-
cable to that Fund in any state in which its
shares are
then
qualified for sale, IMI will bear the excess
expenses.
At the
present time, the most restrictive state
expense
limitation
provision limits each Fund's annual expenses
to 2.5% of
the first
$30 million of its average daily net assets,
2.0% of
the next $70
million and 1.5% of its average daily net
assets over
$100
million.
IMI currently limits each of Ivy
Emerging Market
Fund's
total operating expenses (excluding Rule
12b-1 fees,
interest,
taxes, brokerage commissions, litigation and
indemnification
expenses, and other extraordinary expenses)
to an
annual rate of
1.95% of each the Fund's average daily net
assets. As
long as a
Fund's expense limitation continues, it may
lower that
Fund's
expenses and increase its yield. Each the
Fund's
expense
limitation may be terminated or revised at
any time, at
which
time a Fund's expenses may increase and its
yield may
be reduced,
depending on the total assets of the
particular Fund.
On August 25-26, 1995, the Board,
including a
majority of
the Independent Trustees, last approved the
continuance
of the
Agreement with respect to each of Ivy Bond
Fund, Ivy
Emerging
Growth Fund, Ivy Growth Fund and Ivy Growth
with Income
Fund.
Each Agreement will continue in effect with
respect to
each Fund
from year to year, or for more than the
initial period,
as the
case may be, only so long as the continuance
is
specifically
approved at least annually (i) by the vote of
a
majority of the
Independent Trustees and (ii) either (a) by
the vote of
a
majority of the outstanding voting securities
(as
defined in the
1940 Act) of the particular Fund or (b) by
the vote of
a majority
of the entire Board. If the question of
continuance of
the
Agreements (or adoption of any new agreement)
is
presented to
shareholders, continuance (or adoption) shall
be
effected only if
approved by the affirmative vote of a
majority of the
outstanding
voting securities of the particular Fund.
See
"Capitalization
and Voting Rights."
Each Agreement may be terminated with
respect to a
particular Fund at any time, without payment
of any
penalty, by
the vote of a majority of the Board, or by a
vote of a
majority
of the outstanding voting securities of that
Fund, on
60 days'
written notice to IMI, or by IMI on 60 days'
written
notice to
the Trust. The Agreement shall terminate
automatically
in the
event of its assignment.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI,
serves as
the
exclusive distributor of the Funds' shares
pursuant to
an Amended
and Restated Distribution Agreement with the
Trust
dated October
23, 1991, as amended from time to time (the
"Distribution
Agreement"). The Distribution Agreement was
last
approved by the
Board of Trustees on August 25, 1995. IMDI
distributes
shares of
the Funds through broker-dealers who are
members of the
National
Association of Securities Dealers, Inc. and
who have
executed
dealer agreements with IMDI. IMDI
distributes shares
of the
Funds on a continuous basis, but reserves the
right to
suspend or
discontinue distribution on that basis. IMDI
is not
obligated to
sell any specific amount of Fund shares.
Pursuant to the Distribution Agreement,
IMDI is
entitled to
deduct a commission on all Class A Fund
shares sold
equal to the
difference, if any, between the public
offering price,
as set
forth in the Funds' then-current prospectus,
and the
net asset
value on which such price is based. Out of
that
commission, IMDI
may reallow to dealers such concession as
IMDI may
determine from
time to time. In addition, IMDI is entitled
to deduct
a CDSC on
the redemption of Class A shares sold without
an
initial sales
charge and Class B and Class C shares, in
accordance
with, and in
the manner set forth in, the Prospectus.
Under the Distribution Agreement, each
Fund bears,
among
other expenses, the expenses of registering
and
qualifying its
shares for sale under federal and state
securities laws
and
preparing and distributing to existing
shareholders
periodic
reports, proxy materials and prospectuses.
During the fiscal year ended June 30,
1993 and the
three
months ended September 30, 1993, MIMI (which
at that
time was Ivy
Bond Fund's distributor) received from sales
of Class A
[Shares
of Ivy Bond Fund outstanding as of March 31,
1994 were
designated
Class A shares of the Fund.] shares of Ivy
Bond Fund
$900,303 and
$236,973, respectively, in sales commissions,
of which
$201,431
and $46,312, respectively, was retained after
dealers'
reallowances. During the nine months ended
June 30,
1994, the
six-month period ended December 31, 1994 and
the fiscal
year
ended December 31, 1995, IMDI received
commissions of
$343,167,
$123,560 and $101,081, respectively, from
sales of
Class A shares
of the Fund, of which $65,470, $23,740 and
$20,028,
respectively,
was retained after dealers' reallowances.
During the period from March 3, 1993
(commencement
of
operations) to September 30, 1993, MIMI
received from
sales of
Class A shares of Ivy Emerging Growth Fund
$198,884 in
sales
commissions, of which $30,643 was retained
after
dealers' re-
allowances. During the period from October
1, 1993 to
December 31, 1993 and during the fiscal years
ended
December 31,
1994 and 1995, IMDI received from sales of
Class A
shares of Ivy
Emerging Growth Fund $267,621, $193,050 and
$268,012
respectively, in sales commissions, of which
$41,714,
$31,480 and
$41,326, respectively, was retained after
dealers'
re-allowances.
During the periods from March 3, 1993
(commencement of
operations) to September 30, 1993 and from
October 1,
1993 to
December 31, 1993, MIMI and IMDI,
respectively,
received no CDSCs
upon certain redemptions of Class A shares of
Ivy
Emerging Growth
Fund. During the period from October 23,
1993 and
during the
fiscal year ended December 31, 1994, (the
date on which
Class B
shares of Ivy Emerging Growth Fund were first
offered
for sale to
the public) to December 31, 1993 and during
the fiscal
years
ended December 31, 1994 and 1995, IMDI
received $239,
$12,352 and
$31,687, respectively, in CDSCs paid upon
certain
redemptions of
Class B shares of Ivy Emerging Growth Fund.
During the period from January 1, 1993
to
September 30,
1993, MIMI received from sales of Class A
shares of Ivy
Growth
Fund $310,897 in sales commissions, of which
$51,790
was retained
after dealers' re-allowances. During the
period from
October 1,
1993 to December 31, 1993 and during the
fiscal years
ended
December 31, 1994 and 1995, IMDI received
from sales of
Class A
shares of Ivy Growth Fund $26,792, $70,092
and
$150,873,
respectively, in sales commissions, of which
$4,463,
$10,667 and
$23,327, respectively, was retained after
dealers'
re-allowances.
During the period from January 1, 1993 to
September 30,
1993,
MIMI received no CDSCs. During the period
from October
1, 1993
to December 31, 1993 and during the fiscal
years ended
December
31, 1994 and 1995, IMDI received $0, $4,669
and $8,722,
respectively, in CDSCs paid upon certain
redemptions of
Class B
shares of Ivy Growth Fund.
During the period from January 1, 1993
to
September 30,
1993, MIMI received from sales of Class A
shares of Ivy
Growth
with Income Fund $145,295 in sales
commissions, of
which $23,818
was retained after dealers' re-allowances.
During the
period
from October 1, 1993 to December 31, 1993 and
during
the fiscal
years ended December 31, 1994 and 1995, IMDI
received
from sales
of Class A shares of the Fund $60,844,
$236,691 and
$143,107,
respectively, in sales commissions, of which
$9,974,
$37,077 and
$22,948, respectively, was retained after
dealers'
re-allowances.
During the period from January 1, 1993 to
September 30,
1993,
MIMI received no CDSCs. During the period
from October
1, 1993
to December 31, 1993 and during the fiscal
year ended
December
31, 1994, IMDI received no CDSCs. During the
fiscal
year ended
December 31, 1995, IMDI received $26,361 in
CDSCs paid
upon
certain redemptions of Class B shares of Ivy
Growth
with Income
Fund.
Since the inception date for Class C
shares of
each Fund is
April 30, 1996, no payments were made in
connection
with the sale
of Class C shares with respect to any Fund
during the
relevant
time periods.
Each Distribution Agreement will
continue in
effect for
successive one-year periods, provided that
such
continuance is
specifically approved at least annually by
the vote of
a majority
of the Independent Trustees, cast in person
at a
meeting called
for that purpose and by the vote of either a
majority
of the
entire Board or a majority of the outstanding
voting
securities
of each Fund. Each Distribution Agreement
may be
terminated with
respect to a particular Fund at any time,
without
payment of any
penalty, by IMDI on 60 days' written notice
to the Fund
or by the
Fund by vote of either a majority of the
outstanding
voting
securities of the Fund or a majority of the
Independent
Trustees
on 60 days' written notice to IMDI. Each
Distribution
Agreement
shall terminate automatically in the event of
its
assignment.
RULE 18F-3 PLAN. On February 23, 1995,
the SEC
adopted Rule
18f-3 under the 1940 Act, which permits a
registered
open-end
investment company whose shares are
registered on Form
N-1A to
issue multiple classes of shares in
accordance with a
written
plan approved by the investment company's
board of
directors/trustees and filed with the SEC.
At a
meeting held on
December 1-2, 1995, the Board adopted a
multi-class
plan (the
"Rule 18f-3 plan") on behalf of each Fund.
The key
features of
the Rule 18f-3 plan are as follows: (i)
shares of each
class of
a Fund represent an equal pro rata interest
in that
Fund and
generally have identical voting, dividend,
liquidation,
and other
rights, preferences, powers, restrictions,
limitations,
qualifications, terms and conditions, except
that each
class
bears certain class-specific expenses and has
separate
voting
rights on certain matters that relate solely
to that
class or in
which the interests of shareholders of one
class differ
from the
interests of shareholders of another class;
(ii)
subject to
certain limitations described in the
Prospectus, shares
of a
particular class of a Fund may be exchanged
for shares
of the
same class of another Ivy or Mackenzie fund;
and (iii)
a Fund's
Class B shares will convert automatically
into Class A
shares of
that Fund after a period of eight years,
based on the
relative
net asset value of such shares at the time of
conversion.
RULE 12B-1 DISTRIBUTION PLANS. The
Trust has
adopted on
behalf of each Fund, in accordance with Rule
12b-1
under the 1940
Act, separate distribution plans pertaining
to the
Funds'
Class A, Class B and Class C shares (each, a
"Plan").
In
adopting each Plan, a majority of the
Independent
Trustees have
concluded in conformity with the requirements
of the
1940 Act
that there is a reasonable likelihood that
each Plan
will benefit
each respective Fund and its shareholders.
The
Trustees of the
Trust believe that the Plans should result in
greater
sales
and/or fewer redemptions of each Fund's
shares,
although it is
impossible to know for certain the level of
sales and
redemptions
of a Fund's shares in the absence of a Plan
or under an
alternative distribution arrangement.
Under each Plan, each Fund pays IMDI a
service
fee, accrued
daily and paid monthly, at the annual rate of
up to
0.25% of the
average daily net assets attributable to the
class of
shares to
which the Plan applies. The services for
which service
fees may
be paid include, among other services,
advising clients
or
customers regarding the purchase, sale or
retention of
shares of
the Fund, answering routine inquiries
concerning the
Fund and
assisting shareholders in changing options or
enrolling
in
specific plans. Pursuant to each Plan,
service fee
payments made
out of or charged against the assets
attributable to a
Fund's
Class A, Class B or Class C shares must be in
reimbursement for
services rendered for or on behalf of that
Class of
that Fund.
The expenses not reimbursed in any one month
may be
reimbursed in
a subsequent month.
Under the Funds' Class B and Class C
Plans, each
Fund also
pays IMDI a distribution fee, accrued daily
and paid
monthly, at
the annual rate of 0.75% of the average daily
net
assets
attributable to its Class B or Class C
shares. IMDI
may reallow
to dealers all or a portion of the service
and
distribution fees
as IMDI may determine from time to time. The
distribution fee
compensates IMDI for expenses incurred in
connection
with
activities primarily intended to result in
the sale of
the Funds'
Class B or Class C shares, including the
printing of
prospectuses
and reports for persons other than existing
shareholders and the
preparation, printing and distribution of
sales
literature and
advertising materials. Under the Funds'
Class B and
Class C
Plans, IMDI may include interest, carrying or
other
finance
charges in its calculation of distribution
expenses, if
not
prohibited from doing so pursuant to an order
of or a
regulation
adopted by the SEC.
Among other things, each Plan provides
that (1)
IMDI will
submit to the Board at least quarterly, and
the
Trustees will
review, written reports regarding all amounts
expended
under the
Plan and the purposes for which such
expenditures were
made;
(2) each Plan will continue in effect only so
long as
such
continuance is approved at least annually,
and any
material
amendment thereto is approved, by the votes
of a
majority of the
Board, including the Independent Trustees,
cast in
person at a
meeting called for that purpose; (3) payments
by each
Fund under
each Plan shall not be materially increased
without the
affirmative vote of the holders of a majority
of the
outstanding
shares of the relevant class; and (4) while
each Plan
is in
effect, the selection and nomination of
Trustees who
are not
"interested persons" (as defined in the 1940
Act) of
the Trust
shall be committed to the discretion of the
Trustees
who are not
"interested persons" of the Trust.
IMDI may make payments for distribution
assistance
and for
administrative and accounting services from
resources
that may
include the management fees paid by a Fund.
IMDI also
may make
payments (such as the service fee payments
described
above) to
unaffiliated broker-dealers for services
rendered in
the
distribution of each Fund's shares. To
qualify for
such
payments, shares may be subject to a minimum
holding
period.
However, no such payments will be made to any
dealer or
broker if
at the end of each year the amount of shares
held does
not exceed
a minimum amount. The minimum holding period
and
minimum level
of holdings will be determined from time to
time by
IMDI.
A report of the amount expended pursuant
to each
Plan, and
the purposes for which such expenditures were
incurred,
must be
made to the Board for its review at least
quarterly.
During the fiscal year ended June 30,
1994, the
six-month
period ended December 31, 1994 and the fiscal
year
ended December
31, 1995 Ivy Bond Fund paid IMDI $327,497,
$146,362 and
$273,837,
respectively, pursuant to the Class A plan,
and $693,
$7,469 and
$36,359, respectively, pursuant to the Class
B plan.
For the period from March 3, 1993
(commencement of
operations) to September 30, 1993, Ivy
Emerging Growth
Fund paid
MIMI $3,137 pursuant to the Class A Plan.
For the
period from
October 1, 1993 to December 31, 1993 and
during the
fiscal years
ended December 31, 1994 and 1995, the Fund
paid IMDI
$7,644,
$41,576 and $70,182, respectively, pursuant
to the
Class A Plan.
For the period from October 23, 1993 (the
date on which
Class B
shares of Ivy Emerging Growth Fund were first
offered
for sale to
the public) to December 31, 1993 and during
the fiscal
years
ended December 31, 1994 and 1995, Ivy
Emerging Growth
Fund paid
IMDI $1,235,$32,179 and $93,593,
respectively, pursuant
to the
Class B Plan.
For the period from January 1, 1993 to
September
30, 1993,
Ivy Growth Fund paid MIMI $36,753 pursuant to
the Class
A Plan.
For the period from October 1, 1993 to
December 31,
1993, and for
the fiscal years ended December 31, 1994 and
1995, Ivy
Growth
Fund paid IMDI $21,315, $89,478 and $115,730,
respectively,
pursuant to the Class A Plan. For the period
from
October 23,
1993 (the date on which Class B shares of Ivy
Growth
Fund were
first offered for sale to the public) to
December 31,
1993, and
during the fiscal year ended December 31,
1994 and
1995, Ivy
Growth Fund paid IMDI $109, $6,983 and
$20,164,
respectively,
pursuant to the Class B Plan.
For the period from January 1, 1993 to
September
30, 1993,
Ivy Growth with Income Fund paid MIMI $8,540
pursuant
to the
Class A Plan. For the period from October 1,
1993 to
December 31, 1993 and for the fiscal years
ended
December 31,
1994 and 1995, Ivy Growth with Income Fund
paid IMDI
$2,459,
$34,975 , and $105,143, respectively,
pursuant to the
Class A
Plan. For the period from October 23, 1993
(the date
on which
Class B shares of Ivy Growth with Income Fund
were
first offered
for sale to the public) to December 31, 1993
and for
the fiscal
years ended December 31, 1994 and 1995, Ivy
Growth with
Income
Fund paid IMDI $312, $38,866 and $76,355,
respectively,
pursuant
to the Class B Plan.
Since the inception date for Class C
shares is
April 30,
1996, no payments were made under the Funds'
Class C
Plan during
the relevant time periods.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class A
shares of Ivy
Bond Fund: advertising, $21,861; printing
and mailing
of
prospectuses to persons other than current
shareholders, $33,497;
compensation to dealers, $72,172;
compensation to sales
personnel,$149,532; seminars and meetings,
$18,043;
travel and
entertainment, $37,480; general and
administrative,
$88,470;
telephone, $4,837; and occupancy and
equipment rental,
$12,242.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class B
shares of Ivy
Bond Fund: advertising, $726; printing and
mailing of
prospectuses to persons other than current
shareholders, $1,112;
compensation to dealers, $2,396; compensation
to sales
personnel,$4,964; seminars and meetings,
$599; travel
and
entertainment, $1,244; general and
administrative,
$2,937;
telephone, $161; and occupancy and equipment
rental,
$406.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class A
shares of Ivy
Emerging Growth Fund: advertising, $6,209;
printing
and mailing
of prospectuses to persons other than current
shareholders,
$28,295; compensation to dealers, $56,587;
compensation
to sales
personnel,$41,868; seminars and meetings,
$14,147;
travel and
entertainment, $10,476; general and
administrative,
$24,278;
telephone, $1,385; and occupancy and
equipment rental,
$3,420.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class B
shares of Ivy
Emerging Growth Fund: advertising, $2,070;
printing
and mailing
of prospectuses to persons other than current
shareholders,
$9,433; compensation to dealers, $18,866;
compensation
to sales
personnel,$13,959; seminars and meetings,
$4,717;
travel and
entertainment, $3,492; general and
administrative,
$8,094;
telephone, $462; and occupancy and equipment
rental,
$1,140.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class A
shares of Ivy
Growth Fund: advertising, $55,550; printing
and
mailing of
prospectuses to persons other than current
shareholders,
$102,141; compensation to dealers, $150,781;
compensation to
sales personnel,$384,129; seminars and
meetings,
$37,395; travel
and entertainment, $96,456; general and
administrative,
$224,237;
telephone, $12,543; and occupancy and
equipment rental,
$31,463.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class B
shares of Ivy
Growth Fund: advertising, $421; printing and
mailing
of
prospectuses to persons other than current
shareholders, $774;
compensation to dealers, $1,143; compensation
to sales
personnel,$2,912; seminars and meetings,
$286; travel
and
entertainment, $731; general and
administrative,
$1,700;
telephone, $95; and occupancy and equipment
rental,
$239.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class A
shares of Ivy
Growth with Income Fund: advertising,
$11,699;
printing and
mailing of prospectuses to persons other than
current
shareholders, $32,765; compensation to
dealers,
$61,301;
compensation to sales personnel,$76,646;
seminars and
meetings,
$15,325; travel and entertainment, $19,090;
general and
administrative, $45,079; telephone, $2,523;
and
occupancy and
equipment rental, $6,247.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class B
shares of Ivy
Growth with Income Fund: advertising,
$1,746; printing
and
mailing of prospectuses to persons other than
current
shareholders, $4,889; compensation to
dealers, $9,148;
compensation to sales personnel,$11,437;
seminars and
meetings,
$2,287; travel and entertainment, $2,849;
general and
administrative, $6,727; telephone, $376; and
occupancy
and
equipment rental, $932.
Since the inception date for Class C
shares of
each Fund is
April 30, 1996, no payments were made in
marketing
Class C shares
of any Fund during the relevant time period.
Each Plan may be amended at any time
with respect
to the
class of shares of the particular Fund to
which the
Plan relates
by vote of the Trustees, including a majority
of the
Independent
Trustees, cast in person at a meeting called
for the
purpose of
considering such amendment. Each Plan may be
terminated with
respect to the class of shares of the
particular Fund
to which
the Plan relates at any time, without payment
of any
penalty, by
vote of a majority of the Independent
Trustees, or by
vote of a
majority of the outstanding voting securities
of that
class.
If the Distribution Agreement or the
Distribution
Plans are
terminated (or not renewed) with respect to
one or more
funds (or
Class of shares thereof) of the Trust, they
may
continue in
effect with respect to any fund (or Class of
shares
thereof) as
to which they have not been terminated (or
have been
renewed).
CUSTODIAN
Brown Brothers Harriman & Co. ("Brown
Brothers"),
a private
bank and member of the principal securities
exchanges,
located at
40 Water Street, Boston, Massachusetts 02109
(the
"Custodian"),
has been retained to act as the Trust's
Custodian for
assets of
each Fund held in the United States. Rules
adopted
under the
1940 Act permit the Trust to maintain its
foreign
securities and
cash in the custody of certain eligible
foreign banks
and
securities depositories. Pursuant to those
rules,
Brown Brothers
has entered into subcustodial agreements for
the
holding of each
Fund's foreign securities. With respect to
each Fund,
Brown
Brothers may receive, as partial payment for
its
services, a
portion of the Trust's brokerage business,
subject to
its ability
to provide best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services
Agreement,
MIMI
provides certain accounting and pricing
services for
each Fund.
As compensation for those services, Ivy Bond
Fund pays
MIMI a
monthly fee plus out-of-pocket expenses as
incurred.
The monthly
fee is based upon the net assets of the
particular Fund
at the
preceding month end at the following rates:
$1,000
when the net
assets are less than $20 million; $1,500 when
the net
assets are
$20 to $75 million; $4,000 when the net
assets are $75
to $100
million; and $6,000 when the net assets are
over $100
million.
For the fiscal years ended June 30, 1993
and 1994,
the six
months ended December 31, 1994 and the fiscal
year
ended December
31, 1995, Ivy Bond Fund paid $84,116,
$85,737, $45,015
and
$102,160, respectively, to MIMI under such
agreement.
During the
period from March 3, 1993 to December 31,
1993 and
during the
fiscal years ended December 31, 1994 and 1995
Ivy
Emerging Growth
Fund paid MIMI $12,798, $31,948 and $45,324,
respectively, under
such agreement. During the period from
January 25,
1993 through
December 31, 1993 and during the fiscal years
ended
December 31,
1994 and 1995, Ivy Growth Fund paid MIMI
$101,323,
$103,232 and
$103,945, respectively under such agreement.
During
the period
from April 1, 1993 through December 31, 1993
and the
fiscal years
ended December 31, 1994 and 1995, Ivy Growth
with
Income Fund
paid MIMI $24,500, $33,702 and $60,915,
respectively,
pursuant to
such agreement.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and
Shareholder
Service
Agreement, IMSC, a wholly owned subsidiary of
MIMI, is
the
transfer agent for each Fund. Each Fund
(except for
Ivy Bond
Fund) pays a monthly fee at an annual rate of
$20.00
per open
account. Ivy Bond Fund pays $20.75 per open
account
for Class A,
Class B and Class C and $10.25 per open
account for
Class I. In
addition, each Fund pays a monthly fee at an
annual
rate of $4.36
per account that is closed plus certain
out-of-pocket
expenses.
Such fees and expenses for the fiscal year
ended
December 31,
1995 for Ivy Bond Fund, Ivy Emerging Growth
Fund, Ivy
Growth Fund
and Ivy Growth with Income Fund totalled
$198,311,
$130,012,
$1,104,622 and $280,966, respectively.
Certain
broker-dealers
that maintain shareholder accounts with a
Fund through
an omnibus
account provide transfer agent and other
shareholder-related
services that would otherwise be provided by
IMSC if
the
individual accounts that comprise the omnibus
account
were opened
by their beneficial owners directly. IMSC
pays such
broker-
dealers a per account fee for each open
account within
the
omnibus account, or a fixed rate (e.g., .10%)
fee,
based on the
average daily net asset value of the omnibus
account
(or a
combination thereof).
ADMINISTRATOR
Pursuant to an Administrative Services
Agreement,
MIMI
provides certain administrative services to
each Fund.
As
compensation for these services, each Fund
except for
Ivy Bond
Fund with respect to its Class I shares only
pays MIMI
a monthly
fee at the annual rate of .10% of that Fund's
average
daily net
assets. Ivy Bond Fund pays MIMI a monthly
fee at the
annual rate
of .01% of its average daily net assets for
Class I.
Such fees
for the fiscal year ended December 31, 1995
for Ivy
Bond Fund,
Ivy Emerging Growth Fund, Ivy Growth Fund and
Ivy
Growth with
Income Fund totalled $113,170, $37,434,
$268,046 and
$60,681,
respectively.
Outside of providing administrative
services to
the Trust,
as described above, MIMI may also act on
behalf of IMDI
in paying
commissions to broker-dealers with respect to
sales of
Class B
and Class C shares of each Fund.
AUDITORS
Coopers & Lybrand L.L.P., independent
certified
public
accountants, 200 East Las Olas Boulevard,
Suite 1700,
Ft.
Lauderdale, Florida 33301, has been selected
as
auditors for the
Trust. The audit services performed by
Coopers &
Lybrand L.L.P.,
include audits of the annual financial
statements of
each of the
funds of the Trust. Other services provided
principally relate
to filings with the SEC and the preparation
of the
Trust's tax
returns.
CAPITALIZATION AND VOTING
RIGHTS
Ivy Bond Fund results from a
reorganization of
Mackenzie
Fixed Income Trust, a series of Mackenzie
Series Trust,
which
reorganization was approved by shareholders
of the Fund
on
December 15, 1994. The capitalization of the
Trust
consists of
an unlimited number of shares of beneficial
interest
(no par
value per share). When issued, shares of
each class of
each Fund
are fully paid, non-assessable, redeemable
and fully
transferable. No class of shares of any Fund
has
preemptive
rights or subscription rights.
The Amended and Restated Declaration of
Trust
permits the
Trustees to create separate series or
portfolios and to
divide
any series or portfolio into one or more
classes. The
Trustees
have authorized thirteen series, each of
which
represents a fund.
The Trustees have further authorized the
issuance of
Classes A, B
and C for Ivy Global Fund, Ivy Growth Fund,
Ivy
Emerging Growth
Fund, Ivy Growth with Income Fund, Ivy Money
Market
Fund, Ivy
China Region Fund, Ivy Latin America Strategy
Fund, Ivy
New
Century Fund, Ivy International Fund, Ivy
Canada Fund,
Ivy Bond
Fund and Ivy International Bond Fund, as well
as
Classes A, B and
I for Ivy Short-Term Bond Fund, Class I for
Ivy
International
Fund and Ivy Bond Fund, and Class D for Ivy
Growth with
Income
Fund. [FN][The Class D shares of Ivy Growth
with Income
Fund were
initially issued as "Ivy Growth with Income
Fund --
Class C" to
shareholders of Mackenzie Growth & Income
Fund, a
former series
of the Company, in connection with the
reorganization
between
that fund and Ivy Growth with Income Fund,
and are not
offered
for sale to the public. On February 29,
1996, the
Trustees of
the Trust resolved by written consent to
establish a
new class of
shares designated as "Class C" for all Ivy
Fund
portfolios (other
than Ivy Short-Term Bond Fund), and to
redesignate the
shares of
beneficial interest of "Ivy Growth with
Income
Fund--Class C" as
shares of beneficial interest of "Ivy Growth
with
Income Fund--
Class D," which establishment and
redesignation,
respectively,
are to become effective on April 30, 1996.
The voting,
dividend,
liquidation and other rights, preferences,
powers,
restrictions,
limitations, qualifications, terms and
conditions of
the Class D
shares of Ivy Growth with Income Fund, as set
forth in
Ivy Fund's
Declaration of Trust, as amended from time to
time,
will not be
changed by this redesignation.]
Shareholders have the right to vote for
the
election of
Trustees of the Trust and on any and all
matters on
which they
may be entitled to vote by law or by the
provisions of
the
Trust's By-Laws. The Trust is not required
to hold a
regular
annual meeting of shareholders, and it does
not intend
to do so.
Shares of each class of each Fund entitle
their holders
to one
vote per share (with proportionate voting for
fractional shares).
On matters affecting only one Fund, only the
shareholders of that
Fund are entitled to vote. All classes of
shares of a
Fund will
vote together, except with respect to the
distribution
plan
applicable to that Fund's Class A, Class B or
Class C
shares or
when a class vote is required by the 1940
Act. On
matters
relating to all funds of the Trust, but
affecting the
funds
differently, separate votes by the
shareholders of each
fund are
required. Approval of an investment advisory
agreement
and a
change in fundamental policies would be
regarded as
matters
requiring separate voting by the shareholders
of each
fund of the
Trust. If the Trustees determine that a
matter does
not affect
the interests of a Fund, then the
shareholders of that
Fund will
not be entitled to vote on that matter.
Matters that
affect the
Trust in general, such as ratification of the
selection
of
independent public accountants, will be voted
upon
collectively
by the shareholders of all funds of the
Trust.
As used in this SAI and the Prospectus,
the phrase
"majority
vote of the outstanding shares" of a Fund
means the
vote of the
lesser of: (1) 67% of the shares of that
Fund (or of
the Trust)
present at a meeting if the holders of more
than 50% of
the
outstanding shares are present in person or
by proxy;
or (2) more
than 50% of the outstanding shares of that
Fund (or of
the
Trust).
With respect to the submission to
shareholder vote
of a
matter requiring separate voting by a Fund,
the matter
shall have
been effectively acted upon with respect to
that Fund
if a
majority of the outstanding voting securities
of that
Fund votes
for the approval of the matter,
notwithstanding that:
(1) the
matter has not been approved by a majority of
the
outstanding
voting securities of any other fund of the
Trust; or
(2) the
matter has not been approved by a majority of
the
outstanding
voting securities of the Trust.
The Amended and Restated Declaration of
Trust
provides that
the holders of not less than two-thirds of
the
outstanding shares
of the Trust may remove a person serving as
trustee
either by
declaration in writing or at a meeting called
for such
purpose.
The Trustees are required to call a meeting
for the
purpose of
considering the removal of a person serving
as Trustee
if
requested in writing to do so by the holders
of not
less than 10%
of the outstanding shares of the Trust.
Shareholders
will be
assisted in communicating with other
shareholders in
connection
with the removal of a Trustee as if Section
26(c) of
the Act were
applicable.
The Trust's shares do not have
cumulative voting
rights and
accordingly the holders of more than 50% of
the
outstanding
shares could elect the entire Board, in which
case the
holders of
the remaining shares would not be able to
elect any
Trustees.
To the knowledge of the Trust, as of
January 31,
1996, no
shareholder owned beneficially or of record
5% or more
of any
Fund's outstanding Class A, Class B, Class C
or Class I
shares,
except that of the outstanding Class A shares
of Ivy
Emerging
Growth Fund, Amalgamated Bank of New York
(custodian)
FBO TWU-NYC
Private Bus Lines Pension Fund, P.O. Box 370
Cooper
Station, New
York, New York 10003, owned of record
90,679.566 shares
(5.48%);
and except that of the outstanding Class B
shares of
Ivy Growth
Fund, IBT (custodian) FBO G. Pattyson, P.O.
Box 11,
Terrace Bay,
Ontario, Canada POT 2W0, owned of record
14,617.961
shares
(9.94%); and of the outstanding Class C
shares of Ivy
Growth with
Income Fund (which shares will be
redesignated as Class
D shares
of Ivy Growth with Income Fund, effective
April 30,
1996),
Resources Trust Co. (custodian) FBO J.
McDonald, 109
South
Street, Needham, Massachusetts 02192, owned
of record
8,037.952
shares (7.10%), and J. and L. Venner
(trustees) FBO
Clampo
Products Profit Sharing Plan, 1743 Wall Road,
Wadsworth, Ohio
44281, owned of record 7,215.092 shares
(6.37%).
Under Massachusetts law, the Trust's
shareholders
could,
under certain circumstances, be held
personally liable
for the
obligations of the Trust. However, the
Amended and
Restated
Declaration of Trust disclaims liability of
the
shareholders,
Trustees or officers of the Trust for acts or
obligations of the
Trust, which are binding only on the assets
and
property of the
Trust, and requires that notice of the
disclaimer be
given in
each contract or obligation entered into or
executed by
the Trust
or its Trustees. The Amended and Restated
Declaration
of Trust
provides for indemnification out of Fund
property for
all loss
and expense of any shareholder of a Fund held
personally liable
for the obligations of that Fund. The risk
of a
shareholder of
the Trust incurring financial loss on account
of
shareholder
liability is limited to circumstances in
which the
Trust itself
would be unable to meet its obligations and,
thus,
should be
considered remote. No series of the Trust is
liable
for the
obligations of any other series of the Trust.
NET ASSET VALUE
The share price, or value, for the
separate
Classes of
shares of a Fund is called the net asset
value per
share. The
net asset value per share of a Fund is
computed by
dividing the
value of the assets of that Fund, less its
liabilities,
by the
number of shares of that Fund outstanding.
For
purposes of
determining the aggregate net assets of a
Fund, cash
and
receivables will be valued at their
realizable amounts.
A
security listed or traded on a recognized
stock
exchange or
NASDAQ is valued at its last sale price on
the
principal exchange
on which the security is traded. The value
of a
foreign security
is determined in its national currency as of
the normal
close of
trading on the foreign exchange on which it
is traded
or as of
the close of regular trading on the Exchange,
if that
is earlier,
and that value is then converted into its
U.S. dollar
equivalent
at the foreign exchange rate in effect at
noon, Eastern
time, on
the day the value of the foreign security is
determined. If no
sale is reported at that time, the average
between the
current
bid and asked price is used. All other
securities for
which OTC
market quotations are readily available are
valued at
the average
between the current bid and asked price.
Interest will
be
recorded as accrued. Securities and other
assets for
which
market prices are not readily available are
valued at
fair value
as determined by IMI and approved in good
faith by the
Board.
Money market instruments of the Fund are
valued at
amortized
cost, which approximates money market value.
A Fund's liabilities are allocated
between its
Classes. The
total of such liabilities allocated to a
Class plus
that Class's
distribution fee and any other expenses
specially
allocated to
that Class are then deducted from the Class's
proportionate
interest in that Fund's assets, and the
resulting
amount for each
Class is divided by the number of shares of
that Class
outstanding to produce the net asset value
per share.
Portfolio securities are valued and net
asset
value per
share is determined as of the close of
regular trading
on the
Exchange (normally 4:00 p.m., eastern time),
every
Monday through
Friday (exclusive of national business
holidays). The
Trust's
offices will be closed, and net asset value
will not be
calculated, on the following national
business
holidays: New
Year's Day, President's Day, Good Friday,
Memorial Day,
Independence Day, Labor Day, Thanksgiving Day
and
Christmas Day.
On those days when either or both of the
Funds'
Custodian or the
Exchange close early as a result of such day
being a
partial
holiday or otherwise, the right is reserved
to advance
the time
on that day by which purchase and redemption
requests
must be
received.
When a Fund writes an option, an amount
equal to
the premium
received by that Fund is included in that
Fund's
Statement of
Assets and Liabilities as an asset and as an
equivalent
liability. The amount of the liability will
be
subsequently
marked-to-market daily to reflect the current
market
value of the
option written. The current market value of
a written
option is
the last sale on the principal exchange on
which such
option is
traded or, in the absence of a sale, the last
offering
price.
The premium paid by a Fund for the
purchase of a
call or a
put option will be deducted from its assets
and an
equal amount
will be included in the asset section of that
Fund's
Statement of
Assets and Liabilities as an investment and
subsequently adjusted
to the current market value of the option.
For
example, if the
current market value of the option exceeds
the premium
paid, the
excess would be unrealized appreciation and,
conversely, if the
premium exceeds the current market value,
such excess
would be
unrealized depreciation. The current market
value of a
purchased
option will be the last sale price on the
principal
exchange on
which the option is traded or, in the absence
of a
sale, the last
bid price. If a Fund exercises a call option
which it
has
purchased, the cost of the security which
that Fund
purchased
upon exercise will be increased by the
premium
originally paid.
The sale of shares of a Fund will be
suspended
during any
period when the determination of its net
asset value is
suspended
pursuant to rules or orders of the SEC and
may be
suspended by
the Board whenever in its judgment it is in
the best
interest of
the particular Fund to do so.
PORTFOLIO TURNOVER
Each Fund purchases securities that are
believed
by IMI to
have above average potential for capital
appreciation.
Common
stocks are disposed of in situations where it
is
believed that
potential for such appreciation has lessened
or that
other common
stocks have a greater potential. Therefore,
a Fund may
purchase
and sell securities without regard to the
length of
time the
security is to be, or has been, held. A
change in
securities
held by a Fund is known as "portfolio
turnover" and may
involve
the payment by the Fund of dealer markup or
underwriting
commission and other transaction costs on the
sale of
securities,
as well as on the reinvestment of the
proceeds in other
securities. A Fund's portfolio turnover rate
is
calculated by
dividing the lesser of purchases or sales of
portfolio
securities
for the most recently completed fiscal year
by the
monthly
average of the value of the portfolio
securities owned
by that
Fund during that year. For purposes of
determining a
Fund's
portfolio turnover rate, all securities whose
maturities at the
time of acquisition were one year or less are
excluded.
The
annual portfolio turnover rates for the Funds
are
provided in the
Prospectus under "The Funds' Financial
Highlights."
REDEMPTIONS
Shares of each Fund are redeemed at
their net
asset value
next determined after a proper redemption
request has
been
received by IMSC, less any applicable CDSC.
Unless a shareholder requests that the
proceeds of
any
redemption be wired to his or her bank
account, payment
for
shares tendered for redemption is made by
check within
seven days
after tender in proper form, except that the
Trust
reserves the
right to suspend the right of redemption or
to postpone
the date
of payment upon redemption beyond seven days,
(i) for
any period
during which the Exchange is closed (other
than
customary weekend
and holiday closings) or during which trading
on the
Exchange is
restricted, (ii) for any period during which
an
emergency exists
as determined by the SEC as a result of which
disposal
of
securities owned by a Fund is not reasonably
practicable or it is
not reasonably practicable for the Fund to
fairly
determine the
value of its net assets, or (iii) for such
other
periods as the
SEC may by order permit for the protection of
shareholders of a
Fund.
Under unusual circumstances, when the
Board deems
it in the
best interest of a Fund's shareholders, the
Fund may
make payment
for shares repurchased or redeemed in whole
or in part
in
securities of that Fund taken at current
values. If
any such
redemption in kind is to be made, each Fund
intends to
make an
election pursuant to Rule 18f-1 under the
1940 Act.
This will
require the particular Fund to redeem with
cash at a
shareholder's election in any case where the
redemption
involves
less than $250,000 (or 1% of that Fund's net
asset
value at the
beginning of each 90-day period during which
such
redemptions are
in effect, if that amount is less than
$250,000).
Should payment
be made in securities, the redeeming
shareholder may
incur
brokerage costs in converting such securities
to cash.
Subject to state law restrictions, the
Trust may
redeem
those accounts of shareholders who have
maintained an
investment,
including sales charges paid, of less than
$1,000 in a
Fund for a
period of more than 12 months. All accounts
below that
minimum
will be redeemed simultaneously when MIMI
deems it
advisable.
The $1,000 balance will be determined by
actual dollar
amounts
invested by the shareholder, unaffected by
market
fluctuations.
The Trust will notify any such shareholder by
certified
mail of
its intention to redeem such account, and the
shareholder shall
have 60 days from the date of such letter to
invest
such
additional sums as shall raise the value of
such
account above
that minimum. Should the shareholder fail to
forward
such sum
within 60 days of the date of the Trust's
letter of
notification,
the Trust will redeem the shares held in such
account
and
transmit the redemption in value thereof to
the
shareholder.
However, those shareholders who are investing
pursuant
to the
Automatic Investment Method will not be
redeemed
automatically
unless they have ceased making payments
pursuant to the
plan for
a period of at least six consecutive months,
and these
shareholders will be given six-months' notice
by the
Trust before
such redemption. Shareholders in a qualified
retirement, pension
or profit sharing plan who wish to avoid tax
consequences must
"rollover" any sum so redeemed into another
qualified
plan within
60 days. The Trustees of the Trust may
change the
minimum
account size.
If a shareholder has given authorization
for
telephonic
redemption privilege, shares can be redeemed
and
proceeds sent by
Federal wire to a single previously
designated bank
account.
Delivery of the proceeds of a wire redemption
request
of $250,000
or more may be delayed by a Fund for up to
seven days
if deemed
appropriate under then-current market
conditions. The
Trust
reserves the right to change this minimum or
to
terminate the
telephonic redemption privilege without prior
notice.
The Trust
cannot be responsible for the efficiency of
the Federal
wire
system of the shareholder's dealer of record
or bank.
The
shareholder is responsible for any charges by
the
shareholder's
bank.
Each Fund employs reasonable procedures
that
require
personal identification prior to acting on
redemption
or exchange
instructions communicated by telephone to
confirm that
such
instructions are genuine. In the absence of
such
instructions, a
Fund may be liable for any losses due to
unauthorized
or
fraudulent telephone instructions.
CONVERSION OF CLASS B
SHARES
As described in the Prospectus, Class B
shares of
each Fund
will automatically convert to Class A shares
of the
respective
Fund, based on the relative net asset values
per share
of the two
classes, no later than the month following
the eighth
anniversary
of the initial issuance of such Class B
shares of the
particular
Fund occurs. For the purpose of calculating
the
holding period
required for conversion of Class B shares,
the date of
initial
issuance shall mean: (1) the date on which
such Class
B shares
were issued, or (2) for Class B shares
obtained through
an
exchange, or a series of exchanges, (subject
to the
exchange
privileges for Class B shares) the date on
which the
original
Class B shares were issued. For purposes of
conversion
of
Class B shares, Class B shares purchased
through the
reinvestment
of dividends and capital gain distributions
paid in
respect of
Class B shares will be held in a separate
sub-account.
Each time
any Class B shares in the shareholder's
regular account
(other
than those shares in the sub-account) convert
to Class
A shares,
a pro rata portion of the Class B shares in
the
sub-account will
also convert to Class A shares. The portion
will be
determined
by the ratio that the shareholder's Class B
shares
converting to
Class A shares bears to the shareholder's
total Class B
shares
not acquired through the reinvestment of
dividends and
capital
gain distributions.
TAXATION
The following is a general discussion of
certain
tax rules
thought to be applicable with respect to the
Funds. It
is merely
a summary and is not an exhaustive discussion
of all
possible
situations or of all potentially applicable
taxes.
Accordingly,
shareholders and prospective shareholders
should
consult a
competent tax advisor about the tax
consequences to
them of
investing in the Funds.
Each Fund intends to be taxed as a
regulated
investment
company under Subchapter M of the Code.
Accordingly,
each Fund
must, among other things, (a) derive in each
taxable
year at
least 90% of its gross income from dividends,
interest,
payments
with respect to certain securities loans, and
gains
from the sale
or other disposition of stock, securities or
foreign
currencies,
or other income derived with respect to its
business of
investing
in such stock, securities or currencies; (b)
derive in
each
taxable year less than 30% of its gross
income from the
sale or
other disposition of certain assets held less
than
three months,
namely: (i) stock or securities; (ii)
options,
futures, or
forward contracts (other than those on
foreign
currencies); or
(iii) foreign currencies (or options,
futures, or
forward
contracts on foreign currencies) that are not
directly
related to
the particular Fund's principal business of
investing
in stock or
securities (or options and futures with
respect to
stock or
securities) (the "30% Limitation"); and (c)
diversify
its
holdings so that, at the end of each fiscal
quarter,
(i) at least
50% of the market value of the particular
Fund's assets
is
represented by cash, U.S. Government
securities, the
securities
of other regulated investment companies and
other
securities,
with such other securities limited, in
respect of any
one issuer,
to an amount not greater than 5% of the value
of the
particular
Fund's total assets and 10% of the
outstanding voting
securities
of such issuer, and (ii) not more than 25% of
the value
of its
total assets is invested in the securities of
any one
issuer
(other than U.S. Government securities and
the
securities of
other regulated investment companies).
As a regulated investment company, each
Fund
generally will
not be subject to U.S. Federal income tax on
its income
and gains
that it distributes to shareholders, if at
least 90% of
its
investment company taxable income (which
includes,
among other
items, dividends, interest and the excess of
any
short-term
capital gains over long-term capital losses)
for the
taxable year
is distributed. Each Fund intends to
distribute all
such income.
Amounts not distributed on a timely
basis in
accordance with
a calendar year distribution requirement are
subject to
a
nondeductible 4% excise tax at the Fund
level. To
avoid the tax,
each Fund must distribute during each
calendar year,
(1) at least
98% of its ordinary income (not taking into
account any
capital
gains or losses) for the calendar year, (2)
at least
98% of its
capital gains in excess of its capital losses
(adjusted
for
certain ordinary losses) for a one-year
period
generally ending
on October 31 of the calendar year, and (3)
all
ordinary income
and capital gains for previous years that
were not
distributed
during such years. To avoid application of
the excise
tax, each
Fund intends to make distributions in
accordance with
the
calendar year distribution requirements. A
distribution will be
treated as paid on December 31 of the current
calendar
year if it
is declared by the particular Fund in
October, November
or
December of the year with a record date in
such a month
and paid
by that Fund during January of the following
year.
Such
distributions will be taxable to shareholders
in the
calendar
year the distributions are declared, rather
than the
calendar
year in which the distributions are received.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD
CONTRACTS
The taxation of equity options and OTC
options on
debt
securities is governed by Code section 1234.
Pursuant
to Code
section 1234, the premium received by a Fund
for
selling a put or
call option is not included in income at the
time of
receipt. If
the option expires, the premium is short-term
capital
gain to the
Fund. If the Fund enters into a closing
transaction,
the
difference between the amount paid to close
out its
position and
the premium received is short-term capital
gain or
loss. If a
call option written by a Fund is exercised,
thereby
requiring the
Fund to sell the underlying security, the
premium will
increase
the amount realized upon the sale of such
security and
any
resulting gain or loss will be a capital gain
or loss,
and will
be long-term or short-term depending upon the
holding
period of
the security. With respect to a put or call
option
that is
purchased by a Fund, if the option is sold,
any
resulting gain or
loss will be a capital gain or loss, and will
be
long-term or
short-term, depending upon the holding period
of the
option. If
the option expires, the resulting loss is a
capital
loss and is
long-term or short-term, depending upon the
holding
period of the
option. If the option is exercised, the cost
of the
option, in
the case of a call option, is added to the
basis of the
purchased
security and, in the case of a put option,
reduces the
amount
realized on the underlying security in
determining gain
or loss.
Some of the options, futures and foreign
currency
forward
contracts in which a Fund may invest may be
"section
1256
contracts." Gains (or losses) on these
contracts
generally are
considered to be 60% long-term and 40%
short-term
capital gains
or losses; however foreign currency gains or
losses
arising from
certain section 1256 contracts are ordinary
in
character. Also,
section 1256 contracts held by a Fund at the
end of
each taxable
year (and on certain other dates prescribed
in the
Code) are
"marked-to-market" with the result that
unrealized
gains or
losses are treated as though they were
realized.
The transactions in options, futures and
forward
contracts
undertaken by a Fund may result in
"straddles" for
Federal income
tax purposes. The straddle rules may affect
the
character of
gains or losses realized by a Fund. In
addition,
losses realized
by a Fund on positions that are part of a
straddle may
be
deferred under the straddle rules, rather
than being
taken into
account in calculating the taxable income for
the
taxable year in
which such losses are realized. Because only
a few
regulations
implementing the straddle rules have been
promulgated,
the
consequences of such transactions to a Fund
are not
entirely
clear. The straddle rules may increase the
amount of
short-term
capital gain realized by a Fund, which is
taxed as
ordinary
income when distributed to shareholders.
A Fund may make one or more of the
elections
available under
the Code which are applicable to straddles.
If a Fund
makes any
of the elections, the amount, character and
timing of
the
recognition of gains or losses from the
affected
straddle
positions will be determined under rules that
vary
according to
the election(s) made. The rules applicable
under
certain of the
elections may operate to accelerate the
recognition of
gains or
losses from the affected straddle positions.
Because application of the straddle
rules may
affect the
character of gains or losses, defer losses
and/or
accelerate the
recognition of gains or losses from the
affected
straddle
positions, the amount which must be
distributed to
shareholders
as ordinary income or long-term capital gain,
may be
increased or
decreased substantially as compared to a fund
that did
not engage
in such transactions.
The 30% Limitation and the
diversification
requirements
applicable to a Fund's assets may limit the
extent to
which a
Fund will be able to engage in transactions
in options,
futures
and forward contracts.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS
OR LOSSES
Gains or losses attributable to
fluctuations in
exchange
rates which occur between the time a Fund
accrues
receivables or
liabilities denominated in a foreign currency
and the
time the
Fund actually collects such receivables or
pays such
liabilities
generally are treated as ordinary income or
ordinary
loss.
Similarly, on disposition of some
investments,
including debt
securities denominated in a foreign currency
and
certain options,
futures and forward contracts, gains or
losses
attributable to
fluctuations in the value of the foreign
currency
between the
date of acquisition of the security or
contract and the
date of
disposition also are treated as ordinary gain
or loss.
These
gains and losses, referred to under the Code
as
"section 988"
gains or losses, increase or decrease the
amount of a
Fund's
investment company taxable income available
to be
distributed to
its shareholders as ordinary income. If
section 988
losses
exceed other investment company taxable
income during a
taxable
year, a Fund would not be able to make any
ordinary
dividend
distributions, or distributions made before
the losses
were
realized would be recharacterized as a return
of
capital to
shareholders, rather than as an ordinary
dividend,
reducing each
shareholder's basis in his or her Fund
shares.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT
COMPANIES
A Fund may invest in shares of foreign
corporations which
may be classified under the Code as passive
foreign
investment
companies ("PFICs"). In general, a foreign
corporation
is
classified as a PFIC if at least one-half of
its assets
constitute investment-type assets, or 75% or
more of
its gross
income is investment-type income. If a Fund
receives a
so-called
"excess distribution" with respect to PFIC
stock, a
Fund itself
may be subject to a tax on a portion of the
excess
distribution,
whether or not the corresponding income is
distributed
by a Fund
to shareholders. In general, under the PFIC
rules, an
excess
distribution is treated as having been
realized ratably
over the
period during which a Fund held the PFIC
shares. A
Fund itself
will be subject to tax on the portion, if
any, of an
excess
distribution that is so allocated to prior
Fund taxable
years and
an interest factor will be added to the tax,
as if the
tax had
been payable in such prior taxable years.
Certain
distributions
from a PFIC as well as gain from the sale of
PFIC
shares are
treated as excess distributions. Excess
distributions
are
characterized as ordinary income even though,
absent
application
of the PFIC rules, certain excess
distributions might
have been
classified as capital gain.
A Fund may be eligible to elect
alternative tax
treatment
with respect to PFIC shares. Under an
election that
currently is
available in some circumstances, a Fund
generally would
be
required to include in its gross income its
share of
the earnings
of a PFIC on a current basis, regardless of
whether
distributions
are received from the PFIC in a given year.
If this
election
were made, the special rules, discussed
above, relating
to the
taxation of excess distributions, would not
apply. In
addition,
other elections may become available that
would affect
the tax
treatment of PFIC shares held by a Fund.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a
fixed maturity
date of
more than one year from the date of issuance)
that may
be
acquired by a Fund may be treated as debt
securities
that are
issued originally at a discount. Generally,
the amount
of the
original issue discount ("OID") is treated as
interest
income and
is included in income over the term of the
debt
security, even
though payment of that amount is not received
until a
later time,
usually when the debt security matures.
If a Fund invests in certain high yield
original
issue
discount obligations issued by corporations,
a portion
of the
original issue discount accruing on the
obligation may
be
eligible for the deduction for dividends
received by
corporations. In such event, dividends of
investment
company
taxable income received from the Fund by its
corporate
shareholders, to the extent attributable to
such
portion of
accrued original issue discount, may be
eligible for
this
deduction for dividends received by
corporations if so
designated
by the Fund in a written notice to
shareholders.
Some of the debt securities (with a
fixed maturity
date of
more than one year from the date of issuance)
that may
be
acquired by a Fund in the secondary market
may be
treated as
having market discount. Generally, gain
recognized on
the
disposition of, and any partial payment of
principal
on, a debt
security having market discount is treated as
ordinary
income to
the extent the gain, or principal payment,
does not
exceed the
"accrued market discount" on such debt
security. In
addition,
the deduction of any interest expenses
attributable to
debt
securities having market discount may be
deferred.
Market
discount generally accrues in equal daily
installments.
A Fund
may make one or more of the elections
applicable to
debt
securities having market discount, which
could affect
the
character and timing of recognition of
income.
Some debt securities (with a fixed
maturity date
of one year
or less from the date of issuance) that may
be acquired
by a Fund
may be treated as having acquisition
discount, or OID
in the case
of certain types of debt securities.
Generally, a Fund
will be
required to include the acquisition discount,
or OID,
in income
over the term of the debt security, even
though payment
of that
amount is not received until a later time,
usually when
the debt
security matures. A Fund may make one or
more of the
elections
applicable to debt securities having
acquisition
discount, or
OID, which could affect the character and
timing of
recognition
of income.
A Fund generally will be required to
distribute
dividends to
shareholders representing discount on debt
securities
that is
currently includible in income, even though
cash
representing
such income may not have been received by a
Fund. Cash
to pay
such dividends may be obtained from sales
proceeds of
securities
held by a Fund.
DISTRIBUTIONS
Distributions of investment company
taxable income
are
taxable to a U.S. shareholder as ordinary
income,
whether paid in
cash or shares. Dividends paid by a Fund to
a
corporate
shareholder, to the extent such dividends are
attributable to
dividends received from U.S. corporations by
the Fund,
may
qualify for the dividends received deduction.
However,
the
revised alternative minimum tax applicable to
corporations may
reduce the value of the dividends received
deduction.
Distributions of net capital gains (the
excess of net
long-term
capital gains over net short-term capital
losses), if
any,
designated by a Fund as capital gain
dividends, are
taxable as
long-term capital gains, whether paid in cash
or in
shares,
regardless of how long the shareholder has
held a
Fund's shares
and are not eligible for the dividends
received
deduction.
Shareholders receiving distributions in the
form of
newly issued
shares will have a cost basis in each share
received
equal to the
net asset value of a share of a Fund on the
distribution date. A
distribution of an amount in excess of a
Fund's current
and
accumulated earnings and profits will be
treated by a
shareholder
as a return of capital which is applied
against and
reduces the
shareholder's basis in his or her shares. To
the
extent that the
amount of any such distribution exceeds the
shareholder's basis
in his or her shares, the excess will be
treated by the
shareholder as gain from a sale or exchange
of the
shares.
Shareholders will be notified annually as to
the U.S.
Federal tax
status of distributions and shareholders
receiving
distributions
in the form of newly issued shares will
receive a
report as to
the net asset value of the shares received.
If the net asset value of shares is
reduced below
a
shareholder's cost as a result of a
distribution by a
Fund, such
distribution generally will be taxable even
though it
represents
a return of invested capital. Investors
should be
careful to
consider the tax implications of buying
shares just
prior to a
distribution. The price of shares purchased
at this
time may
reflect the amount of the forthcoming
distribution.
Those
purchasing just prior to a distribution will
receive a
distribution which generally will be taxable
to them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of
his or her
shares, a
shareholder will realize a taxable gain or
loss
depending upon
his or her basis in the shares. Such gain or
loss will
be
treated as capital gain or loss if the shares
are
capital assets
in the shareholder's hands and generally will
be
long-term or
short-term, depending upon the shareholder's
holding
period for
the shares. Any loss realized on a
redemption sale or
exchange
will be disallowed to the extent the shares
disposed of
are
replaced (including through reinvestment of
dividends)
within a
period of 61 days beginning 30 days before
and ending
30 days
after the shares are disposed of. In such a
case, the
basis of
the shares acquired will be adjusted to
reflect the
disallowed
loss. Any loss realized by a shareholder on
the sale
of Fund
shares held by the shareholder for six-months
or less
will be
treated for tax purposes as a long-term
capital loss to
the
extent of any distributions of capital gain
dividends
received or
treated as having been received by the
shareholder with
respect
to such shares.
In some cases, shareholders will not be
permitted
to take
all or portion of their sales loads into
account for
purposes of
determining the amount of gain or loss
realized on the
disposition of their shares. This
prohibition
generally applies
where (1) the shareholder incurs a sales load
in
acquiring the
shares of a Fund, (2) the shares are disposed
of before
the 91st
day after the date on which they were
acquired, and (3)
the
shareholder subsequently acquires shares in a
Fund or
another
regulated investment company and the
otherwise
applicable sales
charge is reduced under a "reinvestment
right" received
upon the
initial purchase of Fund shares. The term
"reinvestment right"
means any right to acquire shares of one or
more
regulated
investment companies without the payment of a
sales
load or with
the payment of a reduced sales charge. Sales
charges
affected by
this rule are treated as if they were
incurred with
respect to
the shares acquired under the reinvestment
right. This
provision
may be applied to successive acquisitions of
fund
shares.
FOREIGN WITHHOLDING TAXES
Income received by a Fund from sources
within a
foreign
country may be subject to withholding and
other taxes
imposed by
that country.
If more than 50% of the value of a
Fund's total
assets at
the close of its taxable year consists of
securities of
foreign
corporations, the Fund will be eligible and
may elect
to "pass-
through" to that Fund's shareholders the
amount of
foreign income
and similar taxes paid by that Fund.
Pursuant to this
election,
a shareholder will be required to include in
gross
income (in
addition to taxable dividends actually
received) his or
her pro
rata share of the foreign income and similar
taxes paid
by a
Fund, and will be entitled either to deduct
his or her
pro rata
share of foreign income and similar taxes in
computing
his or her
taxable income or to use it as a foreign tax
credit
against his
or her U.S. Federal income taxes, subject to
limitations. No
deduction for foreign taxes may be claimed by
a
shareholder who
does not itemize deductions. Foreign taxes
generally
may not be
deducted by a shareholder that is an
individual in
computing the
alternative minimum tax. Each shareholder
will be
notified
within 60 days after the close of a Fund's
taxable year
whether
the foreign taxes paid by the Fund will
"pass-through"
for that
year and, if so, such notification will
designate (1)
the
shareholder's portion of the foreign taxes
paid to each
such
country and (2) the portion of the dividend
which
represents
income derived from sources within each such
country.
Generally, a credit for foreign taxes is
subject
to the
limitation that it may not exceed the
shareholder's
U.S. tax
attributable to his or her total foreign
source taxable
income.
For this purpose, if a Fund makes the
election
described in the
preceding paragraph, the source of that
Fund's income
flows
through to its shareholders. With respect to
a Fund,
gains from
the sale of securities generally will be
treated as
derived from
U.S. sources and section 988 gains will be
treated as
ordinary
income derived from U.S. sources. The
limitation on
the foreign
tax credit is applied separately to foreign
source
passive
income, including foreign source passive
income
received from a
Fund. In addition, the foreign tax credit
may offset
only 90% of
the revised alternative minimum tax imposed
on
corporations and
individuals.
The foregoing is only a general
description of the
foreign
tax credit under current law. Because
application of
the credit
depends on the particular circumstances of
each
shareholder,
shareholders are advised to consult their own
tax
advisers.
BACKUP WITHHOLDING
Each Fund will be required to report to
the
Internal Revenue
Service ("IRS") all distributions as well as
gross
proceeds from
the redemption of the particular Fund's
shares, except
in the
case of certain exempt shareholders. All
such
distributions and
proceeds will be subject to withholding of
Federal
income tax at
a rate of 31% ("backup withholding") in the
case of
non-exempt
shareholders if (1) the shareholder fails to
furnish a
Fund with
and to certify the shareholder's correct
taxpayer
identification
number or social security number, (2) the IRS
notifies
the
shareholder or the particular Fund that the
shareholder
has
failed to report properly certain interest
and dividend
income to
the IRS and to respond to notices to that
effect, or
(3) when
required to do so, the shareholder fails to
certify
that he or
she is not subject to backup withholding. If
the
withholding
provisions are applicable, any such
distributions or
proceeds,
whether reinvested in additional shares or
taken in
cash, will be
reduced by the amounts required to be
withheld.
Distributions may also be subject to
additional
state, local
and foreign taxes depending on each
shareholder's
particular
situation. Non-U.S. shareholders may be
subject to
U.S. tax
rules that differ significantly from those
summarized
above.
This discussion does not purport to deal with
all of
the tax
consequences applicable to a Fund or
shareholders.
Shareholders
are advised to consult their own tax advisers
with
respect to the
particular tax consequences to them of an
investment in
a Fund.
PERFORMANCE INFORMATION
Performance information for the classes
of shares
of the
Funds may be compared, in reports and
promotional
literature, to:
(i) the S&P 500 Index, the Dow Jones
Industrial Average
("DJIA"),
or other unmanaged indices so that investors
may
compare each
Fund's results with those of a group of
unmanaged
securities
widely regarded by investors as
representative of the
securities
markets in general; (ii) other groups of
mutual funds
tracked by
Lipper Analytical Services, a widely used
independent
research
firm that ranks mutual funds by overall
performance,
investment
objectives and assets, or tracked by other
services,
companies,
publications or other criteria; and (iii) the
Consumer
Price
Index (measure for inflation) to assess the
real rate
of return
from an investment in a Fund. Unmanaged
indices may
assume the
reinvestment of dividends but generally do
not reflect
deductions
or administrative and management costs and
expenses.
In addition, the Trust may, from time to
time,
include the
yield (with respect to Ivy Bond Fund only),
the average
annual
total return and the cumulative total return
of shares
of a Fund
in advertisements, promotional literature or
reports to
shareholders or prospective investors.
YIELD. Quotations of yield for a
specific Class
of shares
of a Fund will be based on all investment
income
attributable to
that Class earned during a particular 30-day
(or one
month)
period (including dividends and interest),
less
expenses
attributable to that Class accrued during the
period
("net
investment income"), and will be computed by
dividing
the net
investment income per share of that Class
earned during
the
period by the maximum offering price per
share (in the
case of
Class A shares) or the net asset value per
share (in
the case of
Class B and Class C shares) on the last day
of the
period,
according to the following formula:
YIELD = 2[({(a-b)/cd} +
1){superscript
6}-1]
Where: a = dividends and
interest earned
during the
period attributable
to a
specific Class
of shares,
b = expenses accrued for
the
period
attributable to that
Class
(net of
reimbursements),
c = the average daily
number of
shares of
that Class
outstanding during
the period
that were entitled
to receive
dividends,
and
d = the maximum offering
price per
share (in
the case of Class A
shares) or
the net
asset value per
share (in the
case of
Class B shares,
Class C shares
and Class
I shares) on the
last day of
the period.
The yield for Class A and Class B shares
of Ivy
Bond Fund
for the 30-day period ended December 31, 1995
were
7.68% and
7.04%, respectively. As of December 31,
1995, there
were no
outstanding Class I shares of Ivy Bond Fund.
AVERAGE ANNUAL TOTAL RETURN. Quotations
of
standardized
average annual total return ("Standardized
Return") for
a
specific Class of shares of a Fund will be
expressed in
terms of
the average annual compounded rate of return
that would
cause a
hypothetical investment in that Class of a
Fund made on
the first
day of a designated period to equal the
ending
redeemable value
("ERV") of such hypothetical investment on
the last day
of the
designated period, according to the following
formula:
P(1 + T){superscript n} = ERV
Where: P = a hypothetical initial
payment of
$1,000 to
purchase shares of a
specific Class
T = the average annual total
return of
shares of
that Class
n = the number of years
ERV = the ending redeemable
value of a
hypothetical
$1,000 payment made at
the
beginning of the
period.
For purposes of the above computation
for a Fund,
it is
assumed that all dividends and capital gains
distributions made
by a Fund are reinvested at net asset value
in
additional shares
of the same Class during the designated
period. In
calculating
the ending redeemable value for Class A
shares and
assuming
complete redemption at the end of the
applicable
period, the
maximum 5.75% (4.75% for Ivy Bond Fund) sales
charge is
deducted
from the initial $1,000 payment and, for
Class B
shares, the
applicable CDSC imposed upon redemption of
Class B
shares held
for the period is deducted. Standardized
Return
quotations for
the Funds do not take into account any
required
payments for
federal or state income taxes. Standardized
Return
quotations
for Class B shares for periods of over eight
years will
reflect
conversion of the Class B shares to Class A
shares at
the end of
the eighth year. Standardized Return
quotations are
determined
to the nearest 1/100 of 1%.
A Fund may, from time to time, include
in
advertisements,
promotional literature or reports to
shareholders or
prospective
investors total return data that are not
calculated
according to
the formula set forth above
("Non-Standardized
Return"). Neither
initial nor CDSCs are taken into account in
calculating
Non-
Standardized Return; a sales charge, if
deducted, would
reduce
the return.
The following tables summarize the
calculation of
Standardized and Non-Standardized Return for
the Class
A, Class
B, Class C and Class I (for Ivy Bond Fund)
shares of
the Funds
for the periods indicated. In determining
the average
annual
total return for a specific Class of shares
of a Fund,
recurring
fees, if any, that are charged to all
shareholder
accounts are
taken into consideration. For any account
fees that
vary with
the size of the account of a Fund, the
account fee used
for
purposes of the following computations is
assumed to be
the fee
that would be charged to the mean account
size of the
particular
Fund. Shares of Ivy Bond Fund outstanding as
of March
31, 1994
were designated Class A shares of the Fund.
Shares of
each of
Ivy Emerging Growth Fund, Ivy Growth Fund and
Ivy
Growth with
Income Fund outstanding as of October 22,
1993 have
been
redesignated as "Class A" shares of each
respective
Fund.
IVY BOND FUND
STANDARDIZED
RETURN[*]
CLASS A[1] CLASS B[2] CLASS
C[7]
CLASS I[5]
One year ended
December 31,
1995: 11.83% 11.54%
N/A
N/A
Five years ended
December 31,
1995: 8.91% N/A
N/A
N/A
Ten years ended
December 31,
1995: 8.93% N/A
N/A
N/A
Inception[#] to
December 31,
1995:[6] 8.79% 5.60%
N/A
N/A
NON-STANDARDIZED
RETURN[**]
CLASS A[3] CLASS B[4] CLASS
C[7]
CLASS I[5]
One year ended
December 31,
1995: 17.41% 16.54%
N/A
N/A
Five years ended
December 31,
1995: 9.98% N/A
N/A
N/A
Ten years ended
December 31,
1995: 9.47% N/A
N/A
N/A
Inception[#] to
December 31,
1995:[6] 9.30% 7.77%%
N/A
N/A
_________________________
[*] The Standardized Return figures for
Class A shares
reflect
the deduction of the maximum initial
sales charge
of 4.75%.
The Standardized Return figures for
Class B shares
reflect
the deduction of the applicable CDSC
imposed on a
redemption
of Class B shares held for the period.
Class I
shares are
not subject to an initial or a CDSC;
therefore,
the Non-
Standardized Return figures would be
identical to
the
Standardized Return figures.
[**] The Non-Standardized Return figures do
not reflect
the
deduction of any initial sales charge or
CDSC.
[#] Until December 31, 1994, MIMI served as
investment
adviser
to Ivy Bond Fund, which until that date
was a
series of
Mackenzie Series Trust. The inception
date for
the Fund
(and the Class A shares of the Fund) was
September
6, 1985;
the inception date for the Class B and
Class I
shares of the
Fund was April 1, 1994; and the
inception date for
the Class
C shares of the Fund is April 30, 1996.
[1] The Standardized Return figures for
Class A shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class A shares
for the one
year
ended December 31, 1995, the five years
ended
December 31,
1995, the ten years ended December 31,
1995 and
the period
from inception through December 31, 1995
would
have been
11.83%, 8.88%, 2.21% and .79%,
respectively.
[2] The Standardized Return figures for
Class B shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class B shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been 11.54%
and 5.60%,
respectively. (Since the inception date
for Class
B shares
of the Fund was April 1, 1994, there
were no Class
B shares
outstanding for the duration of the five
year or
ten year
periods ending December 31, 1995.)
[3] The Non-Standardized Return figures for
Class A
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class A
shares for the one year ended December
31, 1995,
the five
years ended December 31, 1995, the ten
years ended
December
31, 1995 and the period from inception
through
December 31,
1995 would have been 17.41%, 9.95%,
2.73% and
1.28%,
respectively.
[4] The Non-Standardized Return figures for
Class B
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class B
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been 16.54% and 7.77%, respectively.
(Since the
inception
date for Class B shares of the Fund was
April 1,
1994, there
were no Class B shares outstanding for
the
duration of the
five year or ten year periods ending
December 31,
1995.)
[5] No Class I shares were outstanding
during the time
periods
indicated.
[6] The total return for a period less than
a full
year is
calculated on an aggregate basis and is
not
annualized.
[7] Since the inception date for Class C
shares of the
Fund is
April 30, 1996, there were no Class C
shares
outstanding
during any of the relevant time periods.
IVY EMERGING GROWTH FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2]
CLASS
C[6]
One year ended
December 31,
1995: 33.90% 36.03%
N/A
Inception[#] to
December 31,
1995:[5] 29.89% 17.18%
N/A
NON-STANDARDIZED
RETURN[**]
CLASS A[3] CLASS B[4]
CLASS
C[6]
One year ended
December 31,
1995: 42.07% 41.03%
N/A
Inception[#] to
December 31,
1995:[5] 32.78% 18.29%
N/A
_________________________
[*] The Standardized Return figures for
Class A shares
reflect
the deduction of the maximum initial
sales charge
of 5.75%.
The Standardized Return figures for
Class B shares
reflect
the deduction of the applicable CDSC
imposed on a
redemption
of Class B shares held for the period.
[**] The Non-Standardized Return figures do
not reflect
the
deduction of any initial sales charge or
CDSC.
[#] The inception date for Ivy Emerging
Growth Fund
was March 3,
1993. Class A shares of the Fund were
first
offered for
sale to the public on April 30, 1993,
and Class B
shares of
the Fund were first offered for sale to
the public
on
October 23, 1993. The inception date
for the
Class C shares
of the Fund was April 30, 1996
[1] The Standardized Return figures for
Class A shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class A shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been 33.90%
and 29.83%,
respectively.
[2] The Standardized Return figures for
Class B shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class B shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been 36.03%
and 17.09%,
respectively.
[3] The Non-Standardized Return figures for
Class A
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class A
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been 42.07% and 32.74%, respectively.
[4] The Non-Standardized Return figures for
Class B
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class B
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been 41.03% and 18.22%, respectively.
[5] The total return for a period less than
a full
year is
calculated on an aggregate basis and is
not
annualized.
[6] Since the inception date for Class C
shares of the
Fund is
April 30, 1996, there were no Class C
shares
outstanding
during any of the relevant time periods.
IVY GROWTH FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2]
CLASS
C[6]
One year ended
December 31,
1995: 21.01% 21.13%
N/A
Five years ended
December 31,
1995: 12.46% N/A
N/A
Ten years ended
December 31,
1995: 11.09% N/A
N/A
Inception[#] to
December 31,
1995:[5] 10.57% 9.12%
N/A
NON-STANDARDIZED
RETURN[**]
CLASS A[3] CLASS B[4]
CLASS
C[6]
One year ended
December 31,
1995: 27.33% 26.13%
N/A
Five years ended
December 31,
1995: 13.80% N/A
N/A
Ten years ended
December 31,
1995: 11.75% N/A
N/A
Inception[#] to
December 31,
1995:[5] 10.76% 10.34%
N/A
_________________________
[*] The Standardized Return figures for
Class A shares
reflect
the deduction of the maximum initial
sales charge
of 5.75%.
The Standardized Return figures for
Class B shares
reflect
the deduction of the applicable CDSC
imposed on a
redemption
of Class B shares held for the period.
[**] The Non-Standardized Return figures do
not reflect
the
deduction of any initial sales charge or
CDSC.
[#] The inception date for Ivy Growth Fund
(and for
Class A
shares of the Fund) was March 1, 1984.
The
inception date
for Class B shares of the Fund was
October 23,
1993. The
inception date for Class C shares of the
Fund is
April 30,
1996
[1] The Standardized Return figures for
Class A shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class A shares
for the one
year
ended December 31, 1995, the five years
ended
December 31,
1995, the ten years ended December 31,
1995 and
the period
from inception through December 31, 1995
would
have been
20.01%, 12.40%, 11.06% and 10.56%,
respectively.
[2] The Standardized Return figures for
Class B shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class B shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been 21.13%
and 9.01%,
respectively. (Since the inception date
for Class
B shares
of the Fund was October 23, 1993, there
were no
Class B
shares outstanding for the duration of
the five
year or ten
year periods ending December 31, 1995.)
[3] The Non-Standardized Return figures for
Class A
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class A
shares for the one year ended December
31, 1995,
the five
years ended December 31, 1995, the ten
years ended
December
31, 1995 and the period from inception
through
December 31,
1995 would have been 27.33%, 13.74%,
11.72% and
10.76%,
respectively.
[4] The Non-Standardized Return figures for
Class B
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class B
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been 26.13% and 10.24%, respectively.
(Since the
inception
date for Class B shares of the Fund was
October
23, 1993,
there were no Class B shares outstanding
for the
duration of
the five year or ten year periods ending
December
31, 1995.)
[5] The total return for a period less than
a full
year is
calculated on an aggregate basis and is
not
annualized.
[6] Since the inception date for Class C
shares of the
Fund is
April 30, 1996, there were no Class C
shares
outstanding
during any of the relevant time periods.
IVY GROWTH WITH INCOME FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2]
CLASS
C[6]
One year ended
December 31,
1995: 17.75% 18.94%
N/A
Five years ended
December 31,
1995: 13.18% N/A
N/A
Ten years ended
December 31,
1995: 12.35% N/A
N/A
Inception[#] to
December 31,
1995:[5] 14.53% 7.89%
N/A
NON-STANDARDIZED
RETURN[**]
CLASS A[3] CLASS B[4]
CLASS
C[6]
One year ended
December 31,
1995: 24.93% 23.94%
N/A
Five years ended
December 31,
1995: 14.53% N/A
N/A
Ten years ended
December 31,
1995: 13.01% N/A
N/A
Inception[#] to
December 31,
1995:[5] 15.12% 9.13%
N/A
_________________________
[*] The Standardized Return figures for
Class A shares
reflect
the deduction of the maximum initial
sales charge
of 5.75%.
The Standardized Return figures for
Class B shares
reflect
the deduction of the applicable CDSC
imposed on a
redemption
of Class B shares held for the period.
[**] The Non-Standardized Return figures do
not reflect
the
deduction of any initial sales charge or
CDSC.
[#] The inception date for Ivy Growth with
Income Fund
(and the
Class A shares of the Fund) was April 1,
1984; the
inception
date for Class B shares of the Fund was
October
23, 1993;
and the inception date for the Class C
shares of
the Fund is
April 30, 1996.
[1] The Standardized Return figures for
Class A shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class A shares
for the one
year
ended December 31, 1995, the five years
ended
December 31,
1995, the ten years ended December 31,
1995 and
the period
from inception through December 31, 1995
would
have been
17.75%, 13.16%, 12.33% and 14.52%,
respectively.
[2] The Standardized Return figures for
Class B shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class B shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been 18.94%
and 7.89%,
respectively. (Since the inception date
for Class
B shares
of the Fund was October 23, 1993, there
were no
Class B
shares outstanding for the duration of
the five
year or ten
year periods ending December 31, 1995.)
[3] The Non-Standardized Return figures for
Class A
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class A
shares for the one year ended December
31, 1995,
the five
years ended December 31, 1995, the ten
years ended
December
31, 1995 and the period from inception
through
December 31,
1995 would have been 24.93%, 14.51%,
13.00% and
15.10%,
respectively.
[4] The Non-Standardized Return figures for
Class B
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class B
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been 23.94% and 9.13%, respectively.
(Since the
inception
date for Class B shares of the Fund was
October
23, 1993,
there were no Class B shares outstanding
for the
duration of
the five year or ten year periods ending
December
31, 1995.)
[5] The total return for a period less than
a full
year is
calculated on an aggregate basis and is
not
annualized.
[6] Since the inception date for Class C
shares of the
Fund is
April 30, 1996, there were no Class C
shares
outstanding
during any of the relevant time periods.
The
inception of
Class C shares of the Fund will coincide
with the
redesignation as "Class D" those shares
of Ivy
Growth with
Income Fund that were initially issued
as "Ivy
Growth with
Income Fund -- Class C" to shareholders
of
Mackenzie
Growth & Income Fund, a former series of
the
Company, in
connection with the reorganization
between that
fund and Ivy
Growth with Income Fund, which shares
are not
offered for
sale to the public.
CUMULATIVE TOTAL RETURN. Cumulative
total return
is the
cumulative rate of return on a hypothetical
initial
investment of
$1,000 in a specific Class of shares of a
Fund for a
specified
period. Cumulative total return quotations
reflect
changes in
the price of a Fund's shares and assume that
all
dividends and
capital gains distributions during the period
were
reinvested in
the Fund shares. Cumulative total return is
calculated
by
computing the cumulative rates of return of a
hypothetical
investment in a specific Class of shares of a
Fund over
such
periods, according to the following formula
(cumulative
total
return is then expressed as a percentage):
C = (ERV/P) - 1
Where: C = cumulative total return
P = a hypothetical initial
investment
of $1,000
to purchase shares of a
specific
Class
ERV = ending redeemable value:
ERV is
the value,
at the end of the
applicable
period, of a
hypothetical $1,000
investment made
at the
beginning of the
applicable period.
IVY BOND FUND. The following table
summarizes the
calculation of
Cumulative Total Return for the periods
indicated
through
December 31, 1995, assuming the maximum 4.75%
sales
charge has
been assessed.
SINCE
ONE YEAR FIVE YEARS TEN
YEARS
INCEPTION[*]
Class A 11.83% 53.26% 135.32%
138.85%
Class B 11.54% N/A[**] N/A[**]
N/A[**]
Class C N/A[**] N/A[**] N/A[**]
N/A[**]
Class I N/A[**] N/A[**] N/A[**]
N/A[**]
The following table summarizes the
calculation of
Cumulative
Total Return for the periods indicated
through December
31, 1995,
assuming the maximum 5.75% sales charge has
not been
assessed.
SINCE
ONE YEAR FIVE YEARS TEN
YEARS
INCEPTION[*]
Class A 17.41% 60.90% 147.06%
150.76%
Class B 16.54% N/A[**] N/A[**]
14.00%
Class C N/A[**] N/A[**] N/A[**]
N/A[**]
Class I N/A[**] N/A[**] N/A[**]
N/A[**]
___________________________
[*] Until December 31, 1994, MIMI served as
investment
adviser
to Ivy Bond Fund, which until that date
was a
series of
Mackenzie Series Trust. The inception
date for
the Fund
(and the Class A shares of Ivy Bond
Fund) was
September 6,
1985; the inception date for the Class B
and Class
I shares
of the Fund was April 1, 1994. The
inception date
for Class
C shares of the Fund is April 30, 1996.
[**] No such shares were outstanding for the
duration
of the time
period indicated.
IVY EMERGING GROWTH FUND. The following
table
summarizes
the calculation of Cumulative Total Return
for the
periods
indicated through December 31, 1995, assuming
the
maximum 5.75%
sales charge has been assessed.
SINCE
ONE YEAR
INCEPTION[*]
Class A 33.90% 101.01%
Class B 36.03% 41.50%
Class C N/A[**]
N/A[**]
The following table summarizes the
calculation of
Cumulative
Total Return for the periods indicated
through December
31, 1995,
assuming the maximum 5.75% sales charge has
not been
assessed.
SINCE
ONE YEAR
INCEPTION[*]
Class A 42.07% 41.03%
Class B 113.27% 44.50%
Class C N/A[**]
N/A[**]
___________________________
[*] The inception date for Ivy Emerging
Growth Fund
was March 3,
1993. Class A shares of the Fund were
first
offered for
sale to the public on April 30, 1993,
and Class B
shares of
the Fund were first offered for sale to
the public
on
October 23, 1993. The inception date
for Class C
shares of
the Fund is April 30, 1996.
[**] No Class C shares were outstanding for
the
duration of the
time period indicated.
IVY GROWTH FUND. The following table
summarizes
the
calculation of Cumulative Total Return for
the periods
indicated
through December 31, 1995, assuming the
maximum 5.75%
sales
charge has been assessed.
SINCE
ONE YEAR FIVE YEARS TEN
YEARS
INCEPTION[*]
Class A 20.01% 79.90% 186.36%
3,031.88%
Class B 21.13% N/A[**] N/A[**]
21.06%
Class C N/A[**] N/A[**] N/A[**]
N/A[**]
The following table summarizes the
calculation of
Cumulative
Total Return for the periods indicated
through December
31, 1995,
assuming the maximum 5.75% sales charge has
not been
assessed.
SINCE
ONE YEAR FIVE YEARS TEN
YEARS
INCEPTION[*]
Class A 27.33% 90.88% 203.83%
3,222.95%
Class B 26.13% N/A[**] N/A[**]
24.06%
Class C N/A[**] N/A[**] N/A[**]
N/A[**]
___________________________
[*] The inception date for Ivy Growth Fund
(and for
Class A
shares of the Fund) was March 1, 1984.
The
inception date
for the Class B shares of the Fund was
October 23,
1993.
The inception date for Class C shares of
the Fund
is April
30, 1996.
[**] No such shares were outstanding for the
duration
of the time
period indicated.
IVY GROWTH WITH INCOME FUND. The
following table
summarizes
the calculation of Cumulative Total Return
for the
periods
indicated through December 31, 1995, assuming
the
maximum 5.75%
sales charge has been assessed.
SINCE
ONE YEAR FIVE YEARS TEN
YEARS
INCEPTION[*]
Class A 17.75% 85.73% 220.34%
387.72%
Class B 18.94% N/A[**] N/A[**]
18.11%
Class C N/A[**] N/A[**] N/A[**]
N/A[**]
The following table summarizes the
calculation of
Cumulative
Total Return for the periods indicated
through December
31, 1995,
assuming the maximum 5.75% sales charge has
not been
assessed.
SINCE
ONE YEAR FIVE YEARS TEN
YEARS
INCEPTION[*]
Class A 24.93% 97.06% 239.89%
417.48%
Class B 23.94% N/A[**] N/A[**]
21.11%
Class C N/A[**] N/A[**] N/A[**]
N/A[**]
___________________________
[*] The inception date for Ivy Growth with
Income Fund
(and the
Class A shares of the Fund) was April 1,
1984; the
inception
date for the Class B shares of the Fund
was
October 23,
1993. The inception date for Class C
shares of
the Fund is
April 30, 1996.
[**] No such shares were outstanding for the
duration
of the time
period indicated.
OTHER QUOTATIONS, COMPARISONS AND
GENERAL
INFORMATION. The
foregoing computation methods are prescribed
for
advertising and
other communications subject to SEC Rule 482.
Communications not
subject to this rule may contain a number of
different
measures
of performance, computation methods and
assumptions,
including
but not limited to: historical total
returns; results
of actual
or hypothetical investments; changes in
dividends,
distributions
or share values; or any graphic illustration
of such
data. These
data may cover any period of the Trust's
existence and
may or may
not include the impact of sales charges,
taxes or other
factors.
Performance quotations for a Fund will
vary from
time to
time depending on market conditions, the
composition of
the
Fund's portfolio and operating expenses of
the Fund.
These
factors and possible differences in the
methods used in
calculating performance quotations should be
considered
when
comparing performance information regarding a
Fund's
shares with
information published for other investment
companies
and other
investment vehicles. Performance quotations
should
also be
considered relative to changes in the value
of a Fund's
shares
and the risks associated with a Fund's
investment
objectives and
policies. At any time in the future,
performance
quotations may
be higher or lower than past performance
quotations and
there can
be no assurance that any historical
performance
quotation will
continue in the future.
The Funds may also cite endorsements or
use for
comparison
their performance rankings and listings
reported in
such
newspapers or business or consumer
publications as,
among others:
AAII Journal, Barron's, Boston Business
Journal, Boston
Globe,
Boston Herald, Business Week, Consumer's
Digest,
Consumer Guide
Publications, Changing Times, Financial
Planning,
Financial
World, Forbes, Fortune, Growth Fund Guide,
Houston
Post,
Institutional Investor, International Fund
Monitor,
Investor's
Daily, Los Angeles Times, Medical Economics,
Miami
Herald, Money
Mutual Fund Forecaster, Mutual Fund Letter,
Mutual Fund
Source
Book, Mutual Fund Values, National
Underwriter Nelson's
Director
of Investment Managers, New York Times,
Newsweek, No
Load Fund
Investor, No Load Fund* X, Oakland Tribune,
Pension
World,
Pensions and Investment Age, Personal
Investor, Rugg
and Steele,
Time, U.S. News and World Report, USA Today,
The Wall
Street
Journal, and Washington Post.
FINANCIAL STATEMENTS
The Funds' Portfolios of Investments as
of
December 31,
1995, Statements of Assets and Liabilities as
of
December 31,
1995, Statements of Operations for the fiscal
year
ended December
31, 1995, Statements of Changes in Net Assets
for the
six-month
period ended December 31, 1994 and the fiscal
years
ended June
30, 1994 and the fiscal year ended December
31, 1995,
Financial
Highlights, Notes to Financial Statements,
and Reports
of
Independent Accountants are included in each
Fund's
December 31,
1995 Annual Report to shareholders, which are
incorporated by
reference into this SAI.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S
CORPORATION
("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
CORPORATE
BOND AND
COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994
Issue
(Moody's
Investor Service, New York, 1994), and
"Standard &
Poor's
Municipal Ratings Handbook," October 1994
Issue (McGraw
Hill, New
York, 1994).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa
by Moody's
are judged
by Moody's to be of the best quality,
carrying the
smallest
degree of investment risk. Interest payments
are
protected by a
large or exceptionally stable margin and
principal is
secure.
Bonds rated Aa are judged by Moody's to be of
high
quality by all
standards. Aa bonds are rated lower than Aaa
bonds
because
margins of protection may not be as large as
those of
Aaa bonds,
or fluctuations of protective elements may be
of
greater
amplitude, or there may be other elements
present which
make the
long-term risks appear somewhat larger than
those
applicable to
Aaa securities. Bonds which are rated A by
Moody's
possess many
favorable investment attributes and are
considered as
upper
medium-grade obligations. Factors giving
security to
principal
and interest are considered adequate, but
elements may
be present
which suggest a susceptibility to impairment
sometime
in the
future.
Bonds rated Baa by Moody's are
considered
medium-grade
obligations, i.e., they are neither highly
protected
nor poorly
secured. Interest payments and principal
security
appear
adequate for the present, but certain
protective
elements may be
lacking or may be characteristically
unreliable over
any great
length of time. Such bonds lack outstanding
investment
characteristics and in fact have speculative
characteristics as
well. Bonds which are rated Ba are judged to
have
speculative
elements; their future cannot be considered
well-assured. Often
the protection of interest and principal
payments may
be very
moderate and thereby not well safeguarded
during both
good and
bad times over the future. Uncertainty of
position
characterizes
bonds in this class. Bonds which are rated B
generally
lack
characteristics of the desirable investment.
Assurance
of
interest and principal payments of or
maintenance of
other terms
of the contract over any long period of time
may be
small.
Bonds which are rated Caa are of poor
standing.
Such
issues may be in default or there may be
present
elements of
danger with respect to principal or interest.
Bonds
which are
rated Ca represent obligations which are
speculative in
a high
degree. Such issues are often in default or
have other
marked
shortcomings. Bonds which are rated C are
the lowest
rated class
of bonds and issues so rated can be regarded
as having
extremely
poor prospects of ever attaining any real
investment
standing.
(b) COMMERCIAL PAPER. The Prime rating
is the
highest
commercial paper rating assigned by Moody's.
Among the
factors
considered by Moody's in assigning ratings
are the
following:
(1) evaluation of the management of the
issuer; (2)
economic
evaluation of the issuer's industry or
industries and
an
appraisal of speculative-type risks which may
be
inherent in
certain areas; (3) evaluation of the issuer's
products
in
relation to competition and customer
acceptance; (4)
liquidity;
(5) amount and quality of long-term debt; (6)
trend of
earnings
over a period of ten years; (7) financial
strength of a
parent
company and the relationships which exist
with the
issuer; and
(8) recognition by management of obligations
which may
be present
or may arise as a result of public interest
questions
and
preparations to meet such obligations.
Issuers within
this Prime
category may be given ratings 1, 2 or 3,
depending on
the
relative strengths of these factors. The
designation
of Prime-1
indicates the highest quality repayment
capacity of the
rated
issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate
debt
rating is a
current assessment of the creditworthiness of
an
obligor with
respect to a specific obligation. The
ratings are
based on
current information furnished by the issuer
or obtained
by S&P
from other sources it considers reliable.
The ratings
described
below may be modified by the addition of a
plus or
minus sign to
show relative standing within the major
rating
categories.
Debt rated AAA by S&P is considered by
S&P to be
the highest
grade obligation. Capacity to pay interest
and repay
principal
is extremely strong. Debt rated AA is judged
by S&P to
have a
very strong capacity to pay interest and
repay
principal and
differs from the highest rated issues only in
small
degree. Debt
rated A by S&P has a strong capacity to pay
interest
and repay
principal, although it is somewhat more
susceptible to
the
adverse effects of changes in circumstances
and
economic
conditions than debt in higher rated
categories.
Debt rated BBB by S&P is regarded by S&P
as having
an
adequate capacity to pay interest and repay
principal.
Although
such bonds normally exhibit adequate
protection
parameters,
adverse economic conditions or changing
circumstances
are more
likely to lead to a weakened capacity to pay
interest
and repay
principal than debt in higher rated
categories.
Debt rated BB, B, CCC, CC and C is
regarded as
having
predominately speculative characteristics
with respect
to
capacity to pay interest and repay principal.
BB
indicates the
least degree of speculation and C the
highest. While
such debt
will likely have some quality and protective
characteristics,
these are outweighed by large uncertainties
or
exposures to
adverse conditions. Debt rated BB has less
near-term
vulnerability to default than other
speculative issues.
However,
it faces major ongoing uncertainties or
exposure to
adverse
business, financial or economic conditions
which could
lead to
inadequate capacity to meet timely interest
and
principal
payments. The BB rating category is also
used for debt
subordinated to senior debt that is assigned
an actual
or implied
BBB- rating. Debt rated B has a greater
vulnerability
to default
but currently has the capacity to meet
interest
payments and
principal repayments. Adverse business,
financial, or
economic
conditions will likely impair capacity or
willingness
to pay
interest and repay principal. The B rating
category is
also used
for debt subordinated to senior debt that is
assigned
an actual
or implied BB or BB- rating. Debt rated CCC
has a
currently
identifiable vulnerability to default, and is
dependent
upon
favorable business, financial, and economic
conditions
to meet
timely payment of interest and repayment of
principal.
In the
event of adverse business, financial or
economic
conditions, it
is not likely to have the capacity to pay
interest and
repay
principal. The CCC rating category is also
used for
debt
subordinated to senior debt that is assigned
an actual
or implied
B or B- rating. The rating CC typically is
applied to
debt
subordinated to senior debt which is assigned
an actual
or
implied CCC debt rating. The rating C
typically is
applied to
debt subordinated to senior debt which is
assigned an
actual or
implied CCC- debt rating. The C rating may
be used to
cover a
situation where a bankruptcy petition has
been filed,
but debt
service payments are continued.
(b) COMMERCIAL PAPER. An S&P
commercial paper
rating is a
current assessment of the likelihood of
timely payment
of debt
having an original maturity of no more than
365 days.
Commercial paper rated A by S&P has the
following
characteristics: (i) liquidity ratios are
adequate to
meet cash
requirements; (ii) long-term senior debt
rating should
be A or
better, although in some cases BBB credits
may be
allowed if
other factors outweigh the BBB; (iii) the
issuer should
have
access to at least one additional channel of
borrowing;
(iv)
basic earnings and cash flow should have an
upward
trend with
allowances made for unusual circumstances;
and (v)
typically the
issuer's industry should be well established
and the
issuer
should have a strong position within its
industry and
the
reliability and quality of management should
be
unquestioned.
Issues rated A are further referred to by use
of
numbers 1, 2 and
3 to denote relative strength within this
highest
classification.
For example, the A-1 designation indicates
that the
degree of
safety regarding timely payment of debt is
strong.
Issues rated B are regarded as having
only
speculative
capacity for timely payment. The C rating is
assigned
to short-
term debt obligations with a doubtful
capacity for
payment.
IVY CANADA FUND
IVY CHINA REGION FUND
IVY GLOBAL FUND
IVY INTERNATIONAL FUND
IVY LATIN AMERICA STRATEGY
FUND
IVY NEW CENTURY FUND
series of
IVY FUND
Via Mizner Financial Plaza,
Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL
INFORMATION
April 30, 1996
_________________________________________________________________
Ivy Fund (the "Trust") is a diversified,
open-end
management
investment company that currently consists of
thirteen
fully
managed portfolios. This Statement of
Additional
Information
("SAI") describes six of the portfolios, Ivy
Canada
Fund, Ivy
China Region Fund, Ivy Global Fund, Ivy
International
Fund, Ivy
Latin America Strategy Fund and Ivy New
Century Fund
(the
"Funds," each a "Fund"). The other seven
portfolios of
the Trust
are described in separate Statements of
Additional
Information.
This SAI is not a prospectus and should
be read in
conjunction with the prospectus for the Funds
dated
April 30,
1996 (the "Prospectus"), which may be
obtained upon
request and
without charge from the Trust at the
Distributor's
address and
telephone number listed below.
INVESTMENT MANAGER
Ivy Management, Inc.
("IMI")
Via Mizner Financial Plaza,
Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors,
Inc.
Via Mizner Financial Plaza,
Suite 300
700 South Federal Highway
Boca Raton, Florida
33432
Telephone: (800) 456-5111
INVESTMENT ADVISER
(for Ivy Canada Fund
only)
Mackenzie Financial Corporation
("MFC")
150 Bloor Street West
Suite 400
Toronto, Ontario
CANADA M5S3B5
Telephone (416) 922-5322
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES . . . . .
. . . . .
. . . 5
U.S. GOVERNMENT SECURITIES . . . . . . .
. . . . .
. . . 13
ZERO COUPON BONDS . . . . . . . . . . .
. . . . .
. . . 14
REPURCHASE AGREEMENTS . . . . . . . . .
. . . . .
. . . 15
WARRANTS . . . . . . . . . . . . . . . .
. . . . .
. . . 15
COMMERCIAL PAPER . . . . . . . . . . . .
. . . . .
. . . 15
BANKING INDUSTRY AND SAVINGS AND LOAN
OBLIGATIONS
. . . 16
AMERICAN DEPOSITORY RECEIPTS ("ADRs") .
. . . . .
. . . 16
INVESTMENT GRADE DEBT SECURITIES . . . .
. . . . .
. . . 16
HIGH YIELD BONDS . . . . . . . . . . . .
. . . . .
. . . 17
FOREIGN SECURITIES . . . . . . . . . . .
. . . . .
. . . 18
INVESTING IN EMERGING MARKETS . . . . .
. . . . .
. . . 18
CANADIAN SECURITIES . . . . . . . . . .
. . . . .
. . . 20
INVESTING IN LATIN AMERICA . . . . . . .
. . . . .
. . . 22
FORWARD FOREIGN CURRENCY CONTRACTS . . .
. . . . .
. . . 24
FOREIGN CURRENCIES . . . . . . . . . . .
. . . . .
. . . 25
OPTIONS TRANSACTIONS . . . . . . . . . .
. . . . .
. . . 26
GENERAL . . . . . . . . . . . . . .
. . . . .
. . . 26
WRITING OPTIONS ON INDIVIDUAL
SECURITIES . .
. . . 27
PURCHASING OPTIONS ON INDIVIDUAL
SECURITIES .
. . . 28
PURCHASING AND WRITING OPTIONS ON
SECURITIES
INDICES . . . . . . . . . . .
. . . . .
. . . 29
RISKS OF OPTIONS TRANSACTIONS . . .
. . . . .
. . . 29
SECURITIES INDEX FUTURES CONTRACTS . . .
. . . . .
. . . 30
RISKS OF SECURITIES INDEX FUTURES .
. . . . .
. . . 31
COMBINED TRANSACTIONS . . . .
. . . . .
. . . 33
FIRM COMMITMENT AGREEMENTS AND
WHEN-ISSUED
SECURITIES . 33
RESTRICTED AND ILLIQUID SECURITIES . . .
. . . . .
. . . 33
BORROWING . . . . . . . . . . . . . . .
. . . . .
. . . 34
LOANS OF PORTFOLIO SECURITIES . . . . .
. . . . .
. . . 34
INVESTMENT RESTRICTIONS . . . . . . . . . . .
. . . . .
. . . 34
ADDITIONAL RESTRICTIONS . . . . . . . . . . .
. . . . .
. . . 39
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . .
. . . . .
. . . 42
AUTOMATIC INVESTMENT METHOD . . . . . .
. . . . .
. . . 42
EXCHANGE OF SHARES . . . . . . . . . . .
. . . . .
. . . 42
INITIAL SALES CHARGE SHARES . . . .
. . . . .
. . . 42
CONTINGENT DEFERRED SALES CHARGE
SHARES.
CLASS A . 43
CLASS B . . . . . . . . . . . . . .
. . . . .
. . . 43
CLASS C SHARES . . . . . . . . . .
. . . . .
. . . 45
CLASS I SHARES . . . . . . . . . .
. . . . .
. . . 45
LETTER OF INTENT . . . . . . . . . . . .
. . . . .
. . . 46
RETIREMENT PLANS . . . . . . . . . . . .
. . . . .
. . . 47
INDIVIDUAL RETIREMENT ACCOUNTS . .
. . . . .
. . . 47
QUALIFIED PLANS . . . . . . . . . .
. . . . .
. . . 49
DEFERRED COMPENSATION FOR PUBLIC
SCHOOLS AND
CHARITABLE ORGANIZATIONS
("403(B)(7)
ACCOUNT") . . . . . . . . . .
. . . . .
. . . 50
SIMPLIFIED EMPLOYEE PENSION ("SEP")
IRAS . .
. . . 50
REINVESTMENT PRIVILEGE . . . . . . . . .
. . . . .
. . . 50
RIGHTS OF ACCUMULATION . . . . . . . . .
. . . . .
. . . 51
SYSTEMATIC WITHDRAWAL PLAN . . . . . . .
. . . . .
. . . 51
GROUP SYSTEMATIC INVESTMENT PROGRAM . .
. . . . .
. . . 52
BROKERAGE ALLOCATION . . . . . . . . . . . .
. . . . .
. . . 53
TRUSTEES AND OFFICERS . . . . . . . . . . . .
. . . . .
. . . 56
INVESTMENT ADVISORY AND OTHER SERVICES . . .
. . . . .
. . . 63
BUSINESS MANAGEMENT AND INVESTMENT
ADVISORY
SERVICES . . 63
SUBADVISORY CONTRACT - IVY
INTERNATIONAL
FUND . . 67
DISTRIBUTION SERVICES . . . . . . . . .
. . . . .
. . . 68
RULE 18F-3 PLAN . . . . . . . . . .
. . . . .
. . . 71
RULE 12B-1 DISTRIBUTION PLANS . . .
. . . . .
. . . 71
CUSTODIAN . . . . . . . . . . . . . . .
. . . . .
. . . 77
FUND ACCOUNTING SERVICES . . . . . . . .
. . . . .
. . . 77
TRANSFER AGENT AND DIVIDEND PAYING AGENT
. . . . .
. . . 78
ADMINISTRATOR . . . . . . . . . . . . .
. . . . .
. . . 78
AUDITORS . . . . . . . . . . . . . . . .
. . . . .
. . . 79
CAPITALIZATION AND VOTING RIGHTS . . . . . .
. . . . .
. . . 79
NET ASSET VALUE . . . . . . . . . . . . . . .
. . . . .
. . . 82
PORTFOLIO TURNOVER . . . . . . . . . . . . .
. . . . .
. . . 83
REDEMPTIONS . . . . . . . . . . . . . . . . .
. . . . .
. . . 84
CONVERSION OF CLASS B SHARES . . . . . . . .
. . . . .
. . . 85
TAXATION . . . . . . . . . . . . . . . . . .
. . . . .
. . . 86
OPTIONS, FUTURES AND FOREIGN CURRENCY
FORWARD
CONTRACTS . . . . . . . . . . . . .
. . . . .
. . . 87
CURRENCY FLUCTUATIONS -- "SECTION 988"
GAINS OR
LOSSES . 88
INVESTMENT IN PASSIVE FOREIGN INVESTMENT
COMPANIES
. . . 89
DEBT SECURITIES ACQUIRED AT A DISCOUNT .
. . . . .
. . . 90
DISTRIBUTIONS . . . . . . . . . . . . .
. . . . .
. . . 91
DISPOSITION OF SHARES . . . . . . . . .
. . . . .
. . . 91
FOREIGN WITHHOLDING TAXES . . . . . . .
. . . . .
. . . 92
BACKUP WITHHOLDING . . . . . . . . . . .
. . . . .
. . . 93
PERFORMANCE INFORMATION . . . . . . . . . . .
. . . . .
. . . 94
AVERAGE ANNUAL TOTAL RETURN . . . .
. . . . .
. . . 94
OTHER QUOTATIONS, COMPARISONS AND
GENERAL
INFORMATION . . . . . . . . .
. . . . .
. . . 108
FINANCIAL STATEMENTS . . . . . . . . . . . .
. . . . .
. . . 109
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S
CORPORATION
("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
CORPORATE
BOND AND
COMMERCIAL PAPER RATINGS . . . . .
. . . . .
. . . 110
INVESTMENT OBJECTIVES AND
POLICIES
Each Fund has its own investment
objectives and
policies,
which are described more fully in the
Prospectus under
"Investment Objectives and Policies" and
"Risk Factors
and
Investment Techniques." The different types
of
securities and
investment techniques used by the Funds
involve varying
degrees
of risk.
IVY CANADA FUND: Ivy Canada Fund seeks
long-term
capital
appreciation by investing primarily in equity
securities of
Canadian companies. Canada is one of the
world's
leading
industrial countries and a major exporter of
agricultural
products. The country is rich in natural
resources such
as zinc,
uranium, nickel, gold, silver, aluminum, iron
and
copper, and
forest covers over 44% of land areas, making
Canada a
leading
world producer of newsprint. Canada is also a
major
producer of
hydroelectricity, oil and gas.
To meet its objective, the Fund normally
invests
at least
65% of its total assets in Canadian equity
securities
(i.e.,
common and preferred stock, securities
convertible into
common
stock and common stock purchase warrants)
listed on
Canadian
stock exchanges or traded over-the-counter in
Canada.
Canadian
issuers are companies (i) organized under the
laws of
Canada,
(ii) for which the principal securities
trading market
is in
Canada, (iii) which derive at least 50% of
their
revenues or
profits from goods produced or sold,
investments made
or services
performed in Canada, or (iv) which have at
least 50% of
their
assets situated in Canada. The balance of the
Fund's
assets
ordinarily are invested in (i) bills and
bonds of the
Canadian
Government and the governments of the
provinces or
municipalities
of Canada, (ii) high quality notes and
debentures of
Canadian
companies (i.e., those rated Aaa or Aa by
Moody's
Investor
Services, Inc. ("Moody's) or AAA or AA by
Standard and
Poor's
Corporation ("S&P"), or if not rated, judged
to be of
comparable
quality by Mackenzie Financial Corporation
("MFC"), the
Fund's
Adviser), (iii) foreign securities (including
sponsored
or
unsponsored American Depository Receipts
("ADRs")),
(iv) U.S.
Government securities, (v) equity securities
and
investment-grade
debt securities (i.e., those rated Baa or
higher by
Moody's or
BBB or higher by S&P, or if unrated, are
considered by
MFC to be
of comparable quality) of U.S. companies, and
(vi) zero
coupon
bonds that meet these credit quality
standards.
The Fund may purchase securities on a
"when-issued" or firm
commitment basis, engage in currency exchange
transactions and
enter into forward foreign currency
contracts. The
Fund may also
invest up to 10% of its assets in (i) other
investment
companies
and (ii) restricted and other illiquid
securities
(although the
Fund may not invest more than 5% of its
assets in
restricted
securities).
For temporary defensive purposes, the
Fund may
invest
without limit in U.S. or Canadian
dollar-denominated
money market
securities issued by entities organized in
the U.S. or
Canada,
such as (i) obligations issued or guaranteed
by the
Canadian
Government or the governments of the
provinces or
municipalities
of Canada (or their agencies or
instrumentalities), (i)
finance
company and corporate commercial paper (and
other
short-term
corporate obligations rated Prime-1 by
Moody's or A or
better by
S&P, or if not rated, considered by MFC to be
of
comparable
quality), (iii) obligations of banks (i.e.,
certificates of
deposit, time deposits and bankers'
acceptances) of
banks
considered creditworthy by MFC under
guidelines
approved by the
Trust's Board of Trustees, and (iv)
repurchase
agreements with
broker-dealers and banks. For temporary or
emergency
purposes,
the Fund may also borrow up to 10% of the
value of its
total
assets from banks.
IVY CHINA REGION FUND: Ivy China Region
Fund's
principal
investment objective is long-term capital
growth.
Consideration
of current income is secondary to this
principal
objective. The
Fund seeks to meet its objective primarily by
investing
in the
equity securities of companies that are
expected to
benefit from
the economic development and growth of China,
Hong Kong
and
Taiwan. A significant percentage of the
Fund's assets
may also
be invested in the securities markets of
South Korea,
Singapore,
Malaysia, Thailand, Indonesia and the
Philippines
(collectively,
with China, Hong Kong and Taiwan, the "China
Region").
The Fund normally invests at least 65%
of its
total assets
in "Greater China growth companies," defined
as
companies (a)
that are organized in or for which the
principal
securities
trading markets are the China Region; (b)
that have at
least 50%
of their assets in one or more China Region
countries
or derive
at least 50% of their gross sales revenues or
profits
from
providing goods or services to or from within
one or
more China
Region countries; or (c) that have at least
35% of
their assets
in China, Hong Kong or Taiwan, derive at
least 35% of
their gross
sales revenues or profits from providing
goods or
services to or
from within these three countries, or have
significant
manufacturing or other operations in these
countries.
IMI's
determination as to whether a company
qualifies as a
Greater
China growth company is based primarily on
information
contained
in financial statements, reports, analyses
and other
pertinent
information (some of which may be obtained
directly
from the
company). The Fund may invest 25% or more of
its total
assets in
the securities of issuers located in any one
China
Region
country, and currently expects to invest more
than 50%
of its
total assets in Hong Kong.
The balance of the Fund's assets
ordinarily are
invested in
(i) certain investment-grade debt securities
and (ii)
the equity
securities of "China Region associated
companies,"
which are
companies that do not meet the definition of
a Greater
China
growth company, but whose current or expected
performance, based
on certain identified factors (such as the
growth
trends in the
location of a company's assets and the
sources of its
revenues
and profits), is judged by IMI to be strongly
associated with the
China Region. The investment-grade debt
securities in
which the
Fund may invest include (a) obligations of
the U.S.
Government or
its agencies or instrumentalities, (b)
obligations of
U.S. banks
and other banks organized and existing under
the laws
of Hong
Kong, Taiwan or countries that are members of
the
Organization
for Economic Cooperation and Development
("OECD"), and
(c)
obligations denominated in any currency
issued by
international
development institutions and Hong Kong,
Taiwan and OECD
member
governments and their agencies and
instrumentalities,
as well as
repurchase agreements with respect to any of
the
foregoing
instruments. The Fund may also invest in zero
coupon
bonds, and
corporate bonds rated Baa or higher by
Moody's or BBB
or higher
by S&P (or if unrated, are considered by IMI
to be of
comparable
quality).
The Fund may invest less than 35% of its
net
assets in debt
securities rated Ba or below by Moody's or BB
or below
by S&P,
or, if unrated, are considered by IMI to be
of
comparable quality
(commonly referred to as "high yield" or
"junk" bonds).
The Fund
will not invest in debt securities rated less
than C by
either
Moody's or S&P.
The Fund may, but currently does not
intend to,
lend
portfolio securities valued at not more that
30% of the
Fund's
total assets, invest in warrants, purchase
securities
on a "when-
issued" or firm commitment basis, engage in
currency
exchange
transactions and enter into forward foreign
currency
contracts.
The Fund may also invest up to 10% of its
assets in (i)
other
investment companies that invest in equity
securities
of Greater
China growth companies or China Region
associated
companies, and
(ii) restricted and other illiquid securities
(although
the Fund
may not invest more than 5% of its assets in
restricted
securities).
For temporary defensive purposes and
during
periods when IMI
believes that circumstances warrant, the Fund
may
reduce its
position in Greater China growth companies
and Greater
China
associated companies and increase its
investment in
cash and
liquid debt securities, such as U.S.
Government
securities, bank
obligations, commercial paper, short-term
notes and
repurchase
agreements. The Fund currently does not,
however,
intend to
invest in bank obligations. For temporary or
emergency
purposes,
the Fund may also borrow up to 10% of the
value of its
total
assets from banks.
The Fund may purchase put and call
options on
securities and
stock indices, provided the premium paid for
such
options does
not exceed 5% of the Fund's net assets. The
Fund may
also sell
covered put options with respect to up to 10%
of the
value of
its net assets, and may write covered call
options so
long as not
more than 25% of the Fund's net assets is
subject to
being
purchased upon the exercise of the calls. For
hedging
purposes
only, the Fund may engage in transactions in
stock
index futures
contracts, provided that the Fund's aggregate
investment in such
contracts does not exceed 15% of its total
assets.
IVY GLOBAL FUND: The Fund seeks
long-term capital
growth
through a flexible policy of investing in
stocks and
debt
obligations of companies and governments of
any nation.
Any
income realized will be incidental. Under
normal
conditions, the
Fund invests at least 65% of its total assets
in
issuers
domiciled in at least three different nations
(including the
United States). Although the Fund generally
invests in
common
stock, it may also invest in preferred
stocks,
sponsored or
unsponsored ADRs and investment-grade debt
securities
(i.e.,
those rated Baa or higher by Moody's or BBB
or higher
by S&P, or
if unrated, are considered by IMI to be of
comparable
quality),
including corporate bonds, notes, debentures,
convertible bonds
and zero coupon bonds.
The Fund may invest less than 35% of its
net
assets in debt
securities rated Ba or below by Moody's or BB
or below
by S&P,
or, if unrated, considered by IMI to be of
comparable
quality
(commonly referred to as "high yield" or
"junk" bonds).
The Fund
will not invest in debt securities rated less
than C by
either
Moody's or S&P.
The Fund may, but currently does not
intend to,
lend
portfolio securities valued at not more that
30% of the
Fund's
total assets, invest in warrants, purchase
securities
on a "when-
issued" or firm commitment basis, engage in
currency
exchange
transactions and enter into forward foreign
currency
contracts.
The Fund may also invest up to 10% of its
assets in (i)
other
investment companies and (ii) restricted and
other
illiquid
securities (although the Fund may not invest
more than
5% of its
assets in restricted securities).
For temporary defensive purposes and
during
periods when IMI
believes that circumstances warrant, the Fund
may
invest without
limit in U.S. Government securities,
obligations issued
by
domestic or foreign banks (including
certificates of
deposit,
time deposits and bankers' acceptances), and
domestic
or foreign
commercial paper (which, if issued by a
corporation,
must be
rated Prime-1 by Moody's or A-1 by S&P, or if
unrated
has been
issued by a company that at the time of
investment has
an
outstanding debt issue rated AAA or AA by S&P
or Aaa or
Aa by
Moody's). The Fund does not currently intend
to invest
in bank
obligations. The Fund may also enter into
repurchase
agreements,
and, for temporary or emergency purposes, may
borrow up
to 10% of
the value of its total assets from banks.
The Fund may purchase securities on a
when-issued
or firm
commitment basis.
The Fund may purchase put and call
options stock
indices,
provided the premium paid for such options
does not
exceed 10% of
the Fund's net assets. The Fund may also sell
covered
put options
with respect to up to 50% of the value of
its net
assets, and
may write covered call options so long as not
more than
20% of
the Fund's net assets is subject to being
purchased
upon the
exercise of the calls. For hedging purposes
only, the
Fund may
engage in transactions in (and options on)
stock index
and
foreign currency futures contracts, provided
that the
Fund's
aggregate investment in such contracts does
not exceed
20% of its
total assets.
IVY INTERNATIONAL FUND: The Fund's
principal
objective is
long-term capital growth primarily through
investment
in equity
securities. Consideration of current income
is
secondary to this
principal objective. It is anticipated that
at least
65% of the
Fund's total assets will be invested in
common stocks
(and
securities convertible into common stocks)
principally
traded in
European, Pacific Basin and Latin America
markets. For
temporary
defensive purposes, the Fund may also invest
in equity
securities
principally traded in U.S. markets. The
Fund's
subadviser,
Northern Cross Investments Limited (the
"Subadviser"),
invests
the Fund's assets in a variety of economic
sectors,
industry
segments and individual securities in order
to reduce
the effects
of price volatility in any one area and to
enable
shareholders to
participate in markets that do not
necessarily move in
concert
with U.S. markets. The Subadviser seeks to
identify
rapidly
expanding foreign economies, and then
searches out
growing
industries and corporations, focusing on
companies with
established records. Individual securities
are
selected based on
value indicators, such as a low
price-earnings ratio,
and are
reviewed for fundamental financial strength.
Companies
in which
investments are made will generally have at
least $100
million in
capitalization and a solid history of
operations.
When economic or market conditions
warrant, the
Fund may
invest without limit in U.S. Government
securities,
investment-
grade debt securities (i.e., those rated Baa
or higher
by Moody's
or BBB or higher by S&P, or if unrated, are
considered
by the
Subadviser to be of comparable quality),
preferred
stocks,
warrants, or cash or cash equivalents such as
bank
obligations
(including certificates of deposit and
bankers'
acceptances),
commercial paper, short-term notes and
repurchase
agreements.
For temporary or emergency purposes, the Fund
may (but
currently
does not intend to) borrow up to 10% of the
value of
its total
assets from banks. The Fund currently does
not intend
to invest
in U.S. Government securities, bank
obligations or
investment-
grade debt securities
The Fund may (but currently does not
intend to)
lend
portfolio securities valued at not more that
30% of the
Fund's
total assets, engage in currency exchange
transactions
and enter
into forward foreign currency contracts. The
Fund may
also
invest up to 10% of its assets in (i) other
investment
companies
and (ii) restricted and other illiquid
securities
(although the
Fund may not invest more than 5% of its
assets in
restricted
securities).
The Fund may (but currently does not
intend to)
purchase put
and call options on securities and stock
indices,
provided the
premium paid for such options does not exceed
5% of the
Fund's
net assets. The Fund may also sell covered
put options
with
respect to up to 10% of the value of its net
assets,
and may
write covered call options so long as not
more than 25%
of the
Fund's net assets is subject to being
purchased upon
the exercise
of the calls. For hedging purposes only, the
Fund may
engage in
transactions in (and options on) stock index
and
foreign currency
futures contracts, provided that the Fund's
aggregate
investment
in such contracts does not exceed 15% of its
total
assets. The
Fund currently does not intend to engage in
foreign
currency
futures contracts or options on foreign
currency
futures
contracts.
IVY LATIN AMERICA STRATEGY FUND: The
Fund has a
principal
investment objective of long-term capital
growth.
Consideration
of current income is secondary to this
principal
objective.
Under normal conditions the Fund invests at
least 65%
of its
total assets in securities issued in Latin
America,
which for
purposes of this Prospectus is defined as
Mexico,
Central
America, South America and the
Spanish-speaking islands
of the
Caribbean. Securities of Latin American
issuers
include (a)
securities of companies organized under the
laws of a
Latin
American country or for which the principal
securities
trading
market is in Latin America; (b) securities
that are
issued or
guaranteed by the government of a Latin
American
country, its
agencies or instrumentalities, political
subdivisions
or the
country's central bank; (c) securities of a
company,
wherever
organized, where at least 50% of the
company's
non-current
assets, capitalization, gross revenue or
profit in any
one of the
two most recent fiscal years represents
(directly or
indirectly
through subsidiaries) assets or activities
located in
Latin
America; or (d) any of the preceding types of
securities in the
form of depository shares. The Fund may
participate in
markets
throughout Latin America, and it is expected
that the
Fund will
be invested at all times in at least three
countries.
Under
present conditions, the Fund expects to focus
its
investments in
Argentina, Brazil, Chile, Mexico and
Venezuela, which
IMI
believes are the most developed capital
markets in
Latin America.
The Fund does not expect to concentrate its
investments
in any
particular industry.
The Fund's equity investments consist of
common
stock,
preferred stock (either convertible or
non-convertible),
sponsored or unsponsored depository receipts
(including
ADRs,
American Depository Shares, and Global
Depository
Shares) and
warrants (any of which may be purchased
through
rights). The
Fund's equity securities may be listed on
securities
exchanges,
traded over-the-counter, or have no organized
market.
The Fund may invest in debt securities
(including
zero
coupon bonds) when IMI anticipates that the
potential
for capital
appreciation from debt securities is likely
to equal or
exceed
that of equity securities (e.g., a favorable
change in
relative
foreign exchange rates, interest rate levels
or the
creditworthiness of issuers). These include
debt
securities
issued by Latin American Governments
("Sovereign
Debt"). Most of
the debt securities in which the Fund may
invest are
not rated,
and those that are rated are expected to be
below
investment-
grade (i.e., rated Ba or below by Moody's or
BB or
below by S&P,
or considered by IMI to be of comparable
quality), and
are
commonly referred to as "high yield" or
"junk" bonds.
To meet redemptions, or while the Fund
is
anticipating
investments in Latin American securities, the
Fund may
hold cash
or cash equivalents such as bank obligations
(including
certificates of deposit and banders'
acceptances),
commercial
paper, short-term notes and repurchase
agreements. The
Fund
currently does not intend, however, to hold
bank
obligations.
For temporary defensive or emergency
purposes, the Fund
may (i)
invest without limit in such instruments, and
(ii)
borrow up to
one-third of the value of its total assets
from banks
(but may
not purchase securities at any time during
which the
value of the
Fund's outstanding loans exceeds 10% of the
value of
the Fund's
assets).
The Fund may, but currently does not
intend to,
lend
portfolio securities valued at not more that
30% of the
Fund's
total assets, invest in warrants, purchase
securities
on a "when-
issued" or firm commitment basis, engage in
currency
exchange
transactions and enter into forward foreign
currency
contracts.
The Fund may also invest up to 10% of its
assets in (i)
other
investment companies that invest in Latin
American
securities,
and (ii) restricted and other illiquid
securities
(although the
Fund may not invest more than 5% of its
assets in
restricted
securities). The Fund will treat any Latin
American
securities
that are subject to restrictions on
repatriation for
more than
seven days, as well as any securities issued
in
connection with
Latin American debt conversion programs that
are
restricted to
remittance of invested capital or profits, as
illiquid
securities
for purposes of this limitation.
The Fund may purchase put and call
options on
securities and
stock indices, provided the premium paid for
such
options does
not exceed 5% of the Fund's net assets. The
Fund may
also sell
covered put options with respect to up to 10%
of the
value of
its net assets, and may write covered call
options so
long as not
more than 25% of the Fund's net assets is
subject to
being
purchased upon the exercise of the calls. For
hedging
purposes
only, the Fund may engage in transactions in
(and
options on)
stock index and foreign currency futures
contracts,
provided that
the Fund's aggregate investment in such
contracts does
not exceed
15% of its total assets.
IVY NEW CENTURY FUND: The Fund's
principal
objective is
long-term growth. Consideration of current
income is
secondary
to this principal objective. In pursuing its
objective,
the Fund
invests primarily in the equity securities of
companies
that IMI
believes will benefit from the economic
development and
growth of
emerging markets. The Fund considers
countries having
emerging
markets to be those that (i) are generally
considered
to be
"developing" or "emerging" by the World Bank
and the
International Finance Corporation, or (ii)
are
classified by the
United Nations (or otherwise regarded by
their
authorities) as
"emerging." Under normal market conditions,
the Fund
invests at
least 65% of its total assets in equity
securities
(including
common and preferred stocks, convertible debt
obligations,
warrants, options, rights and depository
receipts that
are listed
on stock exchanges or traded
over-the-counter) of
"Emerging
Market growth companies," which are defined
as
companies (a) for
which the principal securities trading market
is an
emerging
market (as defined above), (b) that (alone or
on a
consolidated
basis) derives 50% or more of its total
revenue either
from
goods, sales or services in emerging markets,
or (c)
that are
organized under the laws of (and with a
principal
office in) an
emerging market country.
In recent years, many emerging market
countries
around the
world have undergone political changes that
have
reduced
government's role in economic and personal
affairs and
have
stimulated investment and growth.
Historically, there
is a strong
direct correlation between economic growth
and stock
market
returns. While this is no guarantee of
future
performance, IMI
believes that investment opportunities
(particularly in
the
energy, environmental services, natural
resources,
basic
materials, power, telecommunications and
transportation
industries) may result within the evolving
economies of
emerging
market countries from which the Fund and its
shareholders will
benefit.
The Fund normally invests its assets in
the
securities of
issuers located in at least three emerging
market
countries, and
may invest 25% or more of its total assets in
the
securities of
issuers located in any one country. IMI's
determination as to
whether a company qualifies as a Emerging
Markets
growth company
is based primarily on information contained
in
financial
statements, reports, analyses and other
pertinent
information
(some of which may be obtained directly from
the
company).
For purposes of capital appreciation,
the Fund may
invest up
to 35% of its assets in (i) debt securities
of
government or
corporate issuers in emerging market
countries, (ii)
equity and
debt securities of issuers in developed
countries
(including the
United States), and (iii) cash or cash
equivalents such
as bank
obligations (including certificates of
deposit and
banders'
acceptances), commercial paper, short-term
notes and
repurchase
agreements. The Fund currently does not
intend,
however, to
invest in bank obligations. For temporary
defensive
purposes,
the Fund may invest without limit in such
instruments.
The Fund
may also invest in zero coupon bonds and
purchase
securities on a
"when-issued" or firm commitment basis.
The Fund will not invest more than 20%
of its
total assets
in debt securities rated Ba or lower by
Moody's or BB
or lower by
S&P, or if unrated, are considered by IMI to
be of
comparable
quality (commonly referred to as "high yield"
or "junk"
bonds).
For temporary or emergency purposes, the
Fund may
borrow up
to one-third of the value of its total assets
from
banks, but may
not purchase securities at any time during
which the
value of the
Fund's outstanding loans exceeds 10% of the
value of
the Fund's
assets. The Fund may, but currently does not
intend
to, lend
portfolio securities valued at not more that
30% of the
Fund's
total assets, engage in currency exchange
transactions
and enter
into forward foreign currency contracts. The
Fund may
also
invest in (i) other investment companies that
invest in
Emerging
Markets growth companies, and (ii) up to 15%
of its
assets in
restricted and other illiquid securities
(although the
Fund may
not invest more than 5% of its assets in
restricted
securities).
The Fund may purchase put and call
options on
securities and
stock indices, provided the premium paid for
such
options does
not exceed 5% of the Fund's net assets. The
Fund may
also sell
covered put options with respect to up to 10%
of the
value of
its net assets, and may write covered call
options so
long as not
more than 25% of the Fund's net assets is
subject to
being
purchased upon the exercise of the calls. For
hedging
purposes
only, the Fund may engage in transactions in
(and
options on)
stock index and foreign currency futures
contracts,
provided that
the Fund's aggregate investment in such
contracts does
not exceed
15% of its total assets.
U.S. GOVERNMENT SECURITIES
A Fund may invest in U.S. Government
securities.
U.S.
Government securities are obligations of, or
guaranteed
by, the
U.S. Government, its agencies or
instrumentalities.
Securities
guaranteed by the U.S. Government include:
(1) direct
obligations of the U.S. Treasury (such as
Treasury
bills, notes,
and bonds) and (2) Federal agency obligations
guaranteed as to
principal and interest by the U.S. Treasury
(such as
GNMA
certificates, which are mortgage-backed
securities).
In these
securities, the payment of principal and
interest is
unconditionally guaranteed by the U.S.
Government, and
thus they
are of the highest possible credit quality.
Such
securities are
subject to variations in market value due to
fluctuations in
interest rates, but, if held to maturity,
will be paid
in full.
Mortgage-backed securities are
securities
representing part
ownership of a pool of mortgage loans. For
example,
GNMA
certificates are such securities in which the
timely
payment of
principal and interest is guaranteed by the
full faith
and credit
of the U.S. Government. Although the
mortgage loans in
the pool
will have maturities of up to 30 years, the
actual
average life
of the GNMA certificates typically will be
substantially less
because the mortgages will be subject to
normal
principal
amortization and may be prepaid prior to
maturity.
Prepayment
rates vary widely and may be affected by
changes in
market
interest rates. In periods of falling
interest rates,
the rate
of prepayment tends to increase, thereby
shortening the
actual
average life of the GNMA certificates.
Conversely,
when interest
rates are rising, the rate of prepayments
tends to
decrease,
thereby lengthening the actual average life
of the GNMA
certificates. Accordingly, it is not
possible to
predict
accurately the average life of a particular
pool.
Reinvestment
of prepayment may occur at higher or lower
rates than
the
original yield on the certificates. Due to
the
prepayment
feature and the need to reinvest prepayments
of
principal at
current rates, GNMA certificates can be less
effective
than
typical bonds of similar maturities at
"locking in"
yields during
periods of declining interest rates. GNMA
certificates
may
appreciate or decline in market value during
periods of
declining
or rising interest rates, respectively.
Securities issued by U.S. Government
instrumentalities and
certain federal agencies are neither direct
obligations
of nor
guaranteed by the U.S. Treasury. However,
they involve
Federal
sponsorship in one way or another; some are
backed by
specific
types of collateral; some are supported by
the issuer's
right to
borrow from the Treasury; some are supported
by the
discretionary
authority of the Treasury to purchase certain
obligations of the
issuer; others are supported only by the
credit of the
issuing
government agency or instrumentality. These
agencies
and
instrumentalities include, but are not
limited to,
Federal Land
Banks, Farmers Home Administration, Central
Bank for
Cooperatives, Federal Intermediate Credit
Banks,
Federal Home
Loan Banks, Federal National Mortgage
Association, and
Student
Loan Marketing Association.
ZERO COUPON BONDS
A Fund may purchase zero coupon bonds in
accordance with the
Fund's credit quality standards. Zero coupon
bonds are
debt
obligations issued without any requirement
for the
periodic
payment of interest. Zero coupon bonds are
issued at a
significant discount from face value. The
discount
approximates
the total amount of interest the bonds would
accrue and
compound
over the period until maturity at a rate of
interest
reflecting
the market rate at the time of issuance. If
a Fund
holds zero
coupon bonds in its portfolio, however, it
would
recognize income
currently for Federal income tax purposes in
the amount
of the
unpaid, accrued interest and generally would
be
required to
distribute dividends representing such income
to
shareholders
currently, even though funds representing
such income
would not
have been received by the Fund. Cash to pay
dividends
representing unpaid, accrued interest may be
obtained
from sales
proceeds of portfolio securities and Fund
shares and
from loan
proceeds. The potential sale of portfolio
securities
to pay cash
distributions from income earned on zero
coupon bonds
may result
in a Fund's being forced to sell portfolio
securities
at a time
when the Fund might otherwise choose not to
sell these
securities
and when the Fund might incur a capital loss
on such
sales.
Because interest on zero coupon obligations
is not
distributed to
a Fund on a current basis, but is in effect
compounded,
the value
of the securities of this type is subject to
greater
fluctuations
in response to changing interest rates than
the value
of debt
obligations that distribute income regularly.
REPURCHASE AGREEMENTS
A Fund may enter into repurchase
agreements.
Repurchase
agreements are contracts under which a Fund
buys a
money market
instrument and obtains a simultaneous
commitment from
the seller
to repurchase the instrument at a specified
time and at
an
agreed-upon yield. Under guidelines approved
by the
Trust's
Board of Trustees (the "Board"), a Fund is
permitted to
enter
into repurchase agreements only if the
repurchase
agreements are
at least fully collateralized with U.S.
Government
securities or
other securities that the Fund's investment
adviser has
approved
for use as collateral for repurchase
agreements and the
collateral must be marked-to-market daily. A
Fund will
enter
into repurchase agreements only with banks
and
broker-dealers
deemed to be creditworthy by the Fund's
investment
adviser under
guidelines approved by the Board. In the
unlikely
event of
failure of the executing bank or
broker-dealer, a Fund
could
experience some delay in obtaining direct
ownership of
the
underlying collateral and might incur a loss
if the
value of the
security should decline, as well as costs in
disposing
of the
security.
WARRANTS
A Fund may invest in warrants. The
holder of a
warrant has
the right to purchase a given number of
shares of a
particular
issuer at a specified price until expiration
of the
warrant.
Such investments can provide a greater
potential for
profit or
loss than an equivalent investment in the
underlying
security.
Prices of warrants do not necessarily move in
tandem
with the
prices of the underlying securities, and are
speculative
investments. Warrants pay no dividends and
confer no
rights
other than a purchase option. If a warrant
is not
exercised by
the date of its expiration, the particular
Fund will
lose its
entire investment in such warrant.
COMMERCIAL PAPER
Commercial paper represents short-term
unsecured
promissory
notes issued in bearer form by bank holding
companies,
corporations and finance companies. A Fund
may invest
in
commercial paper that, at the date of
investment, is
rated A-1 by
Standard & Poor's Corporation ("S&P") or
Prime-1 by
Moody's
Investors Service, Inc. ("Moody's") or, if
not rated by
Moody's
or S&P, issued by companies having an
outstanding debt
issue
rated AAA or AA by S&P or Aaa or Aa by
Moody's.
BANKING INDUSTRY AND SAVINGS AND LOAN
OBLIGATIONS
Certificates of deposit are negotiable
certificates issued
against funds deposited in a commercial bank
for a
definite
period of time and earning a specified
return.
Bankers'
acceptances are negotiable drafts or bills of
exchange,
normally
drawn by an importer or exporter to pay for
specific
merchandise,
which are "accepted" by a bank, meaning, in
effect,
that the bank
unconditionally agrees to pay the face value
of the
instrument on
maturity. In addition to investing in
certificates of
deposit
and bankers' acceptances, a Fund may invest
in time
deposits in
banks or savings and loan associations. Time
deposits
are
generally similar to certificates of deposit,
but are
uncertificated. A Fund's investments in
certificates of
deposit,
time deposits, and bankers' acceptances are
limited to
obligations of (i) banks having total assets
in excess
of $1
billion, (ii) U.S. banks which do not meet
the $1
billion asset
requirement, if the principal amount of such
obligation
(currently $100,000) is fully insured by the
Federal
Deposit
Insurance Corporation (the "FDIC"), (iii)
savings and
loan
associations which have total assets in
excess of $1
billion and
which are members of the FDIC, and (iv)
foreign banks
if the
obligation is, in IMI's opinion, of an
investment
quality
comparable to other debt securities which may
be
purchased by the
particular Fund.
AMERICAN DEPOSITORY RECEIPTS ("ADRs")
A Fund may purchase sponsored or
unsponsored ADRs.
ADRs are
dollar-denominated receipts issued generally
by U.S.
banks that
represent the deposit with the bank of a
foreign
company's
security. ADRs are publicly traded on
exchanges or
over-the-
counter ("OTC") in the United States.
Ownership of
unsponsored
ADRs may not entitle a Fund to financial or
other
reports from
the issuer to which it would be entitled as
the owner
of
sponsored ADRs.
INVESTMENT GRADE DEBT SECURITIES
Bonds rated Aaa by Moody's and AAA by
S&P are
judged to be
of the best quality (i.e., capacity to pay
interest and
repay
principal is extremely strong). Bonds rated
Aa/AA are
considered
to be of high quality (i.e., capacity to pay
interest
and repay
interest is very strong and differs from the
highest
rated issues
only to a small degree). Bonds rated A are
viewed as
having many
favorable investment attributes, but elements
may be
present that
suggest a susceptibility to the adverse
effects of
changes in
circumstances and economic conditions than
debt in
higher rated
categories. Bonds rated Baa/BBB (considered
by Moody's
to be
"medium grade" obligations) are considered to
have an
adequate
capacity to pay interest and repay principal,
but
certain
protective elements may be lacking (i.e.,
such bonds
lack
outstanding investment characteristics and
have some
speculative
characteristics).
HIGH YIELD BONDS
A Fund may invest in corporate debt
securities
rated Ba or
lower by Moody's, BB or lower by S&P. A Fund
will not,
however,
invest in securities that, at the time of
investment,
are rated
lower than C by either Moody's or S&P.
Securities
rated Baa or
BBB (and comparable unrated securities) are
considered
by major
credit-rating organizations to have
speculative
elements as well
as investment-grade characteristics.
Securities rated
lower than
Baa or BBB (and comparable unrated
securities) are
commonly
referred to as "high yield" or "junk" bonds
and are
considered to
be predominantly speculative with respect to
the
issuer's
continuing ability to meet principal and
interest
payments. The
lower the ratings of corporate debt
securities, the
more their
risks render them like equity securities.
(See
Appendix A for a
more complete description of the ratings
assigned by
Moody's and
S&P and their respective characteristics.)
While IMI may refer to ratings issued by
established credit
rating agencies, it is not IMI's policy to
rely
exclusively on
such ratings, but rather to supplement such
ratings
with its own
independent and ongoing review of credit
quality. A
Fund's
achievement of its investment objective may,
to the
extent of its
investment in high yield bonds, be more
dependent upon
IMI's
credit analysis than would be the case if the
Funds
were
investing in higher quality bonds. Should
the rating
of a
portfolio security be downgraded, IMI will
determine
whether it
is in the relevant Fund's best interest to
retain or
dispose of
the security. However, should any individual
bond held
by a Fund
be downgraded below a rating of C, IMI
currently
intends to
dispose of such bond based on then existing
market
conditions.
The secondary market on which high yield
bonds are
traded
may be less liquid than the market for higher
grade
bonds. Less
liquidity in the secondary trading market
could
adversely affect
the price at which a Fund could sell a high
yield bond,
and could
adversely affect and cause large fluctuations
in the
daily net
asset value of each the Fund's shares.
Adverse
publicity and
investor perceptions, whether or not based on
fundamental
analysis, may decrease the value and
liquidity of high
yield
bonds, especially in a thinly traded market.
When
secondary
markets for high yield securities are less
liquid than
the
markets for higher grade securities, it may
be more
difficult to
value the securities because such valuation
may require
more
research, and elements of judgment may play a
greater
role in the
valuation because there is less reliable,
objective
data
available.
Furthermore, prices for high yield bonds
may be
affected by
legislative and regulatory developments. For
example,
federal
rules require savings and loan institutions
to reduce
gradually
their holdings of this type of security.
FOREIGN SECURITIES
A Fund may invest in debt securities of
foreign
issuers,
including non-U.S. dollar-denominated debt
securities,
Eurodollar
securities and debt securities issued,
assumed or
guaranteed by
foreign governments or political subdivisions
or the
instrumentalities thereof. Investors should
consider
carefully
the substantial risks involved in investing
in
securities issued
by companies and governments of foreign
nations, which
are in
addition to the usual risks inherent in the
domestic
investments.
Although a Fund intends to invest only in
nations that
IMI
considers to have relatively stable and
friendly
governments,
there is the possibility of expropriation,
nationalization or
confiscatory taxation, taxation of income
earned in a
foreign
country and other foreign taxes, foreign
exchange
controls (which
may include suspension of the ability to
transfer
currency from a
given country), default in foreign government
securities,
political or social instability or diplomatic
developments which
could affect investments in securities of
issuers in
those
nations. In addition, in many countries
there is less
publicly
available information about issuers than is
available
in reports
about companies in the United States. For
example,
ownership of
unsponsored ADRs may not entitle the owner to
financial
or other
reports from the issuer to which it might
otherwise be
entitled
as the owner of a sponsored ADR. Moreover,
foreign
companies are
not generally subject to uniform accounting,
auditing
and
financial reporting standards, and auditing
practices
and
requirements may not be comparable to those
applicable
to U.S.
companies. In many foreign countries, there
is less
government
supervision and regulation of business and
industry
practices,
stock exchanges, brokers and listed companies
than in
the United
States. Foreign securities transactions may
be subject
to higher
brokerage costs than domestic securities
transactions.
The
foreign securities markets of many of the
countries in
which a
Fund may invest may also be smaller, less
liquid and
subject to
greater price volatility than those in the
United
States.
Further, a Fund may encounter difficulties or
be unable
to pursue
legal remedies and obtain judgment in foreign
courts.
INVESTING IN EMERGING MARKETS
Investors should recognize that
investing in
certain foreign
securities involves certain special
considerations,
including
those set forth below, that are not typically
associated with
investing in United States securities and
that may
affect a
Fund's performance favorably or unfavorably.
(See also
"Foreign
Securities" under the caption "Risk Factors
and
Investment
Techniques" in the Prospectus.)
Foreign stock markets have different
clearance and
settlement procedures and in certain markets
there have
been
times when settlements have been unable to
keep pace
with the
volume of securities transactions, making it
difficult
to conduct
such transactions. Delays in settlement
could result
in
temporary periods when assets of a Fund are
uninvested
and no
return is earned thereon. The inability of a
Fund to
make
intended security purchases due to settlement
problems
could
cause that Fund to miss attractive investment
opportunities.
Further, the inability to dispose of
portfolio
securities due to
settlement problems could result either in
losses to a
Fund
because of subsequent declines in the value
of the
portfolio
security or, if a Fund has entered into a
contract to
sell the
security, in possible liability to the
purchaser.
Fixed
commissions on some foreign securities
exchanges are
generally
higher than negotiated commissions on U.S.
exchanges,
although
IMI will endeavor to achieve the most
favorable net
results on a
Fund's portfolio transactions. In addition,
a Fund may
encounter
difficulties or be unable to pursue legal
remedies and
obtain
judgment in foreign courts. It may be more
difficult
for a
Fund's agents to keep currently informed
about
corporate actions
such as stock dividends or other matters that
may
affect the
prices of portfolio securities.
Communications between
the
United States and foreign countries may be
less
reliable than
within the United States, thus increasing the
risk of
delayed
settlements of portfolio transactions or loss
of
certificates for
portfolio securities. Moreover, individual
foreign
economies may
differ favorably or unfavorably from the
United States
economy in
such respects as growth of gross national
product, rate
of
inflation, capital reinvestment, resource
self-sufficiency and
balance of payments position. IMI seeks to
mitigate
the risks to
a Fund associated with the foregoing
considerations
through
investment variation and continuous
professional
management.
Investments in companies domiciled in
developing
countries
may be subject to potentially higher risks
than
investments in
developed countries. These risks include (i)
less
social,
political and economic stability; (ii) the
small
current size of
the markets for such securities and the
currently low
or
nonexistent volume of trading, which result
in a lack
of
liquidity and in greater price volatility;
(iii)
certain national
policies that may restrict a Fund's
investment
opportunities,
including restrictions on investment in
issuers or
industries
deemed sensitive to national interests; (iv)
foreign
taxation;
(v) the absence of developed structures
governing
private or
foreign investment or allowing for judicial
redress for
injury to
private property; (vi) the absence, until
relatively
recently in
certain Eastern European countries, of a
capital market
structure
or market-oriented economy; (vii) the
possibility that
recent
favorable economic developments in Eastern
Europe may
be slowed
or reversed by unanticipated political or
social events
in such
countries; and (viii) the possibility that
currency
devaluations
could adversely affect the value of a Fund's
investments.
Despite the dissolution of the Soviet
Union, the
Communist
Party may continue to exercise a significant
role in
certain
Eastern European countries. To the extent of
the
Communist
Party's influence, investments in such
countries will
involve
risks of nationalization, expropriation and
confiscatory
taxation. The communist governments of a
number of
Eastern
European countries expropriated large amounts
of
private property
in the past, in many cases without adequate
compensation, and
there can be no assurance that such
expropriation will
not occur
in the future. In the event of such
expropriation, a
Fund could
lose a substantial portion of any investments
it has
made in the
affected countries. Further, few (if any)
accounting
standards
exist in Eastern European countries.
Finally, even
though
certain Eastern European currencies may be
convertible
into U.S.
dollars, the conversion rates may be
artificial in
relation to
the actual market values and may be adverse
to a Fund's
Shareholders.
Certain Eastern European countries that
do not
have market
economies are characterized by an absence of
developed
legal
structures governing private and foreign
investments
and private
property. In addition, certain countries
require
governmental
approval prior to investments by foreign
persons, or
limit the
amount of investment by foreign persons in a
particular
company,
or limit the investment of foreign persons to
only a
specific
class of securities of a company that may
have less
advantageous
terms than securities of the company
available for
purchase by
nationals.
Authoritarian governments in certain
Eastern
European
countries may require that a governmental or
quasi-governmental
authority act as custodian of a Fund's assets
invested
in such
country. To the extent such governmental or
quasi-governmental
authorities do not satisfy the requirements
of the
Investment
Company Act of 1940, as amended (the "1940
Act"), to
act as
foreign custodians of a Fund's cash and
securities,
that Fund's
investment in such countries may be limited
or may be
required to
be effected through intermediaries. The risk
of loss
through
governmental confiscation may be increased in
such
countries.
CANADIAN SECURITIES
Ivy Canada Fund may invest in Canadian
securities.
The
Canadian securities market is among the
largest in the
world.
Equity securities are traded primarily on the
country's
five
independent regional stock exchanges: The
Toronto
Stock Exchange
("TSE"), the Montreal Exchange ("ME"), the
Vancouver
Stock
Exchange ("VSE"), the Alberta Stock Exchange
and the
Winnipeg
Stock Exchange. The TSE, which is the
largest regional
exchange,
had a total market capitalization of $756.3
billion as
of
November 3, 1994 and its 1,250 listed
companies had a
November
trading volume of 1,120,300,000 shares. A
small
percentage of
Canadian stocks are traded on the unlisted or
OTC
market. In
contrast, almost all debt securities are
traded on the
OTC.
Interlisting is common among the Canadian and
U.S.
stock
exchanges and the OTC markets. In addition,
the TSE,
the
American Stock Exchange and the Midwest Stock
Exchange
are
electronically linked to permit the order
routing of
interlisted
securities on those stock exchanges. The ME
and the
Boston Stock
Exchange are similarly linked. Ivy Canada
Fund invests
less than
1% of its assets in securities listed solely
on the
VSE.
The economy of Canada is strongly
influenced by
the
activities of companies and industries
involved in the
production
and processing of natural resources. The
companies may
include
those involved in the energy industry,
industrial
materials
(chemicals, base metals, timber and paper)
and
agricultural
materials (grain cereals). The securities of
companies
in the
energy industry are subject to changes in
value and
dividend
yield, which depend, to a large extent, on
the price
and supply
of energy fuels. Rapid price and supply
fluctuations
may be
caused by events relating to international
politics,
energy
conservation and the success of exploration
projects.
Economic
prospects are changing due to recent
government
attempts to
reduce restrictions against foreign
investment. These
considerations are especially important for a
Fund,
like Ivy
Canada Fund, which invests primarily in
Canadian
securities.
Many factors, including social,
environmental and
economic
conditions, that are not within the control
of Canada
affect and
could have an adverse impact on the financial
condition
of
Canada. IMI is unable to predict what
effect, if any,
such
factors would have on instruments held in a
Fund's
portfolio.
Beginning in January of 1989 the U.S. -
Canada
Free Trade
Agreement will be phased in over a period of
10 years.
This
agreement will remove tariffs on U.S.
technology and
Canadian
agricultural products in addition to removing
trade
barriers
affecting other important sectors of each
country's
economy.
Additionally, the recent implementation of
the North
American
Free Trade Agreement in January, 1994 is
expected to
lead to
increased trade and reduced barriers between
Canada and
the
United States.
Canada is one of the world's leading
industrial
countries,
as well as a major exporter of agricultural
products.
Canada is
rich in natural resources such as zinc,
uranium,
nickel, gold,
silver, aluminum, iron and copper. Forest
covers over
44% of
land area, making Canada a leading world
producer of
newsprint.
Canada is also a major producer of
hydroelectricity, oil and
gas. The business activities of companies in
the
energy field
may include the production, generation,
transmission,
marketing,
control or measurement of energy or energy
fuels.
Canadian securities exchanges are
self-regulatory
agencies
that are recognized by the securities
administrators of
the
province in which the exchange is located.
The
largest, most
active Canadian exchange is the TSE, which is
a
self-regulated
agency recognized by the Ontario Securities
Commission.
Canadian
securities regulation differs in certain
respects from
United
States securities regulation. For example,
the amount
of
information available concerning companies
that have
securities
traded on Canadian exchanges and do not have
securities
traded on
an exchange in the United States is generally
less than
that
available concerning companies which have
securities
traded on
United States exchanges. See "Risk Factors
and
Investment
Techniques" in the Prospectus for a
discussion of the
risks
associated with investing in the securities
of foreign
companies.
INVESTING IN LATIN AMERICA
Investing in securities of Latin
American issuers
may entail
risks relating to the potential political and
economic
instability of certain Latin American
countries and the
risks of
expropriation, nationalization, confiscation
or the
imposition of
restrictions on foreign investment and on
repatriation
of capital
invested. In the event of expropriation,
nationalization or
other confiscation by any country, a Fund
could lose
its entire
investment in any such country.
The securities markets of Latin American
countries
are
substantially smaller, less developed, less
liquid and
more
volatile than the major securities markets in
the U.S.
Disclosure
and regulatory standards are in many respects
less
stringent than
U.S. standards. Furthermore, there is a
lower level of
monitoring and regulation of the markets and
the
activities of
investors in such markets.
The limited size of many Latin American
securities
markets
and limited trading volume in the securities
of Latin
American
issuers compared to volume of trading in the
securities
of U.S.
issuers could cause prices to be erratic for
reasons
apart from
factors that affect the soundness and
competitiveness
of the
securities issuers. For example, limited
market size
may cause
prices to be unduly influenced by traders who
control
large
positions. Adverse publicity and investors'
perceptions, whether
or not based on in-depth fundamental
analysis, may
decrease the
value and liquidity of portfolio securities.
Latin America Strategy Fund invests in
securities
denominated in currencies of Latin American
countries.
Accordingly, changes in the value of these
currencies
against the
U.S. dollar will result in corresponding
changes in the
U.S.
dollar value of the Fund's assets denominated
in those
currencies.
Some Latin American countries also may
have
managed
currencies, which are not free floating
against the
U.S. dollar.
In addition, there is risk that certain Latin
American
countries
may restrict the free conversion of their
currencies
into other
countries. Further, certain Latin American
currencies
may not be
internationally traded. Certain of these
currencies
have
experienced a steep devaluation relative to
the U.S.
dollar. Any
devaluations in the currencies in which a
Fund's
portfolio
securities are denominated may have a
detrimental
impact on that
Fund's net asset value.
The economies of individual Latin
American
countries may
differ favorably or unfavorably from the U.S.
economy
in such
respects as the rate of growth of gross
domestic
product, the
rate of inflation, capital reinvestment,
resource self-
sufficiency and balance of payments position.
Certain
Latin
American countries have experienced high
levels of
inflation
which can have a debilitating effect on the
economy.
Furthermore, certain Latin American countries
may
impose
withholding taxes on dividends payable to a
Fund at a
higher rate
than those imposed by other foreign
countries. This
may reduce
the Fund's investment income available for
distribution
to
shareholders.
Certain Latin American countries such as
Argentina, Brazil
and Mexico are among the world's largest
debtors to
commercial
banks and foreign governments. At times,
certain Latin
American
countries have declared moratoria on the
payment of
principal
and/or interest on outstanding debt.
Investment in
sovereign
debt can involve a high degree of risk. The
governmental entity
that controls the repayment of sovereign debt
may not
be able or
willing to repay the principal and/or
interest when due
in
accordance with the terms of such debt. A
governmental
entity's
willingness or ability to repay principal and
interest
due in a
timely manner may be affected by, among other
factors,
its cash
flow situation, the extent of its foreign
reserves, the
availability of sufficient foreign exchange
on the date
a payment
is due, the relative size of the debt service
burden to
the
economy as a whole, the governmental entity's
policy
towards the
International Monetary Fund, and the
political
constraints to
which a governmental entity may be subject.
Governmental
entities may also be dependent on expected
disbursements from
foreign governments, multilateral agencies
and others
abroad to
reduce principal and interest arrearages on
their debt.
The
commitment on the part of these governments,
agencies
and others
to make such disbursements may be conditioned
on a
governmental
entity's implementation of economic reforms
and/or
economic
performance and the timely service of such
debtor's
obligations.
Failure to implement such reforms, achieve
such levels
of
economic performance or repay principal or
interest
when due may
result in the cancellation of such third
parties'
commitments to
lend funds to the governmental entity, which
may
further impair
such debtor's ability or willingness to
service its
debts in a
timely manner. Consequently, governmental
entities may
default
on their sovereign debt.
Holders of sovereign debt, including a
Fund, may
be
requested to participate in the rescheduling
of such
debt and to
extend further loans to governmental
entities. There
is no
bankruptcy proceeding by which defaulted
sovereign debt
may be
collected in whole or in part.
Governments of many Latin American
countries have
exercised
and continue to exercise substantial
influence over
many aspects
of the private sector through the ownership
or control
of many
companies, including some of the largest in
those
countries. As
a result, government actions in the future
could have a
significant effect on economic conditions
which may
adversely
affect prices of certain portfolio
securities.
Expropriation,
confiscatory taxation, nationalization,
political,
economic or
social instability or other similar
developments, such
as
military coups, have occurred in the past and
could
also
adversely affect a Fund's investments in this
region.
Changes in political leadership, the
implementation of
market oriented economic policies, such as
privatization, trade
reform and fiscal and monetary reform are
among the
recent steps
taken to renew economic growth. External
debt is being
restructured and flight capital (domestic
capital that
has left
home country) has begun to return. Inflation
control
efforts
have also been implemented. Latin American
equity
markets can be
extremely volatile and in the past have shown
little
correlation
with the U.S. market. Currencies are
typically weak,
but most
are now relatively free floating, and it is
not unusual
for the
currencies to undergo wide fluctuations in
value over
short
periods of time due to changes in the market.
FORWARD FOREIGN CURRENCY CONTRACTS
A Fund may enter into forward foreign
currency
contracts (a
"forward contract"). A forward contract is
an
obligation to
purchase or sell a specific currency for an
agreed
price at a
future date (usually less than a year), which
is
individually
negotiated and privately traded by currency
traders and
their
customers. A forward contract generally has
no deposit
requirement, and no commissions are charged
at any
stage for
trades. Although foreign exchange dealers do
not
charge a fee
for commissions, they do realize a profit
based on the
difference
between the price at which they are buying
and selling
various
currencies. Although these contracts are
intended to
minimize
the risk of loss due to a decline in the
value of the
hedged
currencies, at the same time, they tend to
limit any
potential
gain which might result should the value of
such
currencies
increase.
While a Fund may enter into forward
contracts to
reduce
currency exchange risks, changes in currency
exchange
rates may
result in poorer overall performance for a
Fund than if
it had
not engaged in such transactions. Moreover,
there may
be an
imperfect correlation between a Fund's
portfolio
holdings of
securities denominated in a particular
currency and
forward
contracts entered into by that Fund. Such
imperfect
correlation
may prevent a Fund from achieving the
intended hedge or
expose
the Fund to the risk of currency exchange
loss.
A Fund will not enter into forward
contracts or
maintain a
net exposure to such contracts where the
consummation
of the
contracts would obligate the Fund to deliver
an amount
of
currency in excess of the value of the Fund's
portfolio
securi-
ties or other assets denominated in that
currency.
Further, a
Fund generally will not enter into a forward
contract
with a term
of greater than one year.
To the extent required by applicable
law, a Fund
will hold
liquid assets, such as cash, U.S. Government
securities, or other
appropriate high grade debt obligations in a
segregated
account
with its Custodian in an amount equal (on a
daily
marked-to-
market basis) to the amount of the
commitments under
these
contracts. At the maturity of a forward
contract, a
Fund may
either accept or make delivery of the
currency
specified in the
contract, or, prior to maturity, enter into a
closing
purchase
transaction involving the purchase or sale of
an
offsetting
contract. Closing purchase transactions with
respect
to forward
contracts are usually effected with the
currency trader
who is a
party to the original forward contract.
FOREIGN CURRENCIES
Investment in foreign securities usually
will
involve
currencies of foreign countries. Moreover, a
Fund may
temporarily hold funds in bank deposits in
foreign
currencies
during the completion of investment programs
and may
purchase
forward contracts. Because of these factors,
the value
of the
assets of a Fund as measured in U.S. dollars
may be
affected
favorably or unfavorably by changes in
foreign currency
exchange
rates and exchange control regulations, and
the Fund
may incur
costs in connection with conversions between
various
currencies.
Although a Fund's custodian values the Fund's
assets
daily in
terms of U.S. dollars, a Fund does not intend
to
convert its
holdings of foreign currencies into U.S.
dollars on a
daily
basis. A Fund may do so from time to time,
and
investors should
be aware of the costs of currency conversion.
Although
foreign
exchange dealers do not charge a fee for
conversion,
they do
realize a profit based on the difference (the
"spread")
between
the prices at which they are buying and
selling various
currencies. Thus, a dealer may offer to sell
a foreign
currency
to a Fund at one rate, while offering a
lesser rate of
exchange
should the Fund desire to resell that
currency to the
dealer. A
Fund will conduct its foreign currency
exchange
transactions
either on a spot (i.e., cash) basis at the
spot rate
prevailing
in the foreign currency exchange market, or
through
entering into
forward contracts to purchase or sell foreign
currencies.
Because a Fund normally will be invested
in both
U.S. and
foreign securities markets, changes in the
Fund's share
price may
have a low correlation with movements in the
U.S.
markets. A
Fund's share price will reflect the movements
of both
the
different stock and bond markets in which it
is
invested and of
the currencies in which the investments are
denominated; the
strength or weakness of the U.S. dollar
against foreign
currencies may account for part of a Fund's
investment
performance. U.S. and foreign securities
markets do
not always
move in step with each other, and the total
returns
from
different markets may vary significantly.
OPTIONS TRANSACTIONS
GENERAL. A Fund may engage in
transactions in
options on
securities and stock indices in accordance
with the
Fund's stated
investment objective and policies. A Fund
may also
purchase put
options on securities and may purchase and
sell (write)
put and
call options on stock indices. Options on
securities
and stock
indices purchased or written by a Fund will
be limited
to options
traded on national securities exchanges,
boards of
trade or
similar entities, or in the OTC markets.
A call option is a short-term contract
(having a
duration of
less than one year) pursuant to which the
purchaser, in
return
for the premium paid, has the right to buy
the security
underlying the option at the specified
exercise price
at any time
during the term of the option. The writer of
the call
option,
who receives the premium, has the obligation,
upon
exercise of
the option, to deliver the underlying
security against
payment of
the exercise price. A put option is a
similar contract
pursuant
to which the purchaser, in return for the
premium paid,
has the
right to sell the security underlying the
option at the
specified
exercise price at any time during the term of
the
option. The
writer of the put option, who receives the
premium, has
the
obligation, upon exercise of the option, to
buy the
underlying
security at the exercise price. The premium
paid by
the
purchaser of an option will reflect, among
other
things, the
relationship of the exercise price to the
market price
and
volatility of the underlying security, the
time
remaining to
expiration of the option, supply and demand,
and
interest rates.
If the writer of an option wishes to
terminate the
obligation, the writer may effect a "closing
purchase
transaction." This is accomplished by buying
an option
of the
same series as the option previously written.
The
effect of the
purchase is that the writer's position will
be
cancelled by the
Options Clearing Corporation. However, a
writer may
not effect a
closing purchase transaction after it has
been notified
of the
exercise of an option. Likewise, an investor
who is
the holder
of an option may liquidate his or her
position by
effecting a
"closing sale transaction." This is
accomplished by
selling an
option of the same series as the option
previously
purchased.
There is no guarantee that either a closing
purchase or
a closing
sale transaction can be effected at any
particular time
or at any
acceptable price. If any call or put option
is not
exercised or
sold, it will become worthless on its
expiration date.
A Fund will realize a gain (or a loss)
on a
closing purchase
transaction with respect to a call or a put
previously
written by
the Fund if the premium, plus commission
costs, paid by
the Fund
to purchase the call or the put is less (or
greater)
than the
premium, less commission costs, received by
the Fund on
the sale
of the call or the put. A gain also will be
realized
if a call
or a put that a Fund has written lapses
unexercised,
because the
Fund would retain the premium. Any such
gains (or
losses) are
considered short-term capital gains (or
losses) for
Federal
income tax purposes. Net short-term capital
gains,
when
distributed by a Fund, are taxable as
ordinary income.
See
"Taxation."
A Fund will realize a gain (or a loss)
on a
closing sale
transaction with respect to a call or a put
previously
purchased
by the Fund if the premium, less commission
costs,
received by
the Fund on the sale of the call or the put
is greater
(or less)
than the premium, plus commission costs, paid
by the
Fund to
purchase the call or the put. If a put or a
call
expires
unexercised, it will become worthless on the
expiration
date, and
a Fund will realize a loss in the amount of
the premium
paid,
plus commission costs. Any such gain or loss
will be
long-term
or short-term gain or loss, depending upon a
Fund's
holding
period for the option.
Exchange-traded options generally have
standardized terms
and are issued by a regulated clearing
organization
(such as the
Options Clearing Corporation), which, in
effect,
guarantees the
completion of every exchange-traded option
transaction.
In
contrast, the terms of OTC options are
negotiated by a
Fund and
its counterparty (usually a securities dealer
or a
financial
institution) with no clearing organization
guarantee.
When a
Fund purchases an OTC option, it relies on
the party
from whom it
has purchased the option (the "counterparty")
to make
delivery of
the instrument underlying the option. If the
counterparty fails
to do so, a Fund will lose any premium paid
for the
option, as
well as any expected benefit of the
transaction.
Accordingly,
IMI will assess the creditworthiness of each
counterparty to
determine the likelihood that the terms of
the OTC
option will be
satisfied.
WRITING OPTIONS ON INDIVIDUAL
SECURITIES. A Fund
may write
(sell) covered call options on the Fund's
securities in
an
attempt to realize a greater current return
than would
be
realized on the securities alone. A Fund may
also
write covered
call options to hedge a possible stock or
bond market
decline
(only to the extent of the premium paid to
the Fund for
the
options). In view of the investment
objectives of a
Fund, the
Fund generally would write call options only
in
circumstances
where the investment adviser to the Fund does
not
anticipate
significant appreciation of the underlying
security in
the near
future or has otherwise determined to dispose
of the
security.
A Fund may write covered call options as
described
in the
Fund's Prospectus. A "covered" call option
means
generally that
so long as the Fund is obligated as the
writer of a
call option,
the Fund will (i) own the underlying
securities subject
to the
option, or (ii) have the right to acquire the
underlying
securities through immediate conversion or
exchange of
convertible preferred stocks or convertible
debt
securities owned
by the Fund. Although a Fund receives
premium income
from these
activities, any appreciation realized on an
underlying
security
will be limited by the terms of the call
option. A
Fund may
purchase call options on individual
securities only to
effect a
"closing purchase transaction."
As the writer of a call option, a Fund
receives a
premium
for undertaking the obligation to sell the
underlying
security at
a fixed price during the option period, if
the option
is
exercised. So long as a Fund remains
obligated as a
writer of a
call option, it forgoes the opportunity to
profit from
increases
in the market price of the underlying
security above
the exercise
price of the option, except insofar as the
premium
represents
such a profit (and retains the risk of loss
should the
value of
the underlying security decline).
PURCHASING OPTIONS ON INDIVIDUAL
SECURITIES. A
Fund may
purchase a put option on an underlying
security owned
by the Fund
as a defensive technique in order to protect
against an
anticipated decline in the value of the
security. A
Fund, as the
holder of the put option, may sell the
underlying
security at the
exercise price regardless of any decline in
its market
price. In
order for a put option to be profitable, the
market
price of the
underlying security must decline sufficiently
below the
exercise
price to cover the premium and transaction
costs that a
Fund must
pay. These costs will reduce any profit a
Fund might
have
realized had it sold the underlying security
instead of
buying
the put option. The premium paid for the put
option
would reduce
any capital gain otherwise available for
distribution
when the
security is eventually sold. The purchase of
put
options will
not be used by a Fund for leverage purposes.
A Fund may also purchase a put option on
an
underlying
security that it owns and at the same time
write a call
option on
the same security with the same exercise
price and
expiration
date. Depending on whether the underlying
security
appreciates
or depreciates in value, a Fund would sell
the
underlying
security for the exercise price either upon
exercise of
the call
option written by it or by exercising the put
option
held by it.
A Fund would enter into such transactions in
order to
profit from
the difference between the premium received
by the Fund
for the
writing of the call option and the premium
paid by the
Fund for
the purchase of the put option, thereby
increasing the
Fund's
current return.
A Fund will purchase put options only to
the
extent
permitted by the policies of state securities
authorities in
states where shares of the Fund are qualified
for offer
and sale.
Such authorities may impose further
limitations on the
ability of
a Fund to purchase options. A Fund may write
(sell)
put options
on individual securities only to effect a
"closing sale
transaction."
PURCHASING AND WRITING OPTIONS ON
SECURITIES
INDICES. A
Fund may purchase and sell (write) put and
call options
on
securities indices. An index assigns
relative values
to the
securities included in the index and the
index
fluctuates with
changes in the market values of the
securities so
included.
Options on indices are similar to options on
individual
securities, except that, rather than giving
the
purchaser the
right to take delivery of an individual
security at a
specified
price, they give the purchaser the right to
receive
cash. The
amount of cash is equal to the difference
between the
closing
price of the index and the exercise price of
the
option,
expressed in dollars, times a specified
multiple (the
"multiplier"). The writer of the option is
obligated,
in return
for the premium received, to make delivery of
this
amount.
The multiplier for an index option
performs a
function
similar to the unit of trading for a stock
option. It
determines
the total dollar value per contract of each
point in
the
difference between the exercise price of an
option and
the
current level of the underlying index. A
multiplier of
100 means
that a one-point difference will yield $100.
Options
on
different indices have different multipliers.
When a Fund writes a call or put option
on a stock
index,
the option is "covered", in the case of a
call, or
"secured", in
the case of a put, if the Fund maintains in a
segregated account
with the Custodian liquid assets, such as
cash, U.S.
Government
securities, or other appropriate high grade
debt
obligations
equal to the contract value. A call option
is also
covered if a
Fund holds a call on the same index as the
call written
where the
exercise price of the call held is (i) equal
to or less
than the
exercise price of the call written or (ii)
greater than
the
exercise price of the call written, provided
that the
Fund
maintains in a segregated account with the
Custodian
the
difference in liquid assets, such as cash,
U.S.
Government
securities, or other appropriate high grade
debt
obligations. A
put option is also "secured" if a Fund holds
a put on
the same
index as the put written where the exercise
price of
the put held
is (i) equal to or greater than the exercise
price of
the put
written or (ii) less than the exercise price
of the put
written,
provided that the Fund maintains in a
segregated
account with the
Custodian the difference in liquid assets,
such as
cash, U.S.
Government securities, or other appropriate
high grade
debt
obligations.
RISKS OF OPTIONS TRANSACTIONS. The
purchase and
writing of
options involves certain risks. During the
option
period, the
covered call writer has, in return for the
premium on
the option,
given up the opportunity to profit from a
price
increase in the
underlying securities above the exercise
price, but, as
long as
its obligation as a writer continues, has
retained the
risk of
loss should the price of the underlying
security
decline. The
writer of an option has no control over the
time when
it may be
required to fulfill its obligation as a
writer of the
option.
Once an option writer has received an
exercise notice,
it cannot
effect a closing purchase transaction in
order to
terminate its
obligation under the option and must deliver
the
underlying
securities (or cash in the case of an index
option) at
the
exercise price. If a put or call option
purchased by a
Fund is
not sold when it has remaining value, and if
the market
price of
the underlying security (or index), in the
case of a
put, remains
equal to or greater than the exercise price
or, in the
case of a
call, remains less than or equal to the
exercise price,
a Fund
will lose its entire investment in the
option. Also,
where a put
or call option on a particular security (or
index) is
purchased
to hedge against price movements in a related
security
(or
securities), the price of the put or call
option may
move more or
less than the price of the related security
(or
securities). In
this regard, there are differences between
the
securities and
options markets that could result in an
imperfect
correlation
between these markets, causing a given
transaction not
to achieve
its objective.
There can be no assurance that a liquid
market
will exist
when a Fund seeks to close out an option
position.
Furthermore,
if trading restrictions or suspensions are
imposed on
the options
markets, a Fund may be unable to close out a
position.
Finally,
trading could be interrupted, for example,
because of
supply and
demand imbalances arising from a lack of
either buyers
or
sellers, or the options exchange could
suspend trading
after the
price has risen or fallen more than the
maximum amount
specified
by the exchange. Closing transactions can be
made for
OTC
options only by negotiating directly with the
counterparty or by
a transaction in the secondary market, if any
such
market exists.
There is no assurance that a Fund will be
able to close
out an
OTC option position at a favorable price
prior to its
expiration.
In the event of insolvency of the
counterparty, a Fund
might be
unable to close out an OTC option position at
any time
prior to
its expiration. Although a Fund may be able
to offset
to some
extent any adverse effects of being unable to
liquidate
an option
position, the Fund may experience losses in
some cases
as a
result of such inability.
A Fund's options activities also may
have an
impact upon the
level of its portfolio turnover and brokerage
commissions. See
"Portfolio Turnover."
A Fund's success in using options
techniques
depends, among
other things, on IMI's ability to predict
accurately
the
direction and volatility of price movements
in the
options
markets as well as the securities markets and
on IMI's
ability to
select the proper type, time and duration of
options.
SECURITIES INDEX FUTURES CONTRACTS
A Fund may enter into securities index
futures
contracts as
an efficient means of regulating the Fund's
exposure to
the
equity markets. A Fund will not engage in
transactions
in
futures contracts for speculation but only as
a hedge
against
changes resulting from market conditions in
the values
of
securities held in the Fund's portfolio or
which it
intends to
purchase.
An index futures contract is a contract
to buy or
sell units
of an index at a specified future date at a
price
agreed upon
when the contract is made. Entering into a
contract to
buy units
of an index is commonly referred to as
purchasing a
contract or
holding a long position in the index.
Entering into a
contract
to sell units of an index is commonly
referred to as
selling a
contract or holding a short position. The
value of a
unit is the
current value of the stock index. For
example, the S&P
500 Index
is composed of 500 selected common stocks,
most of
which are
listed on the New York Stock Exchange (the
"Exchange").
The S&P
500 Index assigns relative weightings to the
500 common
stocks
included in the Index, and the Index
fluctuates with
changes in
the market values of the shares of those
common stocks.
In the
case of the S&P 500 Index, contracts are to
buy or sell
500
units. Thus, if the value of the S&P 500
Index were
$150, one
contract would be worth $75,000 (500 units x
$150).
The index
futures contract specifies that no delivery
of the
actual
securities making up the index will take
place.
Instead,
settlement in cash must occur upon the
termination of
the
contract, with the settlement being the
difference
between the
contract price and the actual level of the
stock index
at the
expiration of the contract. For example, if
a Fund
enters into a
futures contract to buy 500 units of the S&P
500 Index
at a
specified future date at a contract price of
$150 and
the S&P 500
Index is at $154 on that future date, a Fund
will gain
$2,000
(500 units x gain of $4). If a Fund enters
into a
futures
contract to sell 500 units of the stock index
at a
specified
future date at a contract price of $150 and
the S&P 500
Index is
at $154 on that future date, the Fund will
lose $2,000
(500 units
x loss of $4).
RISKS OF SECURITIES INDEX FUTURES. A
Fund's
success in
using hedging techniques depends, among other
things,
on IMI's
ability to predict correctly the direction
and
volatility of
price movements in the futures and options
markets as
well as in
the securities markets and to select the
proper type,
time and
duration of hedges. The skills necessary for
successful use of
hedges are different from those used in the
selection
of
individual stocks.
A Fund's ability to hedge effectively
all or a
portion of
its securities through transactions in index
futures
(and
therefore the extent of its gain or loss on
such
transactions)
depends on the degree to which price
movements in the
underlying
index correlate with price movements in the
Fund's
securities.
Inasmuch as such securities will not
duplicate the
components of
an index, the correlation probably will not
be perfect.
Consequently, a Fund will bear the risk that
the prices
of the
securities being hedged will not move in the
same
amount as the
hedging instrument. This risk will increase
as the
composition
of a Fund's portfolio diverges from the
composition of
the
hedging instrument.
Although a Fund intends to establish
positions in
these
instruments only when there appears to be an
active
market, there
is no assurance that a liquid market will
exist at a
time when
the Fund seeks to close a particular option
or futures
position.
Trading could be interrupted, for example,
because of
supply and
demand imbalances arising from a lack of
either buyers
or
sellers. In addition, the futures exchanges
may
suspend trading
after the price has risen or fallen more than
the
maximum amount
specified by the exchange. In some cases, a
Fund may
experience
losses as a result of its inability to close
out a
position, and
it may have to liquidate other investments to
meet its
cash
needs.
Although some index futures contracts
call for
making or
taking delivery of the underlying securities,
generally
these
obligations are closed out prior to delivery
by
offsetting
purchases or sales of matching futures
contracts (same
exchange,
underlying security or index, and delivery
month). If
an
offsetting purchase price is less than the
original
sale price, a
Fund generally realizes a capital gain, or if
it is
more, the
Fund generally realizes a capital loss.
Conversely, if
an
offsetting sale price is more than the
original
purchase price, a
Fund generally realizes a capital gain, or if
it is
less, the
Fund generally realizes a capital loss. The
transaction costs
must also be included in these calculations.
A Fund will only enter into index
futures
contracts or
futures options that are standardized and
traded on a
U.S. or
foreign exchange or board of trade, or
similar entity,
or quoted
on an automated quotation system. A Fund
will use
futures
contracts and related options only for "bona
fide
hedging"
purposes, as such term is defined in
applicable
regulations of
the CFTC.
When purchasing an index futures
contract, a Fund
will
maintain with its custodian in a segregated
account
(and mark-to-
market on a daily basis) liquid assets, such
as cash,
U.S.
Government securities, or other appropriate
high grade
debt
obligations that, when added to the amounts
deposited
with a
futures commission merchant ("FCM") as
margin, are
equal to the
market value of the futures contract.
Alternatively, a
Fund may
"cover" its position by purchasing a put
option on the
same
futures contract with a strike price as high
as or
higher than
the price of the contract held by a Fund.
When selling an index futures contract,
a Fund
will maintain
with its custodian in a segregated account
(and
mark-to-market on
a daily basis) liquid assets, such as cash,
U.S.
Government
securities, or other appropriate high grade
debt
obligations
that, when added to the amounts deposited
with an FCM
as margin,
are equal to the market value of the
instruments
underlying the
contract. Alternatively, a Fund may "cover"
its
position by
owning the instruments underlying the
contract (or, in
the case
of an index futures contract, a portfolio
with a
volatility
substantially similar to that of the index on
which the
futures
contract is based), or by holding a call
option
permitting a Fund
to purchase the same futures contract at a
price no
higher than
the price of the contract written by the Fund
(or at a
higher
price if the difference is maintained in
liquid assets
with the
Fund's custodian).
COMBINED TRANSACTIONS. A Fund may enter
into
multiple
transactions, including multiple options
transactions,
multiple
futures transactions, multiple currency
transactions
(including
forward currency contracts) and multiple
interest rate
transactions and any combination of futures,
options,
currency
and interest rate transactions ("component"
transactions),
instead of a single transaction, as part of a
single or
combined
strategy when, in the opinion of IMI, it is
in the best
interests
of a Fund to do so. A combined transaction
will
usually contain
elements of risk that are present in each of
its
component
transactions. Although combined transactions
are
normally
entered into based on IMI's judgment that the
combined
strategies
will reduce risk or otherwise more
effectively achieve
the
desired portfolio management goal, it is
possible that
the
combination will instead increase such risks
or hinder
achievement of the management objective.
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED
SECURITIES
A Fund may purchase securities on a firm
commitment or when-
issued basis. New issues of certain debt
securities
are often
offered on a when-issued basis; that is, the
payment
obligation
and the interest rate are fixed at the time
the buyer
enters into
the commitment, but delivery and payment for
the
securities
normally take place after the date of the
commitment to
purchase.
Firm commitment agreements call for the
purchase of
securities at
an agreed-upon price on a specified future
date. The
transactions are entered into in order to
secure what
is
considered to be an advantageous price and
yield to a
Fund and
not for purposes of leveraging the Fund's
assets. A
Fund will
maintain in a segregated account with its
custodian
liquid
assets, such as cash, U.S. Government
securities, or
other
appropriate high grade debt obligations equal
(on a
daily marked-
to-market basis) to the amount of its
commitment to
purchase the
securities on a when-issued or firm
commitment basis.
RESTRICTED AND ILLIQUID SECURITIES
Issuers of restricted securities may not
be
subject to the
disclosure and other investor protection
requirements
that would
be applicable if their securities were
publicly traded.
Restricted securities may be sold only in
privately
negotiated
transactions or in a public offering with
respect to
which a
registration statement is in effect under the
Securities Act of
1933. Where a registration statement is
required, a
Fund may be
required to bear all or part of the
registration
expenses. There
may be a lapse of time between a Fund's
decision to
sell a
restricted or illiquid security and the point
at which
the Fund
is permitted or able to sell such security.
If, during
such a
period, adverse market conditions were to
develop, a
Fund might
obtain a price less favorable than the price
that
prevailed when
it decided to sell. Since it is not possible
to
predict with
assurance that the market for securities
eligible for
resale
under Rule 144A will continue to be liquid, a
Fund may
carefully
monitor each of its investments in these
securities,
focussing on
such important factors, among others, as
valuation,
liquidity and
availability of information. This investment
practice
could have
the effect of increasing the level of
illiquidity in a
Fund to
the extent that qualified institutional
buyers become,
for a
time, uninterested in purchasing these
restricted
securities.
BORROWING
All borrowings will be repaid before any
additional
investments are made. Borrowing may
exaggerate the
effect on a
Fund's net asset value of any increase or
decrease in
the value
of the Fund's portfolio securities. Money
borrowed
will be
subject to interest costs (which may include
commitment
fees
and/or the cost of maintaining minimum
average
balances).
Although the principal of a Fund's borrowings
will be
fixed, the
Fund's assets may change in value during the
time a
borrowing is
outstanding, thus increasing exposure to
capital risk.
LOANS OF PORTFOLIO SECURITIES
A Fund may lend its investment
securities to
brokers,
dealers and financial institutions for the
purpose of
realizing
additional income. Loans of securities by a
Fund will
be
collateralized by cash, letters of credit, or
securities issued
or guaranteed by the U.S Government or its
agencies or
instrumentalities. The collateral will equal
(on a
daily marked-
to-market basis) at least 100% of the current
market
value of the
loaned securities. The risks in lending
portfolio
securities, as
with other extensions of credit, involve a
possible
loss of
rights in the collateral should the borrower
fail
financially.
In determining whether to lend securities,
IMI will
consider all
relevant facts and circumstances, including
the
creditworthiness
of the borrower.
INVESTMENT RESTRICTIONS
A Fund's investment objective, as set
forth in the
Prospectus under "Investment Objectives and
Policies,"
and the
investment restrictions set forth below are
fundamental
policies
of the Fund and may not be changed with
respect to that
Fund
without the approval of a majority (as
defined in the
1940 Act)
of the outstanding voting shares of that
Fund. Under
these
restrictions, each of Ivy China Region Fund,
Ivy
International
Fund, Ivy Latin America Strategy Fund and Ivy
New
Century Fund
may not:
(i) purchase or sell real estate
or
commodities and
commodity contracts;
(ii) purchase securities on margin;
(iii) sell securities short;
(iv) participate in an underwriting
or
selling group in
connection with the public
distribution
of
securities except for its own
capital
stock;
(v) purchase from or sell to any
of its
officers or
trustees, or firms of which
any of them
are
members or which they control,
any
securities
(other than capital stock of
the Fund),
but such
persons or firms may act as
brokers for
the Fund
for customary commissions to
the extent
permitted
by the Investment Company Act
of 1940;
(vi) make an investment in
securities of
companies in
any one industry (except
obligations of
domestic
banks or the U.S. Government,
its
agencies,
authorities, or
instrumentalities) if
such
investment would cause
investments in
such
industry to exceed 25% of the
market
value of the
Fund's total assets at the
time of such
investment; or
(vii) issue senior securities,
except as
appropriate to
evidence indebtedness which it
is
permitted to
incur, and except to the
extent that
shares of the
separate classes or series of
the Trust
may be
deemed to be senior
securities; provided
that
collateral arrangements with
respect to
currency-
related contracts, futures
contracts,
options or
other permitted investments,
including
deposits of
initial and variation margin,
are not
considered
to be the issuance of senior
securities
for
purposes of this restriction.
Under the 1940 Act, a Fund is permitted,
subject
to each
Fund's investment restrictions, to borrow
money only
from banks.
The Trust has no current intention of
borrowing amounts
in excess
of 5% of each the Fund's assets. Each of Ivy
China
Region Fund,
Ivy International Fund, Ivy Latin America
Strategy Fund
and Ivy
New Century Fund will continue to interpret
fundamental
investment restriction (i) above to prohibit
investment
in real
estate limited partnership interests; this
restriction
shall not,
however, prohibit investment in readily
marketable
securities of
companies that invest in real estate or
interests
therein,
including real estate investment trusts.
Further, as a matter of fundamental policy,
each of Ivy
China
Region Fund, Ivy Latin America Strategy Fund
and Ivy
New Century
Fund may not:
(i) lend any funds or other
assets, except
that this
restriction shall not prohibit
(a) the
entry into
repurchase agreements, (b) the
purchase
of
publicly distributed bonds,
debentures
and other
securities of a similar type,
or
privately placed
municipal or corporate bonds,
debentures
and other
securities of a type
customarily
purchased by
institutional investors or
publicly
traded in the
securities markets, or (c) the
lending
of
portfolio securities (provided
that the
loan is
secured continuously by
collateral
consisting of
U.S. Government securities or
cash or
cash
equivalents maintained on a
daily
marked-to-market
basis in an amount at least
equal to the
market
value of the securities
loaned).
Further, as a matter of fundamental policy,
each of Ivy
Canada
Fund, Ivy China Region Fund, Ivy Global Fund
and Ivy
New Century
Fund may not:
(i) purchase securities of any one
issuer
(except U.S.
Government securities) if as a
result
more than 5%
of the Fund's total assets
would be
invested in
such issuer or the Fund would
own or
hold more
than 10% of the outstanding
voting
securities of
that issuer; provided,
however, that up
to 25% of
the value of the Fund's total
assets may
be
invested without regard to
these
limitations.
Further, as a matter of fundamental policy,
each of Ivy
Latin
America Strategy Fund and Ivy New Century
Fund may not:
(i) borrow money, except for
temporary or
emergency
purposes; provided that the
Fund
maintains asset
coverage of 300% for all
borrowings.
Further, as a matter of fundamental policy,
each of Ivy
China
Region Fund and Ivy International Fund may
not:
(i) borrow money, except for
temporary
purposes where
investment transactions might
advantageously
require it. Any such loan may
not be
for a period
in excess of 60 days, and the
aggregate
amount of
all outstanding loans may not
at any
time exceed
10% of the value of the total
assets of
the Fund
at the time any such loan is
made.
Further, as a matter of fundamental policy,
Ivy Canada
Fund and
Ivy Global Fund may not:
(i) Make investments in securities
for the
purpose of
exercising control over or
management of
the
issuer;
(ii) Participate on a joint or a
joint and
several
basis in any trading account
in
securities. The
"bunching" of orders of the
Fund and of
other
accounts under the investment
management
of the
Manager (in the case of Ivy
Global Fund)
or the
investment adviser, Mackenzie
Financial
Corporation (the "Investment
Adviser")
(in the
case of Ivy Canada Fund) for
the sale or
purchase
of portfolio securities shall
not be
considered
participation in a joint
securities
trading
account;
(iii) Purchase securities on margin,
except
such short-
term credits as are necessary
for the
clearance of
transactions, but Ivy Global
Fund may
make margin
deposits in connection with
transactions
in
options, futures and options
on futures;
(iv) Make loans, except this
restriction
shall not
prohibit (a) the purchase and
holding of
a portion
of an issue of publicly
distributed debt
securi-
ties, (b) the entry into
repurchase
agreements
with banks or broker-dealers,
or, with
respect to
Ivy Global Fund only, (c) the
lending of
the
Fund's portfolio securities in
accordance with
applicable guidelines
established by the
Securities and Exchange
Commission (the
"SEC") and
any guidelines established by
the
Trust's
Trustees;
(v) Borrow amounts in excess of
10% of its
total
assets, taken at the lower of
cost or
market
value, and then only from
banks as a
temporary
measure for extraordinary or
emergency
purposes.
All borrowings will be repaid
before any
additional investments are
made;
(vi) Purchase the securities of
issuers
conducting
their principal business
activities in
the same
industry if immediately after
such
purchase the
value of the Fund's
investments in such
industry
would exceed 25% of the value
of the
total assets
of the Fund;
(vii) Act as an underwriter of
securities,
except to the
extent that, in connection
with the sale
of
securities, it may be deemed
to be an
underwriter
under applicable securities
laws;
(viii) Purchase any security if, as a
result,
the Fund
would then have more than 5%
of its
total assets
(taken at current value)
invested in
securities
restricted as to disposition
under the
Federal
securities laws; or
(ix) Issue senior securities,
except insofar
as the
Fund may be deemed to have
issued a
senior
security in connection with
any
repurchase
agreement or any permitted
borrowing.
Further, as a matter of fundamental policy,
Ivy Global
Fund may
not:
(i) Invest in real estate, real
estate
mortgage loans,
commodities or interests in
oil, gas
and/or
mineral exploration or
development
programs,
although (a) the Fund may
purchase and
sell
marketable securities of
issuers which
are secured
by real estate, (b) the Fund
may
purchase and sell
securities of issuers which
invest or
deal in real
estate, (c) the Fund may enter
into
forward
foreign currency contracts as
described
in the
Fund's prospectus, and (d) the
Fund may
write or
buy puts, calls, straddles or
spreads
and may
invest in commodity futures
contracts
and options
on futures contracts; or
(ii) purchase securities of another
investment company,
except in connection with a
merger,
consolidation,
reorganization or acquisition
of assets,
and
except that the Fund may
invest in
securities of
other investment companies
subject to
the
restrictions in Section
12(d)(1) of the
Investment
Company Act of 1940 (the "1940
Act").
Further, as a matter of fundamental policy,
Ivy
International
Fund may not:
(i) lend any funds or other
assets, except
that this
restriction shall not prohibit
(a) the
entry into
repurchase agreements or (b)
the
purchase of
publicly distributed bonds,
debentures
and other
securities of a similar type,
or
privately placed
municipal or corporate bonds,
debentures
and other
securities of a type
customarily
purchased by
institutional investors or
publicly
traded in the
securities markets;
(ii) invest more than 5% of the
value of its
total
assets in the securities of
any one
issuer (except
obligations of domestic banks
or the
U.S.
Government, its agencies,
authorities
and
instrumentalities); or
(iii) purchase the securities of any
other
open-end
investment company, except as
part of a
plan of
merger or consolidation.
Further, as a matter of fundamental policy,
Ivy Canada
Fund may
not:
(i) Write or buy puts, calls,
straddles or
spreads;
invest in real estate, real
estate
mortgage loans,
commodities, commodity futures
contracts
or
interests in oil, gas and/or
mineral
exploration
or development programs,
although (a)
the Fund may
purchase and sell marketable
securities
of issuers
which are secured by real
estate, (b)
the Fund may
purchase and sell securities
of issuers
which
invest or deal in real estate,
and (c)
the Fund
may enter into forward foreign
currency
contracts
as described in the Fund's
prospectus.
ADDITIONAL RESTRICTIONS
Unless otherwise indicated, each Fund
has adopted
the
following additional restrictions, which are
not
fundamental and
which may be changed without shareholder
approval, to
the extent
permitted by applicable law, regulation or
regulatory
policy.
Under these restrictions, each Fund may not:
(i) purchase any security if, as a
result,
the Fund
would then have more than 5%
of its
total assets
(taken at current value)
invested in
securities of
companies (including
predecessors) less
than three
years old.
Further, as a matter of non-fundamental
policy, each of
Ivy China
Region Fund, Ivy International Fund, Ivy
Latin America
Strategy
Fund and Ivy New Century Fund may not:
(i) invest in oil, gas or other
mineral
leases or
exploration or development
programs;
(ii) engage in the purchase and
sale of puts,
calls,
straddles or spreads (except
to the
extent
described in the Prospectus
and in this
SAI);
(iii) invest in companies for the
purpose of
exercising
control of management; or
(iv) invest more than 5% of its
total assets
in
warrants, valued at the lower
of cost or
market,
or more than 2% of its total
assets in
warrants,
so valued, which are not
listed on
either the New
York or American Stock
Exchanges.
Further, as a matter of non-fundamental
policy, each of
Ivy China
Region Fund, Ivy Latin America Strategy Fund
and Ivy
New Century
Fund may not:
(i) purchase or retain securities
of any
company if
officers and Trustees of the
Trust and
officers
and directors of Ivy
Management, Inc.,
MIMI or
Mackenzie Financial
Corporation who
individually
own more than 1/2 of 1% of the
securities of that
company together own
beneficially more
than 5% of
such securities;
(ii) purchase securities of other
investment
companies,
except in connection with a
merger,
consolidation
or sale of assets, and except
that it
may purchase
shares of other investment
companies
subject to
such restrictions as may be
imposed by
the
Investment Company Act of 1940
and rules
thereunder or by any state in
which its
shares are
registered; or
(iii) invest more than 15% of its
net assets
taken at
market value at the time of
investment
in
"illiquid securities",
provided,
however, that the
Fund will not invest more than
10% of
its total
assets in securities of
issuers that are
restricted from selling to the
public
without
registration under the
Securities act of
1933.
Illiquid securities may
include
securities subject
to legal or contractual
restrictions on
resale
(including private
placements),
repurchase
agreements maturing in more
than seven
days,
certain options traded over
the counter
that the
Fund has purchased, securities
being
used to cover
certain options that a fund
has written,
securities for which market
quotations
are not
readily available, or other
securities
which
legally or in IMI's opinion,
subject to
the
Board's supervision, may be
deemed
illiquid, but
shall not include any
instrument that,
due to the
existence of a trading market,
to the
Fund's
compliance with certain
conditions
intended to
provide liquidity, or to other
factors,
is liquid.
Further, as a matter of non-fundamental
policy, each of
Ivy
Canada Fund and Ivy Global Fund may not:
(i) purchase or sell real estate
limited
partnership
interests; or
(ii) purchase or sell interests in
oil, gas
or mineral
leases (other than securities
of
companies that
invest in or sponsor such
programs).
Further, as a matter of non-fundamental
policy, Ivy
Global Fund
may not:
(i) purchase or retain securities
of any
company if
officers and Trustees of the
Trust and
officers
and directors of the Manager
(and the
investment
adviser with respect to Ivy
Canada Fund)
who
individually own more than 1/2
of 1% of
the
securities of that company,
together own
beneficially more than 5% of
such
securities.
Further, as a matter of non-fundamental
policy, Ivy
Latin America
Strategy Fund may not:
(i) purchase or retain securities
of an
issuer if,
with respect to 75% of the
Fund's total
assets,
such purchase would result in
more than
10% of the
outstanding voting securities
of such
issuer being
held by the Fund.
In addition to the above restrictions,
so long as
it remains
a policy of the California Department of
Corporations,
each of
Ivy China Region Fund, Ivy Global Fund, Ivy
International Fund,
Ivy Latin America Strategy Fund and Ivy New
Century
Fund may not
purchase and sell OTC options on stock
indices unless
(a)
exchange-traded options are not available,
(b) an
active OTC
market exists that establishes pricing and
liquidity,
and (c) the
broker-dealers with whom each Fund enters
into such
transactions
have a minimum net worth of $20 million.
Moreover, so
long as it
remains a restriction of the Ohio Division of
Securities, each
Fund will treat securities eligible for
resale under
Rule 144A of
the Securities Act of 1933 as subject to the
Funds'
restriction
on investing in restricted securities, unless
the Board
determines that such securities are liquid.
Further,
with
respect to the nonfundamental investment
restrictions
for Ivy
Canada Fund, Ivy Global Fund, Ivy Latin
America
Strategy Fund and
Ivy New Century Fund relating to investing in
the
securities of
unseasoned issuers, purchasing the securities
of other
investment
companies and investing in illiquid
securities, each
the Fund
will notify shareholders 30 days before
changing its
investment
policies with respect to any of the
investment
practices
described therein. Finally, as a matter of
nonfundamental
policy, each of Ivy Canada Fund and Ivy
Global Fund may
not make
short sales of securities or maintain a short
position.
In addition, as a matter of
nonfundamental policy,
each Fund
may not purchase securities of any open-end
investment
company,
or securities of closed-end companies, except
by
purchase in the
open market where no commission or profit to
a sponsor
or dealer
results from such purchases, or except when
such
purchase is part
of a merger, consolidation, reorganization or
sale of
assets, and
except that the Fund may purchase shares of
other
investment
companies subject to such restrictions as may
be
imposed by the
1940 Act and rules thereunder or by any state
in which
shares of
the Fund are registered.
Whenever an investment objective, policy
or
restriction set
forth in the Prospectus or this SAI states a
maximum
percentage
of assets that may be invested in any
security or other
asset or
describes a policy regarding quality
standards, such
percentage
limitation or standard shall, unless
otherwise
indicated, apply
to the particular Fund only at the time a
transaction
is entered
into. Accordingly, if a percentage
limitation is
adhered to at
the time of investment, a later increase or
decrease in
the
percentage which results from circumstances
not
involving any
affirmative action by a Fund, such as a
change in
market
conditions or a change in the Fund's asset
level or
other
circumstances beyond the Fund's control, will
not be
considered a
violation.
ADDITIONAL RIGHTS AND
PRIVILEGES
The Trust offers to investors, and
(except as
noted below)
bears the cost of providing, the following
rights and
privileges.
The Trust reserves the right to amend or
terminate any
one or
more of such rights and privileges. Notice
of
amendments to or
terminations of rights and privileges will be
provided
to
shareholders in accordance with applicable
law.
Certain of the rights and privileges
described
below
reference other funds distributed by Ivy
Mackenzie
Distributors,
Inc. ("IMDI")(formerly known as Mackenzie Ivy
Funds
Distribution,
Inc.), which funds are not described in this
SAI.
These funds
are: Ivy Growth Fund, Ivy Growth with Income
Fund, Ivy
Emerging
Growth Fund, Ivy International Bond Fund, Ivy
Bond
Fund, Ivy
Short-Term Bond Fund and Ivy Money Market
Fund, the
other seven
series of the Trust; and Mackenzie California
Municipal
Fund,
Mackenzie Florida Limited Term Municipal
Fund,
Mackenzie Limited
Term Municipal Fund, Mackenzie National
Municipal Fund
and
Mackenzie New York Municipal Fund, the five
series of
Mackenzie
Series Trust (collectively, with the Funds,
the "Ivy
Mackenzie
Funds"). Investors should obtain a current
prospectus
before
exercising any right or privilege that may
relate to
these funds.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method is
available for
all classes
of shares, other than Class I. The minimum
initial and
subsequent investment pursuant to this plan
is $50 per
month,
except in the case of a tax qualified
retirement plan
for which
the minimum initial and subsequent investment
is $25
per month.
The Automatic Investment Method may be
discontinued at
any time
upon receipt by The Ivy Mackenzie Services
Corp.
("IMSC")
(formerly known as The Mackenzie Ivy Investor
Services
Corp.) of
telephone instructions or written notice to
IMSC from
the
investor. See "Automatic Investment Method"
in the
Account
Application.
EXCHANGE OF SHARES
As described in the Prospectus,
shareholders of
each Fund
have an exchange privilege with certain other
Ivy and
Mackenzie
Funds. Before effecting an exchange,
shareholders of
each Fund
should obtain and read the currently
effective
prospectus for the
Ivy or Mackenzie Fund into which the exchange
is to be
made.
INITIAL SALES CHARGE SHARES. Class A
shareholders
may
exchange their Class A shares ("outstanding
Class A
shares") for
Class A shares of another Ivy or Mackenzie
Fund (or for
shares of
another Ivy or Mackenzie Fund that currently
offers
only a single
class of shares) ("new Class A Shares") on
the basis of
the
relative net asset value per Class A share,
plus an
amount equal
to the difference, if any, between the sales
charge
previously
paid on the outstanding Class A shares and
the sales
charge
payable at the time of the exchange on the
new Class A
shares.
(The additional sales charge will be waived
for
outstanding
Class A shares that have been invested for a
period of
12 months
or longer.) Class A shareholders may also
exchange
their Class A
shares for Class A shares of Ivy Money Market
Fund (no
initial
sales charge will be assessed at the time of
such an
exchange).
CONTINGENT DEFERRED SALES CHARGE SHARES.
CLASS A:
Class A
shareholders may exchange their Class A
shares that are
subject
to a contingent deferred sales charge
("CDSC"), as
described in
the Prospectus ("outstanding Class A
shares"), for
Class A shares
of another Ivy or Mackenzie Fund (or for
shares of
another Ivy or
Mackenzie Fund that currently offers only a
single
class of
shares) ("new Class A shares") on the basis
of the
relative net
asset value per Class A share, without the
payment of
any CDSC
that would otherwise be due upon the
redemption of the
outstanding Class A shares. Class A
shareholders of a
Fund
exercising the exchange privilege will
continue to be
subject to
that Fund's CDSC period following an exchange
if such
period is
longer than the CDSC period, if any,
applicable to the
new
Class A shares.
For purposes of computing the CDSC that
may be
payable upon
the redemption of the new Class A shares, the
holding
period of
the outstanding Class A shares is "tacked"
onto the
holding
period of the new Class A shares.
CLASS B: Class B shareholders may
exchange their
Class B
shares ("outstanding Class B shares") for
Class B
shares of
another Ivy or Mackenzie Fund ("new Class B
shares") on
the basis
of the relative net asset value per Class B
share,
without the
payment of any CDSC that would otherwise be
due upon
the
redemption of the outstanding Class B shares.
Class B
shareholders of a Fund exercising the
exchange
privilege will
continue to be subject to that Fund's CDSC
schedule (or
period)
following an exchange if such schedule is
higher (or
such period
is longer) than the CDSC schedule (or period)
applicable to the
new Class B shares.
Class B shares of a Fund acquired
through an
exchange of
Class B shares of another Ivy or Mackenzie
Fund will be
subject
to that Fund's CDSC schedule (or period) if
such
schedule is
higher (or such period is longer) than the
CDSC
schedule (or
period) applicable to the Ivy or Mackenzie
Fund from
which the
exchange was made.
For purposes of both the conversion
feature and
computing
the CDSC that may be payable upon the
redemption of the
new
Class B shares (prior to conversion), the
holding
period of the
outstanding Class B shares is "tacked" onto
the holding
period of
the new Class B shares.
The following CDSC table ("Table 1")
applies to
Class B
shares of Ivy Global Fund, Ivy Growth Fund,
Ivy Growth
with
Income Fund, Ivy Emerging Growth Fund, Ivy
International Fund,
Ivy China Region Fund, Ivy Latin America
Strategy Fund,
Ivy New
Century Fund, Ivy International Bond Fund,
Ivy Bond
Fund, Ivy
Canada Fund, Mackenzie California Municipal
Fund,
Mackenzie
National Municipal Fund, Mackenzie New York
Municipal
Fund
("Table 1 Funds"):
CONTINGENT
DEFERRED
SALES
CHARGE AS
A
PERCENTAGE OF
DOLLAR
AMOUNT
SUBJECT TO
YEAR SINCE PURCHASE CHARGE
First
5%
Second
4%
Third
3%
Fourth
3%
Fifth
2%
Sixth
1%
Seventh and thereafter
0%
The following CDSC table ("Table 2")
applies to
Class B
shares of Ivy Short-Term Bond Fund, Mackenzie
Florida
Limited
Term Municipal Fund and Mackenzie Limited
Term
Municipal Fund
("Table 2 Funds"):
CONTINGENT
DEFERRED
SALES
CHARGE AS
A
PERCENTAGE OF
DOLLAR
AMOUNT
SUBJECT TO
YEAR SINCE PURCHASE CHARGE
First
3%
Second
2.5%
Third
2%
Fourth
1.5%
Fifth
1%
Sixth and thereafter
0%
The CDSC schedule for Table 1 Funds is
higher (and
the
period is longer) than the CDSC schedule (and
period)
for Table 2
Funds.
If a shareholder exchanges Class B
shares of a
Table 1 Fund
for Class B shares of a Table 2 Fund, Table 1
will
continue to
apply to the Class B shares following the
exchange.
For example,
an investor may decide to exchange Class B
shares of a
Table 1
Fund ("outstanding Class B shares") for Class
B shares
of a Table
2 Fund ("new Class B shares") after having
held the
outstanding
Class B shares for two years. The 4% CDSC
that
generally would
apply to a redemption of outstanding Class B
shares
held for two
years would not be deducted at the time of
the
exchange. If,
three years later, the investor redeems the
new Class B
shares, a
2% CDSC will be assessed upon the redemption
because by
"tacking"
the two year holding period of the
outstanding Class B
shares
onto the three year holding period of the new
Class B
shares, the
investor will be deemed to have held the new
Class B
shares for
five years.
If a shareholder exchanges Class B
shares of a
Table 2 Fund
for Class B shares of a Table 1 Fund, Table 1
will
apply to the
Class B shares following the exchange. For
example, an
investor
may decide to exchange Class B shares of a
Table 2 Fund
("outstanding Class B shares") for Class B
shares of a
Table 1
Fund ("new Class B shares") after having held
the
outstanding
Class B shares for two years. The 2.5% CDSC
that
generally would
apply to a redemption of outstanding Class B
shares
held for two
years would not be deducted at the time of
the
exchange. If,
three years later, the investor redeems the
new Class B
shares, a
2% CDSC will be assessed upon the redemption
because by
"tacking"
the two year holding period of the
outstanding Class B
shares
onto the three year holding period of the new
Class B
shares, the
investor will be deemed to have held the new
Class B
shares for
five years.
CLASS C SHARES. Class C shareholders
may exchange
their
Class C shares ("outstanding Class C shares")
for Class
C shares
of another Ivy or Mackenzie Fund ("new Class
C shares")
on the
basis of the relative net asset value per
Class C
share, without
the payment of any CDSC that would otherwise
be due
upon
redemption. (Class C shares are subject to a
CDSC of
1% if
redeemed within one year of the date of
purchase.)
CLASS I SHARES. Class I shareholders
may exchange
their
Class I shares for Class I shares of another
Ivy or
Mackenzie
Fund on the basis of the relative net asset
value per
Class I
share.
The minimum amount which may be
exchanged into a
fund of the
Ivy Mackenzie Funds in which shares are not
already
held is
$1,000 ($5,000,000 in the case of Class I of
Ivy
International
Fund). No exchange out of a Fund (other than
by a
complete
exchange of all the shares of the Fund) may
be made if
it would
reduce the shareholder's interest in that
Fund to less
than
$1,000 ($5,000,000 in the case of Class I of
Ivy
International
Fund). Exchanges are available only in
states where
the exchange
can be legally made.
Each exchange will be made on the basis
of the
relative net
asset values per share of each fund of the
Ivy
Mackenzie Funds
next computed following receipt of telephone
instructions by IMSC
or a properly executed request by IMSC.
Exchanges,
whether
written or telephonic, must be received by
IMSC by the
close of
regular trading on the Exchange (normally
4:00 p.m.,
eastern
time) to receive the price computed on the
day of
receipt;
exchange requests received after that time
will receive
the price
next determined following receipt of the
request. This
exchange
privilege may be modified or terminated at
any time,
upon at
least 60 days' notice when such noticed is
required by
SEC rules.
See "Redemptions."
An exchange of shares in any fund of the
Ivy
Mackenzie Funds
for shares in another fund will result in a
taxable
gain or loss.
Generally, any such taxable gain or loss will
be a
capital gain
or loss (long-term or short-term, depending
on the
holding period
of the shares) in the amount of the
difference between
the net
asset value of the shares surrendered and the
shareholder's tax
basis for those shares. However, in certain
circumstances,
shareholders will be ineligible to take sales
charges
into
account in computing taxable gain or loss on
an
exchange. See
"Taxation."
With limited exceptions, gain realized
by a
tax-deferred
retirement plan will not be taxable to the
plan and
will not be
taxed to the participant until distribution.
Each
investor
should consult his or her tax adviser
regarding the tax
consequences of an exchange transaction.
LETTER OF INTENT
Reduced sales charges apply to initial
investments
in
Class A shares of each Fund made pursuant to
a
non-binding Letter
of Intent. A Letter of Intent may be
submitted by an
individual,
his or her spouse and children under the age
of 21, or
a trustee
or other fiduciary of a single trust estate
or single
fiduciary
account. See the Account Application in the
Prospectus. Any
investor may submit a Letter of Intent
stating that he
or she
will invest, over a period of 13 months, at
least
$50,000 in
Class A shares of a Fund. A Letter of Intent
may be
submitted at
the time of an initial purchase of Class A
shares of a
Fund or
within 90 days of the initial purchase, in
which case
the Letter
of Intent will be back dated. A shareholder
may
include the
value (at the applicable offering price) of
all Class A
shares of
Ivy Global Fund, Ivy Growth Fund, Ivy Growth
with
Income Fund,
Ivy Emerging Growth Fund, Ivy International
Bond Fund,
Ivy Short-
Term Bond Fund, Ivy Bond Fund, Mackenzie
National
Municipal Fund,
Mackenzie Florida Limited Term Municipal
Fund,
Mackenzie Limited
Term Municipal Fund, Mackenzie California
Municipal
Fund and
Mackenzie New York Municipal Fund (and shares
that have
been
exchanged into Ivy Money Market Fund from any
of the
other funds
in the Ivy Mackenzie Funds) held of record by
him or
her as of
the date of his or her Letter of Intent as an
accumulation credit
toward the completion of such Letter. During
the term
of the
Letter of Intent, the Transfer Agent will
hold Class A
shares
representing 5% of the indicated amount (less
any
accumulation
credit value) in escrow. The escrowed Class
A shares
will be
released when the full indicated amount has
been
purchased. If
the full indicated amount is not purchased
during the
term of the
Letter of Intent, the investor is required to
pay IMDI
an amount
equal to the difference between the dollar
amount of
sales charge
that he or she has paid and that which he or
she would
have paid
on his or her aggregate purchases if the
total of such
purchases
had been made at a single time. Such payment
will be
made by an
automatic liquidation of Class A shares in
the escrow
account. A
Letter of Intent does not obligate the
investor to buy
or the
Trust to sell the indicated amount of Class A
shares,
and the
investor should read carefully all the
provisions
thereof before
signing.
RETIREMENT PLANS
Shares may be purchased in connection
with several
types of
tax-deferred retirement plans. Shares of
more than one
fund
distributed by IMDI may be purchased in a
single
application
establishing a single plan account, and
shares held in
such an
account may be exchanged among the funds in
the Ivy
Mackenzie
Funds in accordance with the terms of the
applicable
plan and the
exchange privilege available to all
shareholders.
Initial and
subsequent purchase payments in connection
with
tax-deferred
retirement plans must be at least $25 per
participant.
The following fees will be charged to
individual
shareholder
accounts as described in the retirement
prototype plan
document:
Retirement Plan New Account Fee
no fee
Retirement Plan Annual Maintenance Fee
$10.00
per account
For shareholders whose retirement accounts
are
diversified across
several funds of the Ivy Mackenzie Funds, the
annual
maintenance
fee will be limited to not more than $20.
The following discussion describes the
tax
treatment of
certain tax-deferred retirement plans under
current
Federal
income tax law. State income tax
consequences may
vary. An
individual considering the establishment of a
retirement plan
should consult with an attorney and/or an
accountant
with respect
to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares
of the
Trust may be
used as a funding medium for an Individual
Retirement
Account
("IRA"). Eligible individuals may establish
an IRA by
adopting a
model custodial account available from IMSC,
who may
impose a
charge for establishing the account.
Individuals
should consult
their tax advisers before investing IRA
assets in a
Fund that
primarily distributes exempt-interest
dividends.
An individual who has not reached age
70-1/2 and
who
receives compensation or earned income is
eligible to
contribute
to an IRA, whether or not he or she is an
active
participant in a
retirement plan. An individual who receives
a
distribution from
another IRA, a qualified retirement plan, a
qualified
annuity
plan or a tax-sheltered annuity or custodial
account
("403(b)
plan") that qualifies for "rollover"
treatment is also
eligible
to establish an IRA by rolling over the
distribution
either
directly or within 60 days after its receipt.
Tax
advice should
be obtained in connection with planning a
rollover
contribution
to an IRA.
In general, an eligible individual may
contribute
up to the
lesser of $2,000 or 100% of his or her
compensation or
earned
income to an IRA each year. If a husband and
wife are
both
employed, and both are under age 70-1/2, each
may set
up his or
her own IRA within these limits. If both
earn at least
$2,000
per year, the maximum potential contribution
is $4,000
per year
for both. However, if one spouse has (or
elects to be
treated as
having) no earned income for IRA purposes for
a year,
the other
spouse may contribute to an IRA on his or her
behalf.
In such a
case, the working spouse may contribute up to
the
lesser of
$2,250 or 100% or his or her compensation or
earned
income for
the year to IRAs for both spouses, provided
that no
more than
$2,000 is contributed to the IRA of one
spouse.
Rollover
contributions are not subject to these
limits.
An individual may deduct his or her
annual
contributions to
an IRA in computing his or her Federal income
tax
within the
limits described above, provided he or she
(or his or
her spouse,
if they file a joint Federal income tax
return) is not
an active
participant in a qualified retirement plan
(such as a
qualified
corporate, sole proprietorship, or
partnership pension,
profit
sharing, 401(k) or stock bonus plan),
qualified annuity
plan,
403(b) plan, simplified employee pension, or
governmental plan.
If he or she (or his or her spouse) is an
active
participant, a
full deduction is only available if he or she
has
adjusted gross
income that is less than a specified level
($40,000 for
married
couples filing a joint return, $25,000 for
single
individuals,
and $0 for a married individual filing a
separate
return). The
deduction is phased out ratably for active
participants
with
adjusted gross income between certain levels
($40,000
and $50,000
for married individuals filing a joint
return, $25,000
and
$35,000 for single individuals, and $0 and
$10,000 for
married
individuals filing separate returns).
Individuals who
are active
participants with income above the specified
phase-out
level may
not deduct their IRA contributions. Rollover
contributions are
not includible in income for Federal income
tax
purposes and
therefore are not deductible from it.
Generally, earnings on an IRA are not
subject to
current
Federal income tax until distributed.
Distributions
attributable
to tax-deductible contributions and to IRA
earnings are
taxed as
ordinary income. Distributions of
non-deductible
contributions
are not subject to Federal income tax. In
general,
distributions
from an IRA to an individual before he or she
reaches
age 59-1/2
are subject to a nondeductible penalty tax
equal to 10%
of the
taxable amount of the distribution. The 10%
penalty
tax does not
apply to amounts withdrawn from an IRA after
the
individual
reaches age 59-1/2, becomes disabled or dies,
or if
withdrawn in
the form of substantially equal payments over
the life
or life
expectancy of the individual and his or her
designated
benefi-
ciary, if any, or rolled over into another
IRA.
Distributions
must begin to be withdrawn not later than
April 1 of
the calendar
year following the calendar year in which the
individual reaches
age 70-1/2. Failure to take certain minimum
required
distribu-
tions will result in the imposition of a 50%
non-deductible
penalty tax. Extremely large distributions
in any one
year from
an IRA (or from an IRA and other retirement
plans) may
also
result in a penalty tax.
QUALIFIED PLANS: For those
self-employed
individuals who
wish to purchase shares of one or more of the
funds in
the Ivy
Mackenzie Funds through a qualified
retirement plan, a
Custodial
Agreement and a Retirement Plan are available
from
IMSC. The
Retirement Plan may be adopted as a profit
sharing plan
or a
money purchase pension plan. A profit
sharing plan
permits an
annual contribution to be made in an amount
determined
each year
by the self-employed individual within
certain limits
prescribed
by law. A money purchase pension plan
requires annual
contributions at the level specified in the
Custodial
Agreement.
There is no set-up fee for qualified plans
and the
annual
maintenance fee is $20.00 per account.
In general, if a self-employed
individual has any
common law
employees, employees who have met certain
minimum age
and service
requirements must be covered by the
Retirement Plan. A
self-
employed individual generally must contribute
the same
percentage
of income for common law employees as for
himself or
herself.
A self-employed individual may
contribute up to
the lesser
of $30,000 or 25% of compensation or earned
income to a
money
purchase pension plan or to a combination
profit
sharing and
money purchase pension plan arrangement each
year on
behalf of
each participant. To be deductible, total
contributions to a
profit sharing plan generally may not exceed
15% of the
total
compensation or earned income of all
participants in
the plan,
and total contributions to a combination
money
purchase-profit
sharing arrangement generally may not exceed
25% of the
total
compensation or earned income of all
participants. The
amount of
compensation or earned income of any one
participant
that may be
included in computing the deduction is
limited
(generally to
$150,000 for benefits accruing in plan years
beginning
after
1993, with annual inflation adjustments). A
self-employed
individual's contributions to a retirement
plan on his
or her own
behalf must be deducted in computing his or
her earned
income.
Corporate employers may also adopt the
Custodial
Agreement
and Retirement Plan for the benefit of their
eligible
employees.
Similar contribution and deduction rules
apply to
corporate
employers.
Distributions from the Retirement Plan
generally
are made
after a participant's separation from
service. A 10%
penalty tax
generally applies to distributions to an
individual
before he or
she reaches age 59-1/2, unless the individual
(1) has
reached age
55 and separated from service; (2) dies; (3)
becomes
disabled;
(4) uses the withdrawal to pay tax-deductible
medical
expenses;
(5) takes the withdrawal as part of a series
of
substantially
equal payments over his or her life
expectancy or the
joint life
expectancy of himself or herself and a
designated
beneficiary; or
(6) rolls over the distribution.
The Transfer Agent will furnish
custodial services
to the
employer and any participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS
AND
CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT"): Section
403(b)(7)
of the
Internal Revenue Code of 1986, as amended
(the "Code"),
permits
public school systems and certain charitable
organizations to use
mutual fund shares held in a custodial
account to fund
deferred
compensation arrangements with their
employees. A
custodial
account agreement is available for those
employers
whose
employees wish to purchase shares of the
Trust in
conjunction
with such an arrangement. The sales charge
for
purchases of less
than $10,000 of Class A shares is set forth
under
"Retirement
Plans" in the Prospectus. Sales charges for
purchases
of $10,000
or more of Class A shares are the same as
those set
forth under
"Initial Sales Charge Alternative -- Class A
Shares" in
the
Prospectus. The special application for a
403(b)(7)
Account is
available from IMSC.
Distributions from the 403(b)(7) Account
may be
made only
following death, disability, separation from
service,
attainment
of age 59-1/2, or incurring a financial
hardship. A
10% penalty
tax generally applies to distributions to an
individual
before he
or she reaches age 59-1/2, unless the
individual (1)
has reached
age 55 and separated from service; (2) dies
or becomes
disabled;
(3) uses the withdrawal to pay tax-deductible
medical
expenses;
(4) takes the withdrawal as part of a series
of
substantially
equal payments over his or her life
expectancy or the
joint life
expectancy of himself or herself and a
designated
beneficiary; or
(5) rolls over the distribution. There is no
set-up
fee for
403(b)(7) Accounts and the annual maintenance
fee is
$20.00 per
account.
SIMPLIFIED EMPLOYEE PENSION ("SEP")
IRAS: An
employer may
deduct contributions to a SEP up to the
lesser of
$30,000 or 15%
of compensation. SEP accounts generally are
subject to
all rules
applicable to IRA accounts, except the
deduction
limits, and are
subject to certain employee participation
requirements.
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A
shares of a
Fund may
reinvest all or a part of the proceeds of the
redemption back
into Class A shares of the Fund at net asset
value
(without a
sales charge) within 60 days from the date of
redemption. This
privilege may be exercised only once. The
reinvestment
will be
made at the net asset value next determined
after
receipt by IMSC
of the reinvestment order accompanied by the
funds to
be
reinvested. No compensation will be paid to
any sales
personnel
or dealer in connection with the transaction.
Any redemption is a taxable event. A
loss
realized on a
redemption generally may be disallowed for
tax purposes
if the
reinvestment privilege is exercised within 30
days
after the
redemption. In certain circumstances,
shareholders
will be
ineligible to take sales charges into account
in
computing
taxable gain or loss on a redemption if the
reinvestment
privilege is exercised. See "Taxation."
RIGHTS OF ACCUMULATION
A scale of reduced sales charges applies
to any
investment
of $50,000 or more in Class A shares of a
Fund. See
"Initial
Sales Charge Alternative -- Class A Shares"
in the
Prospectus.
The reduced sales charge is applicable to
investments
made at one
time by an individual, his or her spouse and
children
under the
age of 21, or a trustee or other fiduciary of
a single
trust
estate or single fiduciary account (including
a
pension, profit
sharing or other employee benefit trust
created
pursuant to a
plan qualified under Section 401 of the
Code). It is
also
applicable to current purchases of all of the
funds in
the Ivy
Mackenzie Funds (except Ivy Money Market
Fund) by any
of the
persons enumerated above, where the aggregate
quantity
of Class A
shares of Ivy Global Fund, Ivy Growth Fund,
Ivy Growth
with
Income Fund, Ivy Emerging Growth Fund, Ivy
China Region
Fund, Ivy
Latin America Strategy Fund, Ivy New Century
Fund, Ivy
International Bond Fund, Ivy International
Fund, Ivy
Bond Fund,
Ivy Short-Term Bond Fund, Ivy Canada Fund,
Mackenzie
National
Municipal Fund, Mackenzie California
Municipal Fund,
Mackenzie
Florida Limited Term Municipal Fund,
Mackenzie Limited
Term
Municipal Fund and Mackenzie New York
Municipal Fund
(and shares
that have been exchanged into Ivy Money
Market Fund
from any of
the other funds in the Ivy Mackenzie Funds)
and of any
other
investment company distributed by IMDI,
previously
purchased or
acquired and currently owned, determined at
the higher
of current
offering price or amount invested, plus the
Class A
shares being
purchased, amounts to $50,000 or more for Ivy
Global
Fund, Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
Emerging
Growth
Fund, Ivy International Fund, Ivy China
Region Fund,
Ivy Latin
America Strategy Fund, Ivy New Century Fund
and Ivy
Canada Fund;
$100,000 or more for International Bond Fund,
Ivy Bond
Fund,
Mackenzie National Municipal Fund, Mackenzie
California
Municipal
Fund and Mackenzie New York Municipal Fund;
or $25,000
or more
for Mackenzie Florida Limited Term Municipal
Fund and
Mackenzie
Limited Term Municipal Fund; or $1,000,000 or
more for
Ivy Short-
Term Bond Fund.
At the time an investment takes place,
IMSC must
be notified
by the investor or his or her dealer that the
investment
qualifies for the reduced sales charge on the
basis of
previous
investments. The reduced sales charge is
subject to
confirmation
of the investor's holdings through a check of
the
particular
Fund's records.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder (except shareholders with
accounts
in Class I
of Ivy International Fund) may establish a
Systematic
Withdrawal
Plan (the "Withdrawal Plan") by telephone
instructions
to IMSC or
by delivery to IMSC of a written election to
so redeem,
accompanied by a surrender to IMSC of all
share
certificates then
outstanding in the name of such shareholder,
properly
endorsed by
him or her. To be eligible (with respect to
Ivy Global
Fund and
Ivy Canada Fund only), a shareholder must
have at least
$5,000 in
the shareholder's account. A Withdrawal Plan
may not
be
established if the investor is currently
participating
in the
Automatic Investment Method. A Withdrawal
Plan may
involve the
use of principal and, to the extent that it
does,
depending on
the amount withdrawn, the investor's
principal may be
depleted.
A redemption under a Withdrawal Plan is
a taxable
event.
Investors contemplating participation in a
Withdrawal
Plan should
consult their tax advisers.
Additional investments made by investors
participating in a
Withdrawal Plan must equal at least $1,000
each while
the
Withdrawal Plan is in effect. Making
additional
purchases while
a Withdrawal Plan is in effect may be
disadvantageous
to the
investor because of applicable initial sales
charges or
CDSCs.
An investor may terminate his or her
participation
in the
Withdrawal Plan at any time by delivering
written
notice to IMSC.
If all shares held by the investor are
liquidated at
any time,
participation in the Withdrawal Plan will
terminate
automatically. The Trust or IMSC may
terminate the
Withdrawal
Plan option at any time after reasonable
notice to
shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares of each of Ivy China Region Fund,
Ivy
International
Fund, Ivy Latin America Strategy Fund and Ivy
New
Century Fund
may be purchased in connection with
investment programs
established by employee or other groups using
systematic payroll
deductions or other systematic payment
arrangements.
The Trust
does not itself organize, offer or administer
any such
programs.
However, it may, depending upon the size of
the
program, waive
the minimum initial and additional investment
requirements for
purchases by individuals in conjunction with
programs
organized
and offered by others. Unless shares of a
Fund are
purchased in
conjunction with IRAs (see "How to Buy
Shares" in the
Prospectus), such group systematic investment
programs
are not
entitled to special tax benefits under the
Code. The
Trust
reserves the right to refuse any purchase or
suspend
the offering
of shares in connection with group systematic
investment programs
at any time and to restrict the offering of
shareholder
privileges, such as Check writing, Simplified
Redemptions and
other optional privileges, as described in
the
Prospectus, to
shareholders using group systematic
investment
programs.
With respect to each shareholder account
established on or
after September 15, 1972 under a group
systematic
investment
program, the Trust and IMI each currently
charge a
maintenance
fee of $3.00 (or portion thereof) for each
twelve-month
period
(or portion thereof) the account is
maintained. The
Trust may
collect such fee (and any fees due to IMI)
through a
deduction
from distributions to the shareholders
involved or by
causing on
the date the fee is assessed a redemption in
each such
shareholder account sufficient to pay such
fee. The
Trust
reserves the right to change these fees from
time to
time without
advance notice.
BROKERAGE ALLOCATION
Subject to the overall supervision of
the
President and the
Board, IMI (or MFC with respect to Ivy Canada
Fund)
places orders
for the purchase and sale of each Fund's
portfolio
securities.
With respect to Ivy International Fund,
Northern Cross
Investments Limited ("Northern Cross," or the
"Subadviser") also
places orders for the purchase and sale of
the Fund's
portfolio
securities. All portfolio transactions are
effected at
the best
price and execution obtainable. Purchases and
sales of
debt
securities are usually principal transactions
and
therefore,
brokerage commissions are usually not
required to be
paid by the
particular Fund for such purchases and sales,
although
the price
paid generally includes undisclosed
compensation to the
dealer.
The prices paid to underwriters of
newly-issued
securities
usually include a concession paid by the
issuer to the
underwriter, and purchases of after-market
securities
from
dealers normally reflect the spread between
the bid and
asked
prices. In connection with OTC transactions,
IMI (or
MFC for Ivy
Canada Fund and the Subadviser for Ivy
International
Fund)
attempts to deal directly with the principal
market
makers,
except in those circumstances where IMI (or
MFC for Ivy
Canada
Fund and the Subadviser for Ivy International
Fund)
believes that
a better price and execution are available
elsewhere.
IMI (or MFC for Ivy Canada Fund and the
Subadviser
for Ivy
International Fund) selects broker-dealers to
execute
transactions and evaluates the reasonableness
of
commissions on
the basis of quality, quantity, and the
nature of the
firms'
professional services. Commissions to be
charged and
the
rendering of investment services, including
statistical,
research, and counseling services by
brokerage firms,
are factors
to be considered in the placing of brokerage
business.
The types
of research services provided by brokers may
include
general
economic and industry data, and information
on
securities of
specific companies. Research services
furnished by
brokers
through whom the Trust effects securities
transactions
may be
used by IMI (or MFC for Ivy Canada Fund and
the
Subadviser for
Ivy International Fund) in servicing all of
its
accounts. In
addition, not all of these services may be
used by IMI
(or MFC
for Ivy Canada Fund and the Subadviser for
Ivy
International
Fund) in connection with the services it
provides to a
particular
Fund or the Trust. IMI (or MFC for Ivy
Canada Fund and
the
Subadviser for Ivy International Fund) may
consider
sales of
shares of a Fund as a factor in the selection
of
broker-dealers
and may select broker-dealers who provide it
with
research
services. IMI (or MFC for Ivy Canada Fund
and the
Subadviser for
Ivy International Fund) will not, however,
execute
brokerage
transactions other than at the best price and
execution.
With respect to Ivy International Fund,
when a
security
proposed to be purchased or sold for the Fund
is also
to be
purchased or sold at the same time for other
accounts
managed by
the Subadviser, purchases or sales are
effected on a
pro rata,
rotating or other equitable basis so as to
avoid any
one account
being preferred over any other account.
During the fiscal years ended June 30,
1993 and
1994, during
the six-month period ended December 31, 1994
and during
the
fiscal year ended December 31, 1995, Ivy
Canada Fund
paid
brokerage commissions of $24,925, $202,849,
$98,390 and
$79,464,
respectively.
During the period from October 23, 1993
(commencement of
operations) to December 31, 1993, Ivy China
Region Fund
paid
brokerage commissions of $43,919. During the
fiscal
years ended
December 31, 1994 and December 31, 1995, Ivy
China
Region Fund
paid brokerage commissions of $26,579 and
$70,459,
respectively.
During the fiscal years ended June 30,
1993 and
1994, during
the six-month period ended December 31, 1994,
and
during the
fiscal year ended December 31, 1995, Ivy
Global Fund
paid
brokerage commissions of $31,789, $58,828,
$43,367 and
$96,124,
respectively.
During the fiscal years ended December
31, 1993,
1994 and
1995, Ivy International Fund paid brokerage
commissions
of
$98,756, $139,426 and $715,524, respectively.
During the period from November 1, 1994
(commencement of
operations) to December 31, 1994, Ivy Latin
America
Strategy Fund
and Ivy New Century Fund each paid brokerage
commissions of
$5,491 and $2,611, respectively. During the
fiscal
year ended
December 31, 1995, Ivy Latin America Strategy
Fund and
Ivy New
Century Fund each paid brokerage commissions
of $17,184
and
$15,236, respectively.
Each Fund, with the exception of Ivy
Canada Fund
and Ivy
Global Fund, may, under some circumstances,
accept
securities in
lieu of cash as payment for Fund shares.
Each of these
Funds
will consider accepting securities only to
increase its
holdings
in a portfolio security or to take a new
portfolio
position in a
security that IMI (and the Subadviser for Ivy
International Fund)
deems to be a desirable investment for each
the Fund.
While no
minimum has been established, it is expected
that each
the Fund
will not accept securities having an
aggregate value of
less than
$1 million. The Trust may reject in whole or
in part
any or all
offers to pay for the Fund shares with
securities and
may
discontinue accepting securities as payment
for the
Fund shares
at any time without notice. The Trust will
value
accepted
securities in the manner and at the same time
provided
for
valuing portfolio securities of each the
Fund, and the
Fund
shares will be sold for net asset value
determined at
the same
time the accepted securities are valued. The
Trust
will accept
only securities which are delivered in proper
form and
will not
accept securities subject to legal
restrictions on
transfer. The
acceptance of securities by the Trust must
comply with
the
applicable laws of certain states.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of
the Trust,
their
business addresses and principal occupations
during the
past five
years are:
POSITION
WITH THE
BUSINESS
AFFILIATIONS
NAME, ADDRESS, AGE TRUST AND
PRINCIPAL
OCCUPATIONS
John S. Anderegg, Jr. Trustee
Chairman,
Dynamics
60 Concord Street
Research Corp.
instruments
Wilmington, MA 01887 and
controls);
Director,
Age: 72
Burr-Brown Corp.
(operational
amplifiers);
Director,
Metritage
Incorporated
(level
measuring
instruments);
Trustee
of
Mackenzie Series
Trust
(1992-present).
Paul H. Broyhill Trustee
Chairman, BMC
Fund, Inc.
800 Hickory Blvd.
(1983-present);
Chairman,
Golfview Park
Broyhill Family
Foundation,
Lenoir, NC 28645 Inc.
(1983-Present);
Age: 72
Chairman and
President,
Broyhill
Investments, Inc.
(1983-present);
Chairman,
Broyhill Timber
Resources
(1983-present);
Management
of a
personal
portfolio of
fixed-income and
equity
investments
(1983-present);
Trustee
of
Mackenzie Series
Trust
(1988-present);
Director of The
Mackenzie
Funds
Inc.
(1988-1995).
Stanley Channick Trustee
President, The
Whitestone
11 Bala Avenue
Corporation
(insurance
Bala Cynwyd, PA 19004
agency);
President, Scott
Age: 71
Management
Company
(administrative
services
for
insurance
companies);
President, The
Channick
Group
(consultants to
insurance
companies and
national trade
associations);
Trustee of
Ivy
Fund
(1984-1993);
Director of The
Mackenzie
Funds
Inc.
(1994-1995).
Frank W. DeFriece, Jr. Trustee
Director, Manager
and Vice
The Landmark Centre
President,
Massengill-
113 Landmark Lane,
DeFriece
Foundation
Suite B
(charitable
organization)
Bristol, TN 37625
(1950-present);
Trustee and
Age: 75 Second
Vice
Chairman, East
Tennessee Public
Communications
Corp. (WSJK-
TV)
(1984-present); Trustee
of
Mackenzie
Series Trust
(1985-present);
Director of
The
Mackenzie
Funds Inc.
(1987-1995).
Roy J. Glauber Trustee
Mallinckrodt
Professor of
Lyman Laboratory
Physics, Harvard
of Physics
University (since
1974);
Harvard University Trustee
of Ivy
Fund (1961
Cambridge, MA 02138 -1991);
Trustee
of
Mackenzie Series
Trust
Age: 70
(1994-present).
Michael G. Landry Trustee
President,
Chairman and
700 South Federal Hwy. and
Director of
Mackenzie
Suite 300 President
Investment
Management
Boca Raton, FL 33432 Inc.
(1987-present);
Age: 49
President and
Director
[*Deemed to be an of Ivy
Management, Inc.
"interested person"
(1992-present);
Chairman
of the Trust, as and
Director of
defined under the
Mackenzie Ivy
Investor
1940 Act.]
Services Corp.
(1993-
present);
Director and
President of
Mackenzie Ivy
Funds
Distribution, Inc.
(1993-1994);
Chairman and
Director of
Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present);
Director
and
President of
The
Mackenzie Funds
Inc. (1987-
1995);
Trustee
and
President of
Mackenzie
Series
Trust
(1987-
present).
Michael R. Peers Trustee
Chairman of the
Board,
737 Periwinkle Way and Ivy
Management,
Inc.
Sanibel, FL 33957 Chairman
(1984-1991);
Chairman
Age: 66 of the of the
Board, Ivy
Fund
[*Deemed to be an Board
(1974-present);
Private
"interested person"
Investor.
of the Trust, as
defined under the
1940 Act.]
Joseph G. Rosenthal Trustee
Chartered
Accountant
110 Jardin Drive
(1958-present);
Trustee
Unit #12 of
Mackenzie
Series
Concord, Ontario Canada Trust
(1985-present);
L4K 2T7
Director of The
Mackenzie
Age: 61 Funds
Inc.
(1987-1995).
Richard N. Silverman Trustee
Formerly
President,
18 Bonnybrook Road Hy-Sil
Manufacturing
Waban, MA 02168
Company, a
division of
Age: 71 Van
Leer, U.S.A.,
Inc.
(gift
packaging
materials
and
metalized
film
products);
Formerly
Director, Waters
Manufacturing Co.
(manufacturer of
electronic
parts);
Director,
Panorama
Television
Network.
J. Brendan Swan Trustee
President,
Airspray
4701 North Federal Hwy.
International,
Inc.;
Suite 465 Joint
Managing
Director,
Pompano Beach, FL 33064
Airspray
International
Age: 65 B.V.
(an
environmentally
sensitive
packaging
company);
Director, The
Mackenzie Funds
Inc. (1992-
1995);
Trustee of
Mackenzie
Series
Trust
(1992-
present).
Keith J. Carlson Vice Senior
Vice
President
700 South Federal Hwy. President and
Director of
Mackenzie
Suite 300
Investment
Management,
Boca Raton, FL 33432 Inc.
(1994-present);
Age: 39 Senior
Vice
President,
Secretary and
Treasurer of
Mackenzie
Investment
Management Inc.
(1985-
1994);
Senior
Vice
President and
Director of
Ivy
Management,
Inc. (1994-
present); Senior
Vice
President,
Treasurer and
Director of Ivy
Management,
Inc.
(1992-1994);
Vice
President of The
Mackenzie
Funds
Inc.
(1987-1995);
President and
Director of
Mackenzie Ivy
Investor
Services Corp.
(1993-1996);
Vice
President of
Mackenzie
Series
Trust
(1994-
present);
Treasurer of
Mackenzie Series
Trust
(1985-1994);
President and
Director of
Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present);
Executive
Vice
President
and Director
of
Mackenzie Ivy
Funds
Distribution,
Inc. (1993-
1994).
C. William Ferris Secretary/ Senior
Vice
President,
700 South Federal Hwy. Treasurer
Secretary/Treasurer
Suite 300 and
Director of
Boca Raton, FL 33432
Mackenzie
Investment
Age: 51
Management Inc.
(1994-
present); Senior
Vice
President,
Finance and
Administration/Compliance
Officer
of
Mackenzie
Investment
Management Inc.
(1989-1994);
Senior Vice
President,
Secretary/
Treasurer and
Clerk of Ivy
Management, Inc.
(1994-
present); Senior
Vice
President,
Finance and
Administration/Compliance
Officer
of Ivy
Management,
Inc.
(1992-1994);
Senior
Vice
President,
Secretary/
Treasurer and
Clerk of Ivy
Management, Inc.
(1989-
1994);
Senior
Vice
President,
Secretary/
Treasurer of
Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present);
Secretary/
Treasurer and
Director of
Mackenzie Ivy
Funds
Distribution,
Inc. (1993-
1994);
Secretary/Treasurer
and
Director of
Mackenzie
Ivy
Investor
Services Corp.
(1993-1996);
President and
Director of
Mackenzie Ivy
Investor Services
Corp.
(1996-present);
Secretary/
Treasurer of The
Mackenzie
Funds
Inc.
(1993-1995);
Secretary/Treasurer of
Mackenzie Series
Trust
(1994-present).
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
Employees of IMI are permitted to make
personal
securities
transactions, subject to requirements and
restrictions
set forth
in IMI's Code of Ethics. The Code of Ethics
contains
provisions
and requirements designed to identify and
address
certain
conflicts of interest between personal
investment
activities and
the interests of investment advisory clients
such as
the Funds.
Among other things, the Code of Ethics, which
generally
complies
with standards recommended by the Investment
Company
Institute's
Advisory Group on Personal Investing,
prohibits certain
types of
transactions absent prior approval, imposes
time
periods during
which personal transactions may not be made
in certain
securities, and requires the submission of
duplicate
broker
confirmations and monthly reporting of
securities
transactions.
Additional restrictions apply to portfolio
managers,
traders,
research analysts and others involved in the
investment
advisory
process. Exceptions to these and other
provisions of
the Code of
Ethics may be granted in particular
circumstances after
review by
appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31,
1995)
TOTAL
PENSION OR
COMPENSA-
RETIREMENT
TION FROM
BENEFITS
ESTIMATED
TRUST AND
AGGREGATE ACCRUED AS
ANNUAL
FUND COM-
COMPENSA- PART OF
BENEFITS
PLEX PAID
NAME, TION FUND UPON
TO
POSITION FROM TRUST EXPENSES
RETIREMENT
TRUSTEES
John S. 7,112 N/A N/A
8,000
Anderegg, Jr.
(Trustee)
Paul H. 7,112 N/A N/A
8,000
Broyhill
(Trustee)
Stanley -0- N/A N/A
8,000
Channick[*]
(Trustee)
Frank W. 7,112 N/A N/A
8,000
DeFriece, Jr.
(Trustee)
Roy J. -0- N/A N/A
8,000
Glauber[*]
(Trustee)
Michael G. -0- N/A N/A
-0-
Landry
(Trustee and
President)
Michael R. -0- N/A N/A
-0-
Peers
(Trustee and
Chairman of
the Board)
Joseph G. 7,112 N/A N/A
8,000
Rosenthal
(Trustee)
Richard N. 8,000 N/A N/A
8,000
Silverman
(Trustee)
J. Brendan 7,112 N/A N/A
8,000
Swan
(Trustee)
Keith J. -0- N/A N/A
-0-
Carlson
(Vice President)
C. William -0- N/A N/A
-0-
Ferris
(Secretary/Treasurer)
[*] Appointed as a Trustee of the Trust at a
meeting
of the
Board of Trustees held on February 10,
1996.
As of February 26, 1996, the Officers
and Trustees
of the
Trust as a group owned beneficially less than
1% of the
outstanding Class A, Class B, Class C and
Class I
shares of any
of the Funds.
INVESTMENT ADVISORY AND OTHER
SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY
SERVICES
IMI currently provides business
management and
investment
advisory services to each Fund pursuant to a
Business
Management
and Investment Advisory Agreement (the
"Agreement")
(except for
Ivy Canada Fund, for which IMI provides only
business
management
services pursuant to a Business Management
Agreement).
The
Agreement was approved by the sole
shareholder of Ivy
China
Region Fund on October 23, 1993, by the
shareholders of
Ivy
International Fund on December 30, 1991 and
by the
respective
sole shareholder of Ivy Latin America
Strategy Fund and
Ivy New
Century Fund on October 28, 1994. Prior to
the
approval by the
respective shareholders or sole shareholder
of each
Fund (except
for Ivy Canada Fund and Ivy Global Fund), the
Agreement
was
approved on August 23, 1993 with respect to
Ivy China
Region
Fund, October 28, 1991 with respect to Ivy
International Fund and
September 17, 1994 with respect to Ivy Latin
America
Strategy
Fund and Ivy New Century Fund by the Board,
including a
majority
of the Trustees who are neither "interested
persons"
(as defined
in the 1940 Act) of the Trust nor have any
direct or
indirect
financial interest in the operation of the
distribution
plan (see
"Distribution Services") or in any related
agreement
(the
"Independent Trustees").
Until January 31, 1995 MIMI served as
the
investment adviser
to Ivy Global Fund and as investment manager
to Ivy
Canada Fund,
which Funds were each a series of The
Mackenzie Funds
Inc. (the
"Company") until January 31, 1995. On
January 31,
1995, MIMI's
interest in the Agreement (with respect to
Ivy Global
Fund) and
in the Management Agreement (with respect to
Ivy Canada
Fund) was
assigned by MIMI to IMI, which is a wholly
owned
subsidiary of
MIMI. The provisions of the Agreement and
the
Management
Agreement remain unchanged by IMI's
succession to MIMI
thereunder. The Agreement (with respect to
Ivy Global
Fund) and
the Management Agreement (with respect to Ivy
Canada
Fund) was
initially approved with respect to the Funds
on
September 29,
1994 by the Board including a majority of the
Independent
Trustees. The Agreement was approved by the
sole
shareholder of
each the Fund on January 27, 1995. MIMI is a
subsidiary
of MFC,
150 Bloor Street West, Toronto, Ontario,
Canada, a
public
corporation organized under the laws of
Ontario whose
shares are
listed for trading on The TSE. MFC is
registered in
Ontario as a
mutual fund dealer. IMI currently acts as
manager and
investment
adviser to the following investment companies
registered under
the 1940 Act (other than the Funds and other
than as
investment
manager to Ivy Canada Fund): Ivy Growth
Fund, Ivy
Emerging
Growth Fund, Ivy Growth with Income Fund, Ivy
Bond
Fund, Ivy
International Bond Fund, Ivy Short-Term Bond
Fund and
Ivy Money
Market Fund. The Trust has contracted with
MFC to act
as
investment adviser to Ivy Canada Fund
pursuant to an
Investment
Advisory Agreement (the "Advisory
Agreement"). The
Advisory
Agreement between Ivy Canada Fund and MFC was
approved
on
September 29, 1994 by the Board, including a
majority
of the
Independent Trustees, and was approved on
January 27,
1995 by the
sole shareholder of Ivy Canada Fund.
The Agreement obligates IMI to make
investments
for the
accounts of each Fund (except Ivy Canada
Fund) in
accordance with
its best judgment and within the investment
objectives
and
restrictions set forth in the Prospectus, the
1940 Act
and the
provisions of the Code relating to regulated
investment
companies, subject to policy decisions
adopted by the
Board. IMI
also determines the securities to be
purchased or sold
by these
Funds and places orders with brokers or
dealers who
deal in such
securities. The Advisory Agreement obligates
MFC to
make
investments for the account of Ivy Canada
Fund in
accordance with
its best judgment and within the investment
objectives
and
restrictions set forth in the Prospectus with
respect
to Ivy
Canada Fund, the 1940 Act and the provisions
of the
Code,
relating to regulated investment companies,
subject to
policy
decisions adopted by the Board. MFC also
determines
the
securities to be purchased or sold by Ivy
Canada Fund
and places
orders with brokers or dealers who deal in
such
securities.
Under the Agreement (the Management
Agreement with
respect
to Ivy Canada Fund), IMI also provides
certain business
management services. IMI is obligated to (1)
coordinate with
each Fund's Custodian and monitor the
services it
provides to
that Fund; (2) coordinate with and monitor
any other
third
parties furnishing services to each Fund; (3)
provide
each Fund
with necessary office space, telephones and
other
communications
facilities as are adequate for the particular
Fund's
needs;
(4) provide the services of individuals
competent to
perform
administrative and clerical functions that
are not
performed by
employees or other agents engaged by the
particular
Fund or by
IMI acting in some other capacity pursuant to
a
separate
agreement or arrangements with the Fund; (5)
maintain
or
supervise the maintenance by third parties of
such
books and
records of the Trust as may be required by
applicable
Federal or
state law; (6) authorize and permit IMI's
directors,
officers and
employees who may be elected or appointed as
trustees
or officers
of the Trust to serve in such capacities; and
(7) take
such other
action with respect to the Trust, after
approval by the
Trust as
may be required by applicable law, including
without
limitation
the rules and regulations of the SEC and of
state
securities
commissions and other regulatory agencies.
Pursuant to
the
Management Agreement, IMI is also responsible
for
reviewing the
activities of MFC to insure that Ivy Canada
Fund is
operated in
compliance with that Fund's investment
objectives and
policies
and with the 1940 Act.
Ivy Global Fund pays IMI a monthly fee
for
providing
business management and investment advisory
services at
an annual
rate of 1.00% of the first $500 million of
its average
daily net
assets, reduced to 0.75% on average daily net
assets
over $500
million. Each of the other Funds (except Ivy
Canada
Fund) pays
IMI a monthly fee for providing business
management and
investment advisory serves at an annual rate
of 1.00%
of each the
Fund's average daily net assets. Ivy Canada
Fund pays
IMI a
monthly fee for providing business management
services
at an
annual rate of 0.50% of its average daily net
assets.
For advisory services, Ivy Canada Fund
pays MFC a
monthly
fee at an annual rate of 0.35% of the average
daily net
assets of
the Fund. For the fiscal years ended June
30, 1993 and
1994, for
the six-month period ended December 31, 1994
and for
the fiscal
year ended December 31, 1995, Ivy Canada Fund
paid MFC
fees of
$47,671, $120,495, $54,763 and $67,229,
respectively.
For the period from October 23, 1993
(commencement
of
operations) to December 31, 1993 and during
the fiscal
years
ended December 31, 1994 and 1995, Ivy China
Region Fund
paid IMI
$10,340, $193,875 and $200,605, respectively
(of which
IMI
reimbursed $0, $1,036 and $0, respectively,
pursuant to
required
expense limitations and of which IMI
reimbursed $2,907,
$106,631
and $106,085, respectively, pursuant to
voluntary
expense
limitations).
During the fiscal years ended June 30,
1993 and
1994 and
during the six-month period ended December
31, 1994,
MIMI, as
investment manager to Ivy Canada Fund and as
investment
adviser
to Ivy Global Fund, when each was a series of
the
Company,
received fees of $68,102, $172,136 and
$78,234,
respectively,
from Ivy Canada Fund and $104,015, $155,540
and
$107,966,
respectively, (of which MIMI reimbursed $581,
$0 and
$0,
respectively, pursuant to required expense
limitations
and of
which MIMI reimbursed $83,214, $34,779 and
$15,264,
respectively,
pursuant to voluntary expense limitations)
from Ivy
Global Fund.
During the fiscal year ended December 31,
1995, IMI
received fees
of $96,041 from Ivy Canada Fund (of which IMI
reimbursed $63,466
pursuant to required expense limitations) and
$239,963
from Ivy
Global Fund (of which IMI reimbursed $62,242
pursuant
to
voluntary expense limitations).
For the fiscal years ended December 31,
1993, 1994
and 1995,
Ivy International Fund paid IMI fees of
$1,302,526,
$2,217,950
and $3,948,456, respectively.
During the period from November 1, 1994
(commencement of
operations) to December 31, 1994 and during
the fiscal
year ended
December 31, 1995, Ivy Latin America Strategy
Fund paid
IMI fees
of $1,006 and $95,380, respectively (of which
IMI
reimbursed IMI
reimbursed $13,333 and $93,340,,
respectively, pursuant
to
required expense limitations and of which IMI
reimbursed $523 and
$2,040, respectively, pursuant to voluntary
expense
limitations)
and Ivy New Century Fund paid IMI fees of
$912 and
$91,226,
respectively (of which IMI reimbursed $16,415
and
$87,348,
respectively, pursuant to required expense
limitations
and of
which IMI reimbursed $512 and $3,878,
respectively,
pursuant to
voluntary expense limitations).
Under the Agreement (or the Management
Agreement
and the
Advisory Agreement with respect to Ivy Canada
Fund),
the Trust
pays the following expenses: (1) the fees and
expenses
of the
Trust's Independent Trustees; (2) the
salaries and
expenses of
any of the Trust's officers or employees who
are not
affiliated
with IMI; (3) interest expenses; (4) taxes
and
governmental fees,
including any original issue taxes or
transfer taxes
applicable
to the sale or delivery of shares or
certificates
therefor; (5)
brokerage commissions and other expenses
incurred in
acquiring or
disposing of portfolio securities; (6) the
expenses of
registering and qualifying shares for sale
with the SEC
and with
various state securities commissions; (7)
accounting
and legal
costs; (8) insurance premiums; (9) fees and
expenses of
the
Trust's Custodian and Transfer Agent and any
related
services;
(10) expenses of obtaining quotations of
portfolio
securities and
of pricing shares; (11) expenses of
maintaining the
Trust's legal
existence and of shareholders' meetings; (12)
expenses
of
preparation and distribution to existing
shareholders
of periodic
reports, proxy materials and prospectuses;
and (13)
fees and
expenses of membership in industry
organizations.
The Agreement provides that if a Fund's
total
expenses in
any fiscal year (other than interest, taxes,
distribution
expenses, brokerage commissions and other
portfolio
transaction
expenses, other expenditures which are
capitalized in
accordance
with generally accepted accounting principles
and any
extraor-
dinary expenses including, without
limitation,
litigation and
indemnification expenses) exceed the
permissible limits
appli-
cable to that Fund in any state in which its
shares are
then
qualified for sale, IMI will bear the excess
expenses.
At the
present time, the most restrictive state
expense
limitation
provision limits each Fund's annual expenses
to 2.5% of
the first
$30 million of its average daily net assets,
2.0% of
the next $70
million and 1.5% of its average daily net
assets over
$100
million.
IMI currently limits each of Ivy China
Region, Ivy
Latin
America Strategy and Ivy New Century Fund's
total
operating
expenses (excluding Rule 12b-1 fees,
interest, taxes,
brokerage
commissions, litigation and indemnification
expenses,
and other
extraordinary expenses) to an annual rate of
1.95% of
the
particular Fund's average daily net assets.
As long as
a Fund's
expense limitation continues, it may lower
that Fund's
expenses
and increase its yield. Each the Fund's
expense
limitation may
be terminated or revised at any time, at
which time
that Fund's
expenses may increase and its yield may be
reduced,
depending on
the total assets of the Fund. In addition,
IMI may
voluntarily
reimburse Ivy Global Fund's expenses.
On August 25-26, 1995, the Board,
including a
majority of
the Independent Trustees, last approved the
continuance
of the
Agreement with respect to Ivy China Region
Fund, Ivy
Global Fund
and Ivy International Fund. On August 25-26,
1995, the
Trustees
of the Trust, including a majority of the
Independent
Trustees,
voted to approve the Management Agreement for
Ivy
Canada Fund.
The initial term of the Agreement between IMI
and each
of Ivy
Latin America Strategy Fund and Ivy New
Century Fund,
which
commenced on October 30, 1994, will run for a
period of
two years
from the date of commencement. Each
Agreement (or
Management
Agreement with respect to Ivy Canada Fund)
will
continue in
effect with respect to each Fund from year to
year, or
for more
than the initial period, as the case may be,
only so
long as the
continuance is specifically approved at least
annually
(i) by the
vote of a majority of the Independent
Trustees and (ii)
either
(a) by the vote of a majority of the
outstanding voting
securi-
ties (as defined in the 1940 Act) of the
particular
Fund or (b)
by the vote of a majority of the entire
Board. If the
question
of continuance of the Agreements (or adoption
of any
new agree-
ment) is presented to shareholders,
continuance (or
adoption)
shall be effected only if approved by the
affirmative
vote of a
majority of the outstanding voting securities
of the
particular
Fund. See "Capitalization and Voting
Rights."
Each Agreement (or Management Agreement
with
respect to Ivy
Canada Fund) may be terminated with respect
to a
particular Fund
at any time, without payment of any penalty,
by the
vote of a
majority of the Board, or by a vote of a
majority of
the
outstanding voting securities of that Fund,
on 60 days'
written
notice to IMI, or by IMI on 60 days' written
notice to
the Trust.
The Agreement shall terminate automatically
in the
event of its
assignment.
SUBADVISORY CONTRACT - IVY
INTERNATIONAL FUND.
The Trust
and IMI, on behalf of Ivy International Fund,
have
entered into a
subadvisory contract with an independent
investment
adviser (the
"Subadvisory Contract") under which the
subadviser
develops,
recommends and implements an investment
program and
strategy for
the Fund's portfolio and is responsible for
making all
portfolio
security and brokerage decisions, subject to
the
supervision of
IMI and, ultimately, the Board. Fees payable
under the
Subadvisory Contract accrue daily and are
paid
quarterly by IMI.
Effective April 1, 1993, Northern Cross
serves as
subadviser for
Ivy International Fund's portfolio pursuant
to the
Subadvisory
Contract. As compensation for its services,
Northern
Cross is
paid a fee by IMI at the annual rate of 0.60%
of Ivy
International Fund's average net assets. As
compensation for
advisory services rendered for the period
from April 1,
1993 to
December 31, 1993 and for the fiscal years
ended
December 31,
1994 and 1995, IMI paid Northern Cross
$617,520,
$1,330,770 and
$2,369,074, respectively. Northern Cross,
wholly-owned
and
operated by Hakan Castegren, is the successor
to the
investment
advisory functions of Boston Overseas
Investors, Inc.
("BOI"),
which also was wholly-owned and operated by
Hakan
Castegren.
Boston Investor Services, Inc., the successor
to the
administrative and research functions of BOI,
provides
administrative and research services to
Northern Cross.
BOI served as subadviser for Ivy
International
Fund's
portfolio from July 1, 1990 until March 31,
1993.
Under its
subadvisory contract, IMI paid BOI a fee at
an annual
rate of
0.60% of the Fund's average net assets. As
compensation for
advisory services rendered for the
three-month period
ended
March 31, 1993, IMI paid BOI $163,879.
Any amendment to the current Subadvisory
Contract
requires
approval by votes of (a) a majority of the
outstanding
voting
securities of Ivy International Fund affected
thereby
and (b) a
majority of the Trustees who are not
interested persons
of the
Trust or of any other party to such Contract.
The
Subadvisory
Contract terminates automatically in the
event of its
assignment
(as defined in the 1940 Act) or upon
termination of the
Agreement. Also, the Subadvisory Contract
may be
terminated by
not more than 60 days' nor less than 30 days'
written
notice by
either the Trust or IMI or upon not less than
120 days'
notice by
the Subadviser. The Subadvisory Contract
provides that
IMI or
the Subadviser shall not be liable to the
Trust, to any
shareholder of the Trust, or to any other
person,
except for loss
resulting from willful misfeasance, bad
faith, gross
negligence
or reckless disregard of duty.
The Subadvisory Contract will continue
in effect
(subject to
provisions for earlier termination as
described above)
only if
such continuance is approved at least
annually (a) by a
majority
of the Trustees who are not interested
persons of the
Trust or of
any other party to the Contract and (b) by
either (i) a
majority
of all of the Trustees of the Trust or (ii) a
vote of a
majority
of the outstanding voting securities of any
Fund
affected
thereby. On September 17, 1994, the Board,
including a
majority
of the Independent Trustees, last approved
the
continuance of the
Subadvisory Contract.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI,
serves as
the
exclusive distributor of the Funds' shares
pursuant to
an Amended
and Restated Distribution Agreement with the
Trust
dated October
23, 1991, as amended from time to time (the
"Distribution
Agreement"). The Distribution Agreement was
last
approved by the
Board of Trustees on August 25, 1995. IMDI
distributes
shares of
the Funds through broker-dealers who are
members of the
National
Association of Securities Dealers, Inc. and
who have
executed
dealer agreements with IMDI. IMDI
distributes shares
of the
Funds on a continuous basis, but reserves the
right to
suspend or
discontinue distribution on that basis. IMDI
is not
obligated to
sell any specific amount of Fund shares.
Pursuant to the Distribution Agreement,
IMDI is
entitled to
deduct a commission on all Class A Fund
shares sold
equal to the
difference, if any, between the public
offering price,
as set
forth in the Funds' then-current prospectus,
and the
net asset
value on which such price is based. Out of
that
commission, IMDI
may reallow to dealers such concession as
IMDI may
determine from
time to time. In addition, IMDI is entitled
to deduct
a CDSC on
the redemption of Class A shares sold without
an
initial sales
charge and Class B and Class C shares in
accordance
with, and in
the manner set forth in, the Prospectus.
Under the Distribution Agreement, each
Fund bears,
among
other expenses, the expenses of registering
and
qualifying its
shares for sale under federal and state
securities laws
and
preparing and distributing to existing
shareholders
periodic
reports, proxy materials and prospectuses.
During the fiscal year ended June 30,
1993 and the
three
months ended September 30, 1993, MIMI, which
at that
time was Ivy
Canada Fund's distributor, received from
sales of Class
A[1:
Shares of Ivy Canada Fund outstanding as of
March 31,
1994 were
designated Class A shares of the Fund.]
shares of Ivy
Canada Fund
$395,698 and $332,241, respectively, in sales
commissions, of
which $59,871 and $52,414, respectively, was
retained
after
dealers' reallowances. During the nine
months ended
June 30,
1994, the six-month period ended December 31,
1994 and
the fiscal
year ended December 31, 1995, IMDI received
commissions
of
$386,239, $44,748 and $45,959, respectively,
from sales
of Class
A shares of the Fund, of which $62,036,
$7,074 and
$7,824,
respectively, was retained after dealers'
reallowances.
During
the period April 1, 1994 (commencement of
sales of
Class B
shares) to June 30, 1994 and the six-month
period ended
December
31, 1994 and the fiscal year ended December
31, 1995,
IMDI
received $574 and $2,387, respectively, in
CDSCs on
redemptions
of Class B shares of Ivy Canada Fund.
During the period from October 23, 1993
(commencement of
operations) to December 31, 1993 and during
the fiscal
years
ended December 31, 1994 and December 31,
1995, IMDI
received from
sales of Class A shares of Ivy China Region
Fund
$215,030,
$328,530 and $132,337, respectively, in sales
commissions, of
which $33,451, $52,347 and $9,919,
respectively, was
retained
after dealers' re-allowances. During the
period from
October 23,
1993 (commencement of operations) to December
31, 1993,
IMDI
received no CDSCs on Class B shares of Ivy
China Region
Fund.
During the fiscal years ended December 31,
1994 and
December 31,
1995, IMDI received $17,290 and $48,686,
respectively,
in CDSCs
on redemptions of Class B shares of the Fund.
During the fiscal years ended June 30,
1993 and
the three
month period ended September 30, 1993, MIMI,
which at
that time
was Ivy Global Fund's distributor, received
from sales
of Class A
1[Shares of Ivy Global Fund outstanding as of
March 31,
1994 were
designated Class A shares of the Fund.]
shares of Ivy
Global Fund
$192,128 and $57,279, respectively, in sales
commissions, of
which $35,500 and $8,869, respectively, was
retained
after
dealers' reallowances. During the nine
months ended
June 30,
1994, the six-month period ended December 31,
1994 and
the fiscal
year ended December 31, 1995, IMDI received
commissions
of
$166,539, $96,349 and $150,828, respectively,
from
sales of Class
A shares of the Fund, of which $25,240,
$16,508 and
$23,153,
respectively, was retained after dealers'
reallowances.
During
the period April 1, 1994 (commencement of
sales of
Class B
shares) to December 31, 1994 and during the
fiscal year
ended
December 31, 1995, IMDI received $0 and
$2,833,
respectively, in
CDSCs on redemptions of Class B shares of Ivy
Global
Fund.
During the period from January 1, 1993
to
September 30,
1993, MIMI, which at that time was Ivy
International
Fund's
distributor, received from sales of Class A
shares of
the Fund
$262,908 in sales commissions, of which
$41,306 was
retained
after dealers' re-allowances. During the
period from
October 1,
1993 to December 31, 1993, IMDI received from
sales of
Class A
shares of Ivy International Fund $215,623 in
sales
commissions,
of which $33,877 was retained after dealers'
re-allowances.
During the fiscal years ended December 31,
1994 and
December 31,
1995, IMDI received from sales of Class A
shares of Ivy
International Fund $788,610 and $931,967,
respectively,
in sales
commissions, of which $124,786 and $144,220,
respectively, was
retained after dealers' re-allowances.
During the
period from
January 1, 1993 to September 30, 1993, and
from October
1, 1993
to December 31, 1993, MIMI and IMDI,
respectively,
received no
CDSCs upon certain redemptions of Class A
shares of Ivy
International Fund. During the period from
October 23,
1993 (the
date on which Class B shares of Ivy
International Fund
were first
offered for sale to the public) to December
31, 1993,
IMDI
received $439 in CDSCs paid upon certain
redemptions of
Class B
shares of Ivy International Fund. During the
fiscal
years ended
December 31, 1994 and December 31, 1995, IMDI
received
$23,381
and $102,532, respectively, in CDSCs paid
upon certain
redemptions of Class B shares of Ivy
International
Fund.
During the period from November 1, 1994
(commencement of
operations) to December 31, 1994 and during
the fiscal
year ended
December 31, 1995, IMDI received from sales
of Class A
shares of
Ivy Latin America Strategy Fund $7,492 and
$65,204,
respectively,
in sales commissions, of which $1,071 and
$8,435,
respectively,
was retained after dealers re-allowances.
During the
period from
November 1, 1994 (commencement of operations)
to
December 31,
1994, IMDI received no CDSCs on redemptions
of Class B
shares of
Ivy Latin America Strategy Fund. During the
fiscal
year ended
December 31, 1995, IMDI received $447 in
CDSCs on
redemptions of
Class B shares of the Fund.
During the period from November 1, 1994
(commencement of
operations) to December 31, 1994 and during
the fiscal
year ended
December 31, 1995, IMDI received from sales
of Class A
Shares of
Ivy New Century Fund $5,766 and $96,634,
respectively,
in sales
commissions, of which $865 and $14,419,
respectively,
was
retained after dealer re-allowances. During
the period
from
November 1, 1994 (commencement of operations)
to
December 31,
1994, IMDI received no CDSCs on redemptions
of Class B
Shares of
Ivy New Century Fund. During the fiscal year
ended
December 31,
1995, IMDI received $813 in CDSCs on
redemptions of
Class B
shares of the Fund.
Since the inception date for Class C
shares of
each Fund is
April 30, 1996, no payments were made in
connection
with the sale
of Class C shares with respect to any Fund
during the
relevant
time periods.
Each Distribution Agreement will
continue in
effect for
successive one-year periods, provided that
such
continuance is
specifically approved at least annually by
the vote of
a majority
of the Independent Trustees, cast in person
at a
meeting called
for that purpose and by the vote of either a
majority
of the
entire Board or a majority of the outstanding
voting
securities
of each Fund. Each Distribution Agreement
may be
terminated with
respect to a particular Fund at any time,
without
payment of any
penalty, by IMDI on 60 days' written notice
to the
particular
Fund or by a Fund by vote of either a
majority of the
outstanding
voting securities of the Fund or a majority
of the
Independent
Trustees on 60 days' written notice to IMDI.
Each
Distribution
Agreement shall terminate automatically in
the event of
its
assignment.
RULE 18F-3 PLAN. On February 23, 1995,
the SEC
adopted Rule
18f-3 under the 1940 Act, which permits a
registered
open-end
investment company to issue multiple classes
of shares
in
accordance with a written plan approved by
the
investment
company's board of directors/trustees and
filed with
the SEC. At
a meeting held on December 1-2, 1995, the
Board adopted
a multi-
class plan (the "Rule 18f-3 plan") on behalf
of each
Fund. The
key features of the Rule 18f-3 plan are as
follows:
(i) shares
of each class of a Fund represent an equal
pro rata
interest in
that Fund and generally have identical
voting,
dividend,
liquidation, and other rights, preferences,
powers,
restrictions,
limitations, qualifications, terms and
conditions,
except that
each class bears certain class-specific
expenses and
has separate
voting rights on certain matters that relate
solely to
that class
or in which the interests of shareholders of
one class
differ
from the interests of shareholders of another
class;
(ii) subject
to certain limitations described in the
Prospectus,
shares of a
particular class of a Fund may be exchanged
for shares
of the
same class of another Ivy or Mackenzie fund;
and (iii)
a Fund's
Class B shares will convert automatically
into Class A
shares of
that Fund after a period of eight years,
based on the
relative
net asset value of such shares at the time of
conversion.
RULE 12B-1 DISTRIBUTION PLANS. The
Trust has
adopted on
behalf of each Fund, in accordance with Rule
12b-1
under the 1940
Act, separate distribution plans pertaining
to the
Funds'
Class A, Class B and Class C shares (each, a
"Plan").
In
adopting each Plan, a majority of the
Independent
Trustees have
concluded in conformity with the requirements
of the
1940 Act
that there is a reasonable likelihood that
each Plan
will benefit
each Fund and its shareholders. The Trustees
of the
Trust
believe that the Plans should result in
greater sales
and/or
fewer redemptions of each Fund's shares,
although it is
impossible to know for certain the level of
sales and
redemptions
of a Fund's shares in the absence of a Plan
or under an
alternative distribution arrangement.
Under each Plan, each Fund pays IMDI a
service
fee, accrued
daily and paid monthly, at the annual rate of
up to
0.25% of the
average daily net assets attributable to the
class of
shares to
which the Plan applies. The services for
which service
fees may
be paid include, among other services,
advising clients
or
customers regarding the purchase, sale or
retention of
shares of
the Fund, answering routine inquiries
concerning the
Fund and
assisting shareholders in changing options or
enrolling
in
specific plans. Pursuant to each Plan,
service fee
payments made
out of or charged against the assets
attributable to a
Fund's
Class A, Class B or Class C shares must be in
reimbursement for
services rendered for or on behalf of that
class of the
Fund.
The expenses not reimbursed in any one month
may be
reimbursed in
a subsequent month. The Class A Plan (other
than the
Class A
Plan for Ivy Canada Fund) does not provide
for the
payment of
interest or carrying charges as distribution
expenses.
Under the Funds' Class B and Class C
Plans, each
Fund also
pays IMDI a distribution fee, accrued daily
and paid
monthly, at
the annual rate of 0.75% of the average daily
net
assets
attributable to its Class B or Class C
shares. Ivy
Canada Fund
also pays IMDI a distribution fee, accrued
daily and
paid
monthly, at the annual rate of 0.15% of the
average
daily assets
attributable to its Class A shares. IMDI may
reallow
to dealers
all or a portion of the service and
distribution fees
as IMDI may
determine from time to time. The
distribution fee
compensates
IMDI for expenses incurred in connection with
activities
primarily intended to result in the sale of
the Funds'
Class B or
Class C shares (and Class A shares, in the
case of Ivy
Canada
Fund), including the printing of prospectuses
and
reports for
persons other than existing shareholders and
the
preparation,
printing and distribution of sales literature
and
advertising
materials. Pursuant to each Class B and
Class C Plan
(and Ivy
Canada Fund's Class A Plan), IMDI may include
interest,
carrying
or other finance charges in its calculation
of
distribution
expenses, if not prohibited from doing so
pursuant to
an order of
or a regulation adopted by the SEC.
Among other things, each Plan provides
that (1)
IMDI will
submit to the Board at least quarterly, and
the
Trustees will
review, written reports regarding all amounts
expended
under the
Plan and the purposes for which such
expenditures were
made;
(2) each Plan will continue in effect only so
long as
such
continuance is approved at least annually,
and any
material
amendment thereto is approved, by the votes
of a
majority of the
Board, including the Independent Trustees,
cast in
person at a
meeting called for that purpose; (3) payments
by each
Fund under
each Plan shall not be materially increased
without the
affirmative vote of the holders of a majority
of the
outstanding
shares of the relevant class; and (4) while
each Plan
is in
effect, the selection and nomination of
Trustees who
are not
"interested persons" (as defined in the 1940
Act) of
the Trust
shall be committed to the discretion of the
Trustees
who are not
"interested persons" of the Trust.
IMDI may make payments for distribution
assistance
and for
administrative and accounting services from
resources
that may
include the management fees paid (to MIMI, in
the case
of Ivy
Canada Fund) by a Fund. IMDI also may make
payments
(such as the
service fee payments described above) to
unaffiliated
broker-
dealers for services rendered in the
distribution of
each Fund's
shares. To qualify for such payments, shares
may be
subject to a
minimum holding period. However, no such
payments will
be made
to any dealer or broker if at the end of each
year the
amount of
shares held does not exceed a minimum amount.
The
minimum
holding period and minimum level of holdings
will be
determined
from time to time by IMDI.
A report of the amount expended pursuant
to each
Plan, and
the purposes for which such expenditures were
incurred,
must be
made to the Board for its review at least
quarterly.
During the period from October 1, 1993
to June 30,
1994,
during the six-month period ended December
31, 1994 and
during
the fiscal year ended December 31, 1995, Ivy
Canada
Fund paid
IMDI $92,079, $61,133 and $73,233,
respectively,
pursuant to its
Class A plan. During the period from April
1, 1994
(the date on
which Class B shares of Ivy Canada Fund were
first
offered to the
public) to June 30, 1994, during the
six-month period
ended
December 31, 1994 and during the fiscal year
ended
December 31,
1995, Ivy Canada Fund paid IMDI $312, $2,953
and
$8,964,
respectively, pursuant to its the Class B
plan.
For the period from October 23, 1993
(commencement
of
operations) to December 31, 1993 and during
the fiscal
years
ended December 31, 1994 and December 31,
1995, Ivy
China Region
Fund paid IMDI $1,844, $31,640 and $32,647,
respectively,
pursuant to its Class A Plan. For the period
from
October 23,
1993 (commencement of operations) to December
31, 1993
and during
the fiscal years ended December 31, 1994 and
December
31, 1995,
Ivy China Region Fund paid IMDI $2,962,
$67,315 and
$70,020,
respectively, pursuant to its Class B Plan.
During the period from October 1, 1993
to June 30,
1994,
during the six-month period ended December
31, 1994 and
during
the fiscal year ended December 31, 1995, Ivy
Global
Fund paid
IMDI $30,665, $24,936 and $50,833,
respectively,
pursuant to its
Class A plan. During the period from April
1, 1994
(the date on
which Class B shares of Ivy Global Fund were
first
offered to the
public) to June 30, 1994, during the
six-month period
ended
December 31, 1994 and during the fiscal year
ended
December 31,
1995, the Fund paid IMDI $434, $8,224 and
$36,632,
respectively,
pursuant to its Class B plan.
For the period from January 1, 1993 to
September
30, 1993,
Ivy International Fund paid MIMI $22,673
pursuant to
its Class A
Plan. For the period from October 1, 1993 to
December
31, 1993,
the Fund paid IMDI $9,196 pursuant to its
Class A Plan.
For the
fiscal years ended December 31, 1994 and
December 31,
1995, Ivy
International Fund paid IMDI $168,356 and
$281,215,
respectively,
pursuant to its Class A Plan. For the period
from
October 23,
1993 (the date on which Class B shares of Ivy
International Fund
were first offered for sale to the public) to
December
31, 1993,
the Fund paid IMDI $2,339 pursuant to its
Class B Plan.
For the
fiscal years ended December 31, 1994 and
December 31,
1995, the
Fund paid IMDI $175,505 and $474,670,
respectively,
pursuant to
its Class B Plan.
Since the inception date for Class C
shares of
each Fund is
April 30, 1996, no payments were made
pursuant to the
Funds'
Class C Plan during the relevant time
periods.
During the period from November 1, 1994
(commencement of
operations) to December 31, 1994 and during
the fiscal
year ended
December 31, 1995, Ivy Latin America Strategy
Fund paid
IMDI $208
and $2,637, respectively, pursuant to its
Class A plan.
During
the period from November 1, 1994
(commencement of
operations) to
December 31, 1994 and during the fiscal year
ended
December 31,
1995, the Fund paid IMDI $157 and $3,855,
respectively,
pursuant
to its Class B plan.
During the period from November 1, 1994
(commencement of
operations) to December 31, 1994 and during
the fiscal
year ended
December 31, 1995, Ivy New Century Fund paid
IMDI $196
and
$3,888, respectively, pursuant to its Class A
plan.
During the
period from November 1, 1994 (commencement of
operations) to
December 31, 1994 and during the fiscal year
ended
December 31,
1995, the Fund paid IMDI $124 and $4,160,
respectively,
pursuant
to its Class B plan.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class A
shares of Ivy
Canada Fund: advertising, $4,295; printing
and mailing
of
prospectuses to persons other than current
shareholders, $23,665;
compensation to dealers, $17,887;
compensation to sales
personnel,$38,389; seminars and meetings,
$4,471;
travel and
entertainment, $9,964; general and
administrative,
$20,597;
telephone, $1,271; and occupancy and
equipment rental,
$3,201.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class B
shares of Ivy
Canada Fund: advertising, $264; printing and
mailing
of
prospectuses to persons other than current
shareholders, $1,454;
compensation to dealers, $1,099; compensation
to sales
personnel,$2,359; seminars and meetings,
$275; travel
and
entertainment, $612; general and
administrative,
$1,266;
telephone, $78; and occupancy and equipment
rental,
$197.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class A
shares of Ivy
China Region Fund: advertising, $2,677;
printing and
mailing of
prospectuses to persons other than current
shareholders, $29,558;
compensation to dealers, $23,976;
compensation to sales
personnel,$18,697; seminars and meetings,
$5,994;
travel and
entertainment, $4,704; general and
administrative,
$10,914;
telephone, $608; and occupancy and equipment
rental,
$1,534.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class B
shares of Ivy
China Region Fund: advertising, $1,430;
printing and
mailing of
prospectuses to persons other than current
shareholders, $15,848;
compensation to dealers, $12,855;
compensation to sales
personnel,$10,025; seminars and meetings,
$3,214;
travel and
entertainment, $2,523; general and
administrative,
$5,852;
telephone, $326; and occupancy and equipment
rental,
$822.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class A
shares of Ivy
Global Fund: advertising, $5,843; printing
and mailing
of
prospectuses to persons other than current
shareholders, $27,934;
compensation to dealers, $39,757;
compensation to sales
personnel,$60,170; seminars and meetings,
$9,939;
travel and
entertainment, $15,857; general and
administrative,
$29,677;
telephone, $2,071; and occupancy and
equipment rental,
$5,051.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class B
shares of Ivy
Global Fund: advertising, $1,053; printing
and mailing
of
prospectuses to persons other than current
shareholders, $5,032;
compensation to dealers, $7,162; compensation
to sales
personnel,$10,840; seminars and meetings,
$1,791;
travel and
entertainment, $2,857; general and
administrative,
$5,346;
telephone, $373; and occupancy and equipment
rental,
$910.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class A
shares of Ivy
International Fund: advertising, $77,492;
printing and
mailing
of prospectuses to persons other than current
shareholders,
$132,769; compensation to dealers, $455,975;
compensation to
sales personnel,$517,288; seminars and
meetings,
$113,994; travel
and entertainment, $129,225; general and
administrative,
$301,697; telephone, $17,067; and occupancy
and
equipment rental,
$42,223.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class B
shares of Ivy
International Fund: advertising, $10,840;
printing and
mailing
of prospectuses to persons other than current
shareholders,
$18,573; compensation to dealers, $63,786;
compensation
to sales
personnel,$72,363; seminars and meetings,
$15,946;
travel and
entertainment, $18,077; general and
administrative,
$42,204;
telephone, $2,388; and occupancy and
equipment rental,
$5,906.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class A
shares of Ivy
Latin America Strategy Fund: advertising,
$257;
printing and
mailing of prospectuses to persons other than
current
shareholders, $19,032; compensation to
dealers, $2,606;
compensation to sales personnel,$1,649;
seminars and
meetings,
$650; travel and entertainment, $410; general
and
administrative,
$970; telephone, $55; and occupancy and
equipment
rental, $133.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class B
shares of Ivy
Latin America Strategy Fund: advertising,
$94;
printing and
mailing of prospectuses to persons other than
current
shareholders, $6,920; compensation to
dealers, $947;
compensation
to sales personnel,$600; seminars and
meetings, $237;
travel and
entertainment, $149; general and
administrative, $353;
telephone,
$20; and occupancy and equipment rental, $49.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class A
shares of Ivy
New Century Fund: advertising, $393;
printing and
mailing of
prospectuses to persons other than current
shareholders, $15,252;
compensation to dealers, $4,008; compensation
to sales
personnel,$2,560; seminars and meetings,
$1,002; travel
and
entertainment, $637; general and
administrative,
$1,486;
telephone, $85; and occupancy and equipment
rental,
$208.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class B
shares of Ivy
New Century Fund: advertising, $105;
printing and
mailing of
prospectuses to persons other than current
shareholders, $4,083;
compensation to dealers, $1,073; compensation
to sales
personnel,$685; seminars and meetings, $268;
travel and
entertainment, $170; general and
administrative, $398;
telephone,
$23; and occupancy and equipment rental, $56.
Since the inception date for Class C
shares of
each Fund is
April 30, 1996, no payments were made in
marketing
Class C shares
of any Fund during the relevant time period.
Each Plan may be amended at any time
with respect
to the
class of shares of the Fund to which the Plan
relates
by vote of
the Trustees, including a majority of the
Independent
Trustees,
cast in person at a meeting called for the
purpose of
considering
such amendment. Each Plan may be terminated
with
respect to the
class of shares of the particular Fund to
which the
Plan relates
at any time, without payment of any penalty,
by vote of
a
majority of the Independent Trustees, or by
vote of a
majority of
the outstanding voting securities of that
class.
If the Distribution Agreement or the
Distribution
Plans are
terminated (or not renewed) with respect to
one or more
funds (or
Class of shares thereof) of the Trust, they
may
continue in
effect with respect to any fund (or Class of
shares
thereof) as
to which they have not been terminated (or
have been
renewed).
CUSTODIAN
Brown Brothers Harriman & Co. ("Brown
Brothers"),
a private
bank and member of the principal securities
exchanges,
located at
40 Water Street, Boston, Massachusetts 02109
(the
"Custodian"),
has been retained to act as the Trust's
Custodian for
assets of
each Fund held in the United States. Under
the
Custodian
Agreement, Brown Brothers also provides
certain
financial
services for Ivy International Fund,
including
bookkeeping,
computation of daily net asset value,
maintenance of
income,
expense and brokerage records, and provision
of all
information
required by the Trust in order to satisfy its
reporting
and
filing requirements. Rules adopted under the
1940 Act
permit the
Trust to maintain its foreign securities
(Canadian
securities,
with respect to Ivy Canada Fund) and cash in
the
custody of
certain eligible foreign banks and securities
depositories (and
certain eligible Canadian banks and
securities
depositories, with
respect to Ivy Canada Fund). Pursuant to
those rules,
Brown
Brothers has entered into subcustodial
agreements for
the holding
of each Fund's foreign securities (and for
the holding
of Ivy
Canada Fund's non-Canadian foreign
securities).
Similarly,
pursuant to those rules, Ivy Canada Fund's
portfolio
securities
and cash, when invested in Canadian
securities, will be
held by
its Sub-custodian, The Bank of Nova Scotia.
With
respect to each
Fund, except for Ivy Canada Fund, Brown
Brothers may
receive, as
partial payment for its services, a portion
of the
Trust's
brokerage business, subject to its ability to
provide
best price
and execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services
Agreement,
MIMI
provides certain accounting and pricing
services for
the Funds.
As compensation for those services, each Fund
pays MIMI
a monthly
fee plus out-of-pocket expenses as incurred.
The
monthly fee is
based upon the net assets of a Fund at the
preceding
month end at
the following rates: $1,250 when net assets
are $10
million and
under; $2,500 when net assets are over $10
million to
$40
million; $5,000 when net assets are over $40
million to
$75
million; and $6,500 when net assets are over
$75
million.
For the fiscal years ended June 30, 1993
and 1994,
for the
six-month period ended December 31, 1994 and
for the
fiscal year
ended December 31, 1995, Ivy Canada Fund paid
MIMI
$32,742,
$32,492, $16,442 and $32,399, respectively,
under the
agreement..
During the period from October 23, 1993
(commencement
of
operations) to December 31, 1993 and during
the fiscal
years
ended December 31, 1994 and 1995, Ivy China
Region Fund
paid MIMI
$2,513, $32,137 and $32,653, respectively,
under the
agreement.
For the fiscal years ended June 30, 1993 and
1994, for
the six-
month period ended December 31, 1994 and for
the fiscal
year
ended December 31, 1995, Ivy Global Fund paid
MIMI
$25,612 and
$31,448, $15,957 and $32,982, respectively,
under the
agreement.
The payments to MIMI from Ivy International
Fund
amounted to
$48,788 for the nine months ended December
31, 1994.
Prior to
April 1, 1994, the Fund utilized an unrelated
entity
for fund
accounting and pricing services. Such fees
and
expenses for the
fiscal year ended December 31, 1994 totalled
$88,790.
For the
fiscal year ended December 31, 1995, Ivy
International
Fund paid
MIMI $91,612 under the agreement. During the
period
from
November 1, 1994 (commencement of operations)
to
December 31,
1994 and during the fiscal year ended
December 31,
1995, Ivy
Latin America Strategy Fund paid MIMI $2,505
and
$15,094,
respectively, under the agreement. During
the period
from
November 1, 1994 (commencement of operations)
to
December 31,
1994 and during the fiscal year ended
December 31,
1995, Ivy New
Century Fund paid MIMI $2,505 and $15,112,
respectively, under
the agreement.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and
Shareholder
Service
Agreement, IMSC, a wholly owned subsidiary of
MIMI, is
the
transfer agent for each Fund. Each Fund
(except for
Ivy
International Fund with respect to its Class
I shares
only) pays
a monthly fee at an annual rate of $20.00 per
open
account. Ivy
International Fund pays $10.25 per open
account for
Class I. In
addition, each Fund pays a monthly fee at an
annual
rate of $4.36
per account that is closed plus certain
out-of-pocket
expenses.
Such fees and expenses for the fiscal year
ended
December 31,
1995 for Ivy Canada Fund, Ivy China Region
Fund, Ivy
Global Fund,
Ivy International Fund, Ivy Latin America
Strategy Fund
and Ivy
New Century Fund totalled $181,036, $113,884,
$88,419,
$590,068,
$7,376 and $7,918, respectively. Certain
broker-dealers that
maintain shareholder accounts with a Fund
through an
omnibus
account provide transfer agent and other
shareholder-related
services that would otherwise be provided by
IMSC if
the
individual accounts that comprise the omnibus
account
were opened
by their beneficial owners directly. IMSC
pays such
broker-
dealers a per account fee for each open
account within
the
omnibus account, or a fixed rate (e.g., .10%)
fee,
based on the
average daily net asset value of the omnibus
account
(or a
combination thereof).
ADMINISTRATOR
Pursuant to an Administrative Services
Agreement,
MIMI
provides certain administrative services to
each Fund.
As
compensation for these services, each Fund
(except for
Ivy
International Fund with respect to its Class
I shares
only) pays
MIMI a monthly fee at the annual rate of .10%
of that
Fund's
average daily net assets. Ivy International
Fund pays
MIMI a
monthly fee at the annual rate of .01% of its
average
daily net
assets for Class I. Such fees for the fiscal
year
ended December
31, 1995 for Ivy Canada Fund, Ivy China
Region Fund,
Ivy Global
Fund, Ivy International Fund, Ivy Latin
America
Strategy Fund and
Ivy New Century Fund totalled $19,208,
$20,061,
$23,996,
$387,795, $1,434 and $1,971, respectively.
Outside of providing administrative
services to
the Trust,
as described above, MIMI may also act on
behalf of IMDI
in paying
commissions to broker-dealers with respect to
sales of
Class B
and Class C shares of each Fund.
AUDITORS
Coopers & Lybrand L.L.P., independent
certified
public
accountants, 200 East Las Olas Boulevard,
Suite 1700,
Ft.
Lauderdale, Florida 33301, has been selected
as
auditors for the
Trust. The audit services performed by
Coopers &
Lybrand L.L.P.,
include audits of the annual financial
statements of
each of the
funds of the Trust. Other services provided
principally relate
to filings with the SEC and the preparation
of the
Fund's tax
returns.
CAPITALIZATION AND VOTING
RIGHTS
Ivy Canada Fund results from a
reorganization of
Mackenzie
Canada Fund, a series of the Company, which
reorganization was
approved by shareholders on January 27, 1995.
Ivy
Global Fund
results from a reorganization of Mackenzie
Global Fund,
which
reorganization was approved by shareholders
on January
27, 1995.
The capitalization of the Trust consists of
an
unlimited number
of shares of beneficial interest (no par
value per
share). When
issued, shares of each class of each Fund are
fully
paid, non-
assessable, redeemable and fully
transferable. No
class of
shares of a Fund has preemptive rights or
subscription
rights.
The Amended and Restated Declaration of
Trust
permits the
Trustees to create separate series or
portfolios and to
divide
any series or portfolio into one or more
classes. The
Trustees
have authorized thirteen series, each of
which
represents a fund.
The Trustees have further authorized the
issuance of
Classes A, B
and C for Ivy Global Fund, Ivy Growth Fund,
Ivy
Emerging Growth
Fund, Ivy Growth with Income Fund, Ivy Money
Market
Fund, Ivy
China Region Fund, Ivy Latin America Strategy
Fund, Ivy
New
Century Fund, Ivy International Fund, Ivy
Canada Fund,
Ivy Bond
Fund and Ivy International Bond Fund, as well
as
Classes A, B and
I for Ivy Short-Term Bond Fund, Class I for
Ivy
International
Fund and Ivy Bond Fund, and Class D for Ivy
Growth with
Income
Fund. [FN][The Class D shares of Ivy Growth
with Income
Fund were
initially issued as "Ivy Growth with Income
Fund --
Class C" to
shareholders of Mackenzie Growth & Income
Fund, a
former series
of the Company, in connection with the
reorganization
between
that fund and Ivy Growth with Income Fund and
not
offered for
sale to the public. On February 29, 1996,
the Trustees
of the
Trust resolved by written consent to
establish a new
class of
shares designated as "Class C" for all Ivy
Fund
portfolios (other
than Ivy Short-Term Bond Fund) and to
redesignate the
shares of
beneficial interest of "Ivy Growth with
Income
Fund--Class C" as
shares of beneficial interest of "Ivy Growth
with
Income Fund--
Class D," which establishment and
redesignation,
respectively,
are to become effective on April 30, 1996.
The voting,
dividend,
liquidation and other rights, preferences,
powers,
restrictions,
limitations, qualifications, terms and
conditions of
the Class D
shares of Ivy Growth with Income Fund, as set
forth in
Ivy Fund's
Declaration of Trust, as amended from time to
time,
will not be
changed by this redesignation.]
Shareholders have the right to vote for
the
election of
Trustees of the Trust and on any and all
matters on
which they
may be entitled to vote by law or by the
provisions of
the
Trust's By-Laws. The Trust is not required
to hold a
regular
annual meeting of shareholders, and it does
not intend
to do so.
Shares of each class of each Fund entitle
their holders
to one
vote per share (with proportionate voting for
fractional shares).
On matters affecting only one Fund, only the
shareholders of that
Fund are entitled to vote. All classes of
shares of a
Fund will
vote together, except with respect to the
distribution
plan
applicable to that Fund's Class A, Class B or
Class C
shares or
when a class vote is required by the 1940
Act. On
matters
relating to all funds of the Trust, but
affecting the
funds
differently, separate votes by the
shareholders of each
fund are
required. Approval of an investment advisory
agreement
and a
change in fundamental policies would be
regarded as
matters
requiring separate voting by the shareholders
of each
fund of the
Trust. If the Trustees determine that a
matter does
not affect
the interests of a Fund, then the
shareholders of that
Fund will
not be entitled to vote on that matter.
Matters that
affect the
Trust in general, such as ratification of the
selection
of
independent public accountants, will be voted
upon
collectively
by the shareholders of all funds of the
Trust.
As used in this SAI and the Prospectus,
the phrase
"majority
vote of the outstanding shares" of a Fund
means the
vote of the
lesser of: (1) 67% of the shares of that
Fund (or of
the Trust)
present at a meeting if the holders of more
than 50% of
the
outstanding shares are present in person or
by proxy;
or (2) more
than 50% of the outstanding shares of that
Fund (or of
the
Trust).
With respect to the submission to
shareholder vote
of a
matter requiring separate voting by a Fund,
the matter
shall have
been effectively acted upon with respect to
that Fund
if a
majority of the outstanding voting securities
of that
Fund votes
for the approval of the matter,
notwithstanding that:
(1) the
matter has not been approved by a majority of
the
outstanding
voting securities of any other fund of the
Trust; or
(2) the
matter has not been approved by a majority of
the
outstanding
voting securities of the Trust.
The Amended and Restated Declaration of
Trust
provides that
the holders of not less than two-thirds of
the
outstanding shares
of the Trust may remove a person serving as
trustee
either by
declaration in writing or at a meeting called
for such
purpose.
The Trustees are required to call a meeting
for the
purpose of
considering the removal of a person serving
as Trustee
if
requested in writing to do so by the holders
of not
less than 10%
of the outstanding shares of the Trust.
Shareholders
will be
assisted in communicating with other
shareholders in
connection
with the removal of a Trustee as if Section
26(c) of
the Act were
applicable.
The Trust's shares do not have
cumulative voting
rights and
accordingly the holders of more than 50% of
the
outstanding
shares could elect the entire Board, in which
case the
holders of
the remaining shares would not be able to
elect any
Trustees.
To the knowledge of the Trust, as of
January 31,
1996, no
shareholder owned beneficially or of record
5% or more
of any
Fund's outstanding Class A, Class B, Class C
or Class I
shares,
except that of the outstanding Class A shares
of Ivy
Canada Fund,
Jupiter & Co., P.O. Box 1537 Top 57, Boston,
Massachusetts 02205,
owned of record 486,290.085 shares (22.99%);
and except
that of
the outstanding Class A shares of Ivy
International
Fund, Charles
Schwab & Co., Inc., 101 Montgomery Street,
San
Francisco,
California 94104 owned of record
6,663,138.196 shares
(39.29%);
and that of the outstanding Class A shares of
Ivy Latin
America
Strategy Fund, Merrill Lynch Pierce Fenner &
Smith,
4800 Deer
Lake Drive East, 3rd Floor, Jacksonville,
Florida
32246, owned of
record 32,821.000 shares (10.83%); and except
that of
the
outstanding Class A shares of Ivy New Century
Fund, C.
and M.
Brount, 3312 Lake Knoll Drive, Northbrook,
Illinois
60062 owned
of record 25,014.119 shares (6.09%) and J.
and L.
Paradinovich,
8490 Old Loomis Road, Franklin, Wisconsin
53132, owned
of record
22,183.053 shares (5.40%); and except that of
the
outstanding
Class B shares of Ivy Canada Fund, Merrill
Lynch Pierce
Fenner &
Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville,
Florida 32246, owned of record 14,980.000
shares
(13.96%), and
NFSC FEBO (custodian) FBO R. Brown, 2345
Roxburgh
Drive, Roswell,
Georgia 30076, owned of record 7,891.946
shares
(7.35%); and that
of the outstanding Class B shares of Ivy
International
Fund,
Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake
Drive East,
3rd Floor, Jacksonville, Florida 32246, owned
of record
335,652.00 shares (11.94%); and except that
of the
outstanding
Class B shares of Ivy Latin America Strategy
Fund, IBT
(custodian) FBO G. Pattyson, P.O. Box 11,
Terrace Bay,
Ontario,
Canada POT 2W0, owned of record 10,000.00
shares
(9.44%), and
Donaldson Lufkin Jenrette Securities
Corporation Inc.,
P.O. Box
2052, Jersey City, New Jersey 07303, owned of
record
7,062.147
shares (6.66%); and except that of the
outstanding
Class B shares
of Ivy New Century Fund, Merrill Lynch Pierce
Fenner &
Smith,
4800 Deer Lake Drive East, 3rd Floor,
Jacksonville,
Florida
32246, owned of record 29,351.000 shares
(20.06%), and
S. and S.
Parks, 407 Peachtree Club Drive, Peachtree
City,
Georgia 30269,
owned of record 23,045.588 shares (15.75%);
and except
that of
the outstanding Class I shares of Ivy
International
Fund, Vernat
Company, P.O. Box 800, Brattleboro, Vermont
05302,
owned of
record 192,575.376 shares (35.60%),
BankAmerica State
Trust
Company (custodian) FBO Klukwan Inc., P.O.
Box 32077,
Juneau,
Alaska 99803 owned of record 181,080.463
shares
(33.48%), and
National City Bank Indiana (trustee) FBO
Mechanics
Laundry &
Supply, Inc. Employees Pension Plan, P.O. Box
94777,
Cleveland,
Ohio 44101, owned of record 28,987.004 shares
(5.36%).
Under Massachusetts law, the Trust's
shareholders
could,
under certain circumstances, be held
personally liable
for the
obligations of the Trust. However, the
Amended and
Restated
Declaration of Trust disclaims liability of
the
shareholders,
Trustees or officers of the Trust for acts or
obligations of the
Trust, which are binding only on the assets
and
property of the
Trust, and requires that notice of the
disclaimer be
given in
each contract or obligation entered into or
executed by
the Trust
or its Trustees. The Amended and Restated
Declaration
of Trust
provides for indemnification out of Fund
property for
all loss
and expense of any shareholder of a Fund held
personally liable
for the obligations of that Fund. The risk
of a
shareholder of
the Trust incurring financial loss on account
of
shareholder
liability is limited to circumstances in
which the
Trust itself
would be unable to meet its obligations and,
thus,
should be
considered remote. No series of the Trust is
liable
for the
obligations of any other series of the Trust.
NET ASSET VALUE
The share price, or value, for the
separate
Classes of
shares of a Fund is called the net asset
value per
share. The
net asset value per share of a Fund is
computed by
dividing the
value of the assets of that Fund, less its
liabilities,
by the
number of shares of the particular Fund
outstanding.
For
purposes of determining the aggregate net
assets of a
Fund, cash
and receivables will be valued at their
realizable
amounts. A
security listed or traded on a recognized
stock
exchange or
NASDAQ is valued at its last sale price on
the
principal exchange
on which the security is traded. The value
of a
foreign security
is determined in its national currency as of
the normal
close of
trading on the foreign exchange on which it
is traded
or as of
the close of regular trading on the Exchange,
if that
is earlier,
and that value is then converted into its
U.S. dollar
equivalent
at the foreign exchange rate in effect at
noon, Eastern
time, on
the day the value of the foreign security is
determined. If no
sale is reported at that time, the average
between the
current
bid and asked price is used. All other
securities for
which OTC
market quotations are readily available are
valued at
the average
between the current bid and asked price.
Interest will
be
recorded as accrued. Securities and other
assets for
which
market prices are not readily available are
valued at
fair value
as determined by IMI and approved in good
faith by the
Board.
Money market instruments of the Fund are
valued at
amortized
cost, which approximates money market value.
A Fund's liabilities are allocated
between its
Classes. The
total of such liabilities allocated to a
Class plus
that Class's
distribution fee and any other expenses
specially
allocated to
that Class are then deducted from the Class's
proportionate
interest in that Fund's assets, and the
resulting
amount for each
Class is divided by the number of shares of
that Class
outstanding to produce the net asset value
per share.
Portfolio securities are valued and net
asset
value per
share is determined as of the close of
regular trading
on the
Exchange (normally 4:00 p.m., eastern time),
every
Monday through
Friday (exclusive of national business
holidays). The
Trust's
offices will be closed, and net asset value
will not be
calculated, on the following national
business
holidays: New
Year's Day, President's Day, Good Friday,
Memorial Day,
Independence Day, Labor Day, Thanksgiving Day
and
Christmas Day.
On those days when either or both of the
Funds'
Custodian or the
Exchange close early as a result of such day
being a
partial
holiday or otherwise, the right is reserved
to advance
the time
on that day by which purchase and redemption
requests
must be
received.
When a Fund writes an option, an amount
equal to
the premium
received by that Fund is included in that
Fund's
Statement of
Assets and Liabilities as an asset and as an
equivalent
liability. The amount of the liability will
be
subsequently
marked-to-market daily to reflect the current
market
value of the
option written. The current market value of
a written
option is
the last sale on the principal exchange on
which such
option is
traded or, in the absence of a sale, the last
offering
price.
The premium paid by a Fund for the
purchase of a
call or a
put option will be deducted from its assets
and an
equal amount
will be included in the asset section of that
Fund's
Statement of
Assets and Liabilities as an investment and
subsequently adjusted
to the current market value of the option.
For
example, if the
current market value of the option exceeds
the premium
paid, the
excess would be unrealized appreciation and,
conversely, if the
premium exceeds the current market value,
such excess
would be
unrealized depreciation. The current market
value of a
purchased
option will be the last sale price on the
principal
exchange on
which the option is traded or, in the absence
of a
sale, the last
bid price. If a Fund exercises a call option
which it
has
purchased, the cost of the security which
that Fund
purchased
upon exercise will be increased by the
premium
originally paid.
The sale of shares of a Fund will be
suspended
during any
period when the determination of its net
asset value is
suspended
pursuant to rules or orders of the SEC and
may be
suspended by
the Board whenever in its judgment it is in
the best
interest of
the particular Fund to do so.
PORTFOLIO TURNOVER
Each Fund purchases securities that are
believed
by IMI to
have above average potential for capital
appreciation.
Common
stocks are disposed of in situations where it
is
believed that
potential for such appreciation has lessened
or that
other common
stocks have a greater potential. Therefore,
a Fund may
purchase
and sell securities without regard to the
length of
time the
security is to be, or has been, held. A
change in
securities
held by a Fund is known as "portfolio
turnover" and may
involve
the payment by that Fund of dealer markup or
underwriting
commission and other transaction costs on the
sale of
securities,
as well as on the reinvestment of the
proceeds in other
securities. A Fund's portfolio turnover rate
is
calculated by
dividing the lesser of purchases or sales of
portfolio
securities
for the most recently completed fiscal year
by the
monthly
average of the value of the portfolio
securities owned
by the
Fund during that year. For purposes of
determining a
Fund's
portfolio turnover rate, all securities whose
maturities at the
time of acquisition were one year or less are
excluded.
The
annual portfolio turnover rates for the Funds
are
provided in the
Prospectus under "The Funds' Financial
Highlights."
REDEMPTIONS
Shares of each Fund are redeemed at
their net
asset value
next determined after a proper redemption
request has
been
received by IMSC, less any applicable CDSC.
Unless a shareholder requests that the
proceeds of
any
redemption be wired to his or her bank
account, payment
for
shares tendered for redemption is made by
check within
seven days
after tender in proper form, except that the
Trust
reserves the
right to suspend the right of redemption or
to postpone
the date
of payment upon redemption beyond seven days,
(i) for
any period
during which the Exchange is closed (other
than
customary weekend
and holiday closings) or during which trading
on the
Exchange is
restricted, (ii) for any period during which
an
emergency exists
as determined by the SEC as a result of which
disposal
of
securities owned by a Fund is not reasonably
practicable or it is
not reasonably practicable for the Fund to
fairly
determine the
value of its net assets, or (iii) for such
other
periods as the
SEC may by order permit for the protection of
shareholders of a
Fund.
Under unusual circumstances, when the
Board deems
it in the
best interest of a Fund's shareholders, the
Fund may
make payment
for shares repurchased or redeemed in whole
or in part
in
securities of that Fund taken at current
values. If
any such
redemption in kind is to be made, each Fund
intends to
make an
election pursuant to Rule 18f-1 under the
1940 Act.
This will
require the particular Fund to redeem with
cash at a
shareholder's election in any case where the
redemption
involves
less than $250,000 (or 1% of that Fund's net
asset
value at the
beginning of each 90-day period during which
such
redemptions are
in effect, if that amount is less than
$250,000).
Should payment
be made in securities, the redeeming
shareholder may
incur
brokerage costs in converting such securities
to cash.
Subject to state law restrictions, the
Trust may
redeem
those accounts of shareholders who have
maintained an
investment,
including sales charges paid, of less than
$1,000 in a
Fund for a
period of more than 12 months. All accounts
below that
minimum
will be redeemed simultaneously when MIMI
deems it
advisable.
The $1,000 balance will be determined by
actual dollar
amounts
invested by the shareholder, unaffected by
market
fluctuations.
The Trust will notify any such shareholder by
certified
mail of
its intention to redeem such account, and the
shareholder shall
have 60 days from the date of such letter to
invest
such
additional sums as shall raise the value of
such
account above
that minimum. Should the shareholder fail to
forward
such sum
within 60 days of the date of the Trust's
letter of
notification,
the Trust will redeem the shares held in such
account
and
transmit the redemption in value thereof to
the
shareholder.
However, those shareholders who are investing
pursuant
to the
Automatic Investment Method will not be
redeemed
automatically
unless they have ceased making payments
pursuant to the
plan for
a period of at least six consecutive months,
and these
shareholders will be given six-months' notice
by the
Trust before
such redemption. Shareholders in a qualified
retirement, pension
or profit sharing plan who wish to avoid tax
consequences must
"rollover" any sum so redeemed into another
qualified
plan within
60 days. The Trustees of the Trust may
change the
minimum
account size.
If a shareholder has given authorization
for
telephonic
redemption privilege, shares can be redeemed
and
proceeds sent by
Federal wire to a single previously
designated bank
account.
Delivery of the proceeds of a wire redemption
request
of $250,000
or more may be delayed by a Fund for up to
seven days
if deemed
appropriate under then-current market
conditions. The
Trust
reserves the right to change this minimum or
to
terminate the
telephonic redemption privilege without prior
notice.
The Trust
cannot be responsible for the efficiency of
the Federal
wire
system of the shareholder's dealer of record
or bank.
The
shareholder is responsible for any charges by
the
shareholder's
bank.
Each Fund employs reasonable procedures
that
require
personal identification prior to acting on
redemption
or exchange
instructions communicated by telephone to
confirm that
such
instructions are genuine. In the absence of
such
instructions, a
Fund may be liable for any losses due to
unauthorized
or
fraudulent telephone instructions.
CONVERSION OF CLASS B
SHARES
As described in the Prospectus, Class B
shares of
each Fund
will automatically convert to Class A shares
of the
respective
Fund, based on the relative net asset values
per share
of the two
classes, no later than the month following
the eighth
anniversary
of the initial issuance of such Class B
shares of the
particular
Fund occurs. For the purpose of calculating
the
holding period
required for conversion of Class B shares,
the date of
initial
issuance shall mean: (1) the date on which
such Class
B shares
were issued, or (2) for Class B shares
obtained through
an
exchange, or a series of exchanges, (subject
to the
exchange
privileges for Class B shares) the date on
which the
original
Class B shares were issued. For purposes of
conversion
of
Class B shares, Class B shares purchased
through the
reinvestment
of dividends and capital gain distributions
paid in
respect of
Class B shares will be held in a separate
sub-account.
Each time
any Class B shares in the shareholder's
regular account
(other
than those shares in the sub-account) convert
to Class
A shares,
a pro rata portion of the Class B shares in
the
sub-account will
also convert to Class A shares. The portion
will be
determined
by the ratio that the shareholder's Class B
shares
converting to
Class A shares bears to the shareholder's
total Class B
shares
not acquired through the reinvestment of
dividends and
capital
gain distributions.
TAXATION
The following is a general discussion of
certain
tax rules
thought to be applicable with respect to the
Funds. It
is merely
a summary and is not an exhaustive discussion
of all
possible
situations or of all potentially applicable
taxes.
Accordingly,
shareholders and prospective shareholders
should
consult a
competent tax advisor about the tax
consequences to
them of
investing in the Funds.
Each Fund intends to be taxed as a
regulated
investment
company under Subchapter M of the Code.
Accordingly,
each Fund
must, among other things, (a) derive in each
taxable
year at
least 90% of its gross income from dividends,
interest,
payments
with respect to certain securities loans, and
gains
from the sale
or other disposition of stock, securities or
foreign
currencies,
or other income derived with respect to its
business of
investing
in such stock, securities or currencies; (b)
derive in
each
taxable year less than 30% of its gross
income from the
sale or
other disposition of certain assets held less
than
three months,
namely: (i) stock or securities; (ii)
options,
futures, or
forward contracts (other than those on
foreign
currencies); or
(iii) foreign currencies (or options,
futures, or
forward
contracts on foreign currencies) that are not
directly
related to
the particular Fund's principal business of
investing
in stock or
securities (or options and futures with
respect to
stock or
securities) (the "30% Limitation"); and (c)
diversify
its
holdings so that, at the end of each fiscal
quarter,
(i) at least
50% of the market value of the particular
Fund's assets
is
represented by cash, U.S. Government
securities, the
securities
of other regulated investment companies and
other
securities,
with such other securities limited, in
respect of any
one issuer,
to an amount not greater than 5% of the value
of the
particular
Fund's total assets and 10% of the
outstanding voting
securities
of such issuer, and (ii) not more than 25% of
the value
of its
total assets is invested in the securities of
any one
issuer
(other than U.S. Government securities and
the
securities of
other regulated investment companies).
As a regulated investment company, each
Fund
generally will
not be subject to U.S. Federal income tax on
its income
and gains
that it distributes to shareholders, if at
least 90% of
its
investment company taxable income (which
includes,
among other
items, dividends, interest and the excess of
any
short-term
capital gains over long-term capital losses)
for the
taxable year
is distributed. Each Fund intends to
distribute all
such income.
Amounts not distributed on a timely
basis in
accordance with
a calendar year distribution requirement are
subject to
a
nondeductible 4% excise tax at the Fund
level. To
avoid the tax,
each Fund must distribute during each
calendar year,
(1) at least
98% of its ordinary income (not taking into
account any
capital
gains or losses) for the calendar year, (2)
at least
98% of its
capital gains in excess of its capital losses
(adjusted
for
certain ordinary losses) for a one-year
period
generally ending
on October 31 of the calendar year, and (3)
all
ordinary income
and capital gains for previous years that
were not
distributed
during such years. To avoid application of
the excise
tax, each
Fund intends to make distributions in
accordance with
the
calendar year distribution requirements. A
distribution will be
treated as paid on December 31 of the current
calendar
year if it
is declared by the particular Fund in
October, November
or
December of the year with a record date in
such a month
and paid
by that Fund during January of the following
year.
Such
distributions will be taxable to shareholders
in the
calendar
year the distributions are declared, rather
than the
calendar
year in which the distributions are received.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD
CONTRACTS
The taxation of equity options and OTC
options on
debt
securities is governed by Code section 1234.
Pursuant
to Code
section 1234, the premium received by a Fund
for
selling a put or
call option is not included in income at the
time of
receipt. If
the option expires, the premium is short-term
capital
gain to the
Fund. If the Fund enters into a closing
transaction,
the
difference between the amount paid to close
out its
position and
the premium received is short-term capital
gain or
loss. If a
call option written by a Fund is exercised,
thereby
requiring the
Fund to sell the underlying security, the
premium will
increase
the amount realized upon the sale of such
security and
any
resulting gain or loss will be a capital gain
or loss,
and will
be long-term or short-term depending upon the
holding
period of
the security. With respect to a put or call
option
that is
purchased by a Fund, if the option is sold,
any
resulting gain or
loss will be a capital gain or loss, and will
be
long-term or
short-term, depending upon the holding period
of the
option. If
the option expires, the resulting loss is a
capital
loss and is
long-term or short-term, depending upon the
holding
period of the
option. If the option is exercised, the cost
of the
option, in
the case of a call option, is added to the
basis of the
purchased
security and, in the case of a put option,
reduces the
amount
realized on the underlying security in
determining gain
or loss.
Some of the options, futures and foreign
currency
forward
contracts in which a Fund may invest may be
"section
1256
contracts." Gains (or losses) on these
contracts
generally are
considered to be 60% long-term and 40%
short-term
capital gains
or losses; however foreign currency gains or
losses
arising from
certain section 1256 contracts are ordinary
in
character. Also,
section 1256 contracts held by a Fund at the
end of
each taxable
year (and on certain other dates prescribed
in the
Code) are
"marked-to-market" with the result that
unrealized
gains or
losses are treated as though they were
realized.
The transactions in options, futures and
forward
contracts
undertaken by a Fund may result in
"straddles" for
Federal income
tax purposes. The straddle rules may affect
the
character of
gains or losses realized by a Fund. In
addition,
losses realized
by a Fund on positions that are part of a
straddle may
be
deferred under the straddle rules, rather
than being
taken into
account in calculating the taxable income for
the
taxable year in
which such losses are realized. Because only
a few
regulations
implementing the straddle rules have been
promulgated,
the
consequences of such transactions to a Fund
are not
entirely
clear. The straddle rules may increase the
amount of
short-term
capital gain realized by a Fund, which is
taxed as
ordinary
income when distributed to shareholders.
A Fund may make one or more of the
elections
available under
the Code which are applicable to straddles.
If a Fund
makes any
of the elections, the amount, character and
timing of
the
recognition of gains or losses from the
affected
straddle
positions will be determined under rules that
vary
according to
the election(s) made. The rules applicable
under
certain of the
elections may operate to accelerate the
recognition of
gains or
losses from the affected straddle positions.
Because application of the straddle
rules may
affect the
character of gains or losses, defer losses
and/or
accelerate the
recognition of gains or losses from the
affected
straddle
positions, the amount which must be
distributed to
shareholders
as ordinary income or long-term capital gain,
may be
increased or
decreased substantially as compared to a fund
that did
not engage
in such transactions.
The 30% Limitation and the
diversification
requirements
applicable to a Fund's assets may limit the
extent to
which a
Fund will be able to engage in transactions
in options,
futures
and forward contracts.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS
OR LOSSES
Gains or losses attributable to
fluctuations in
exchange
rates which occur between the time a Fund
accrues
receivables or
liabilities denominated in a foreign currency
and the
time the
Fund actually collects such receivables or
pays such
liabilities
generally are treated as ordinary income or
ordinary
loss.
Similarly, on disposition of some
investments,
including debt
securities denominated in a foreign currency
and
certain options,
futures and forward contracts, gains or
losses
attributable to
fluctuations in the value of the foreign
currency
between the
date of acquisition of the security or
contract and the
date of
disposition also are treated as ordinary gain
or loss.
These
gains and losses, referred to under the Code
as
"section 988"
gains or losses, increase or decrease the
amount of a
Fund's
investment company taxable income available
to be
distributed to
its shareholders as ordinary income. If
section 988
losses
exceed other investment company taxable
income during a
taxable
year, a Fund would not be able to make any
ordinary
dividend
distributions, or distributions made before
the losses
were
realized would be recharacterized as a return
of
capital to
shareholders, rather than as an ordinary
dividend,
reducing each
shareholder's basis in his or her Fund
shares.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT
COMPANIES
A Fund may invest in shares of foreign
corporations which
may be classified under the Code as passive
foreign
investment
companies ("PFICs"). In general, a foreign
corporation
is
classified as a PFIC if at least one-half of
its assets
constitute investment-type assets, or 75% or
more of
its gross
income is investment-type income. If a Fund
receives a
so-called
"excess distribution" with respect to PFIC
stock, a
Fund itself
may be subject to a tax on a portion of the
excess
distribution,
whether or not the corresponding income is
distributed
by a Fund
to shareholders. In general, under the PFIC
rules, an
excess
distribution is treated as having been
realized ratably
over the
period during which a Fund held the PFIC
shares. A
Fund itself
will be subject to tax on the portion, if
any, of an
excess
distribution that is so allocated to prior
Fund taxable
years and
an interest factor will be added to the tax,
as if the
tax had
been payable in such prior taxable years.
Certain
distributions
from a PFIC as well as gain from the sale of
PFIC
shares are
treated as excess distributions. Excess
distributions
are
characterized as ordinary income even though,
absent
application
of the PFIC rules, certain excess
distributions might
have been
classified as capital gain.
A Fund may be eligible to elect
alternative tax
treatment
with respect to PFIC shares. Under an
election that
currently is
available in some circumstances, a Fund
generally would
be
required to include in its gross income its
share of
the earnings
of a PFIC on a current basis, regardless of
whether
distributions
are received from the PFIC in a given year.
If this
election
were made, the special rules, discussed
above, relating
to the
taxation of excess distributions, would not
apply. In
addition,
other elections may become available that
would affect
the tax
treatment of PFIC shares held by a Fund.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a
fixed maturity
date of
more than one year from the date of issuance)
that may
be
acquired by a Fund may be treated as debt
securities
that are
issued originally at a discount. Generally,
the amount
of the
original issue discount ("OID") is treated as
interest
income and
is included in income over the term of the
debt
security, even
though payment of that amount is not received
until a
later time,
usually when the debt security matures.
If a Fund invests in certain high yield
original
issue
discount obligations issued by corporations,
a portion
of the
original issue discount accruing on the
obligation may
be
eligible for the deduction for dividends
received by
corporations. In such event, dividends of
investment
company
taxable income received from the Fund by its
corporate
shareholders, to the extent attributable to
such
portion of
accrued original issue discount, may be
eligible for
this
deduction for dividends received by
corporations if so
designated
by the Fund in a written notice to
shareholders.
Some of the debt securities (with a
fixed maturity
date of
more than one year from the date of issuance)
that may
be
acquired by a Fund in the secondary market
may be
treated as
having market discount. Generally, gain
recognized on
the
disposition of, and any partial payment of
principal
on, a debt
security having market discount is treated as
ordinary
income to
the extent the gain, or principal payment,
does not
exceed the
"accrued market discount" on such debt
security. In
addition,
the deduction of any interest expenses
attributable to
debt
securities having market discount may be
deferred.
Market
discount generally accrues in equal daily
installments.
A Fund
may make one or more of the elections
applicable to
debt
securities having market discount, which
could affect
the
character and timing of recognition of
income.
Some debt securities (with a fixed
maturity date
of one year
or less from the date of issuance) that may
be acquired
by a Fund
may be treated as having acquisition
discount, or OID
in the case
of certain types of debt securities.
Generally, a Fund
will be
required to include the acquisition discount,
or OID,
in income
over the term of the debt security, even
though payment
of that
amount is not received until a later time,
usually when
the debt
security matures. A Fund may make one or
more of the
elections
applicable to debt securities having
acquisition
discount, or
OID, which could affect the character and
timing of
recognition
of income.
A Fund generally will be required to
distribute
dividends to
shareholders representing discount on debt
securities
that is
currently includible in income, even though
cash
representing
such income may not have been received by a
Fund. Cash
to pay
such dividends may be obtained from sales
proceeds of
securities
held by a Fund.
DISTRIBUTIONS
Distributions of investment company
taxable income
are
taxable to a U.S. shareholder as ordinary
income,
whether paid in
cash or shares. Dividends paid by a Fund to
a
corporate
shareholder, to the extent such dividends are
attributable to
dividends received from U.S. corporations by
the Fund,
may
qualify for the dividends received deduction.
However,
the
revised alternative minimum tax applicable to
corporations may
reduce the value of the dividends received
deduction.
Distributions of net capital gains (the
excess of net
long-term
capital gains over net short-term capital
losses), if
any,
designated by a Fund as capital gain
dividends, are
taxable as
long-term capital gains, whether paid in cash
or in
shares,
regardless of how long the shareholder has
held a
Fund's shares
and are not eligible for the dividends
received
deduction.
Shareholders receiving distributions in the
form of
newly issued
shares will have a cost basis in each share
received
equal to the
net asset value of a share of a Fund on the
distribution date. A
distribution of an amount in excess of a
Fund's current
and
accumulated earnings and profits will be
treated by a
shareholder
as a return of capital which is applied
against and
reduces the
shareholder's basis in his or her shares. To
the
extent that the
amount of any such distribution exceeds the
shareholder's basis
in his or her shares, the excess will be
treated by the
shareholder as gain from a sale or exchange
of the
shares.
Shareholders will be notified annually as to
the U.S.
Federal tax
status of distributions and shareholders
receiving
distributions
in the form of newly issued shares will
receive a
report as to
the net asset value of the shares received.
If the net asset value of shares is
reduced below
a
shareholder's cost as a result of a
distribution by a
Fund, such
distribution generally will be taxable even
though it
represents
a return of invested capital. Investors
should be
careful to
consider the tax implications of buying
shares just
prior to a
distribution. The price of shares purchased
at this
time may
reflect the amount of the forthcoming
distribution.
Those
purchasing just prior to a distribution will
receive a
distribution which generally will be taxable
to them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of
his or her
shares, a
shareholder will realize a taxable gain or
loss
depending upon
his or her basis in the shares. Such gain or
loss will
be
treated as capital gain or loss if the shares
are
capital assets
in the shareholder's hands and generally will
be
long-term or
short-term, depending upon the shareholder's
holding
period for
the shares. Any loss realized on a
redemption sale or
exchange
will be disallowed to the extent the shares
disposed of
are
replaced (including through reinvestment of
dividends)
within a
period of 61 days beginning 30 days before
and ending
30 days
after the shares are disposed of. In such a
case, the
basis of
the shares acquired will be adjusted to
reflect the
disallowed
loss. Any loss realized by a shareholder on
the sale
of Fund
shares held by the shareholder for six-months
or less
will be
treated for tax purposes as a long-term
capital loss to
the
extent of any distributions of capital gain
dividends
received or
treated as having been received by the
shareholder with
respect
to such shares.
In some cases, shareholders will not be
permitted
to take
all or portion of their sales loads into
account for
purposes of
determining the amount of gain or loss
realized on the
disposition of their shares. This
prohibition
generally applies
where (1) the shareholder incurs a sales load
in
acquiring the
shares of a Fund, (2) the shares are disposed
of before
the 91st
day after the date on which they were
acquired, and (3)
the
shareholder subsequently acquires shares in a
Fund or
another
regulated investment company and the
otherwise
applicable sales
charge is reduced under a "reinvestment
right" received
upon the
initial purchase of Fund shares. The term
"reinvestment right"
means any right to acquire shares of one or
more
regulated
investment companies without the payment of a
sales
load or with
the payment of a reduced sales charge. Sales
charges
affected by
this rule are treated as if they were
incurred with
respect to
the shares acquired under the reinvestment
right. This
provision
may be applied to successive acquisitions of
fund
shares.
FOREIGN WITHHOLDING TAXES
Income received by a Fund from sources
within a
foreign
country may be subject to withholding and
other taxes
imposed by
that country.
If more than 50% of the value of a
Fund's total
assets at
the close of its taxable year consists of
securities of
foreign
corporations, the Fund will be eligible and
may elect
to "pass-
through" to that Fund's shareholders the
amount of
foreign income
and similar taxes paid by that Fund.
Pursuant to this
election,
a shareholder will be required to include in
gross
income (in
addition to taxable dividends actually
received) his or
her pro
rata share of the foreign income and similar
taxes paid
by a
Fund, and will be entitled either to deduct
his or her
pro rata
share of foreign income and similar taxes in
computing
his or her
taxable income or to use it as a foreign tax
credit
against his
or her U.S. Federal income taxes, subject to
limitations. No
deduction for foreign taxes may be claimed by
a
shareholder who
does not itemize deductions. Foreign taxes
generally
may not be
deducted by a shareholder that is an
individual in
computing the
alternative minimum tax. Each shareholder
will be
notified
within 60 days after the close of a Fund's
taxable year
whether
the foreign taxes paid by the Fund will
"pass-through"
for that
year and, if so, such notification will
designate (1)
the
shareholder's portion of the foreign taxes
paid to each
such
country and (2) the portion of the dividend
which
represents
income derived from sources within each such
country.
Generally, a credit for foreign taxes is
subject
to the
limitation that it may not exceed the
shareholder's
U.S. tax
attributable to his or her total foreign
source taxable
income.
For this purpose, if a Fund makes the
election
described in the
preceding paragraph, the source of that
Fund's income
flows
through to its shareholders. With respect to
a Fund,
gains from
the sale of securities generally will be
treated as
derived from
U.S. sources and section 988 gains will be
treated as
ordinary
income derived from U.S. sources. The
limitation on
the foreign
tax credit is applied separately to foreign
source
passive
income, including foreign source passive
income
received from a
Fund. In addition, the foreign tax credit
may offset
only 90% of
the revised alternative minimum tax imposed
on
corporations and
individuals.
The foregoing is only a general
description of the
foreign
tax credit under current law. Because
application of
the credit
depends on the particular circumstances of
each
shareholder,
shareholders are advised to consult their own
tax
advisers.
BACKUP WITHHOLDING
Each Fund will be required to report to
the
Internal Revenue
Service ("IRS") all distributions as well as
gross
proceeds from
the redemption of the particular Fund's
shares, except
in the
case of certain exempt shareholders. All
such
distributions and
proceeds will be subject to withholding of
Federal
income tax at
a rate of 31% ("backup withholding") in the
case of
non-exempt
shareholders if (1) the shareholder fails to
furnish a
Fund with
and to certify the shareholder's correct
taxpayer
identification
number or social security number, (2) the IRS
notifies
the
shareholder or the particular Fund that the
shareholder
has
failed to report properly certain interest
and dividend
income to
the IRS and to respond to notices to that
effect, or
(3) when
required to do so, the shareholder fails to
certify
that he or
she is not subject to backup withholding. If
the
withholding
provisions are applicable, any such
distributions or
proceeds,
whether reinvested in additional shares or
taken in
cash, will be
reduced by the amounts required to be
withheld.
Distributions may also be subject to
additional
state, local
and foreign taxes depending on each
shareholder's
particular
situation. Non-U.S. shareholders may be
subject to
U.S. tax
rules that differ significantly from those
summarized
above.
This discussion does not purport to deal with
all of
the tax
consequences applicable to a Fund or
shareholders.
Shareholders
are advised to consult their own tax advisers
with
respect to the
particular tax consequences to them of an
investment in
a Fund.
PERFORMANCE INFORMATION
Comparisons of a Fund's performance may
be made
with respect
to various unmanaged indices (including the
TSE 300,
S&P 100, S&P
500, Dow Jones Industrial Average and Major
Market
Index) which
assume reinvestment of dividends, but do not
reflect
deductions
for administrative and management costs. A
Fund also
may be
compared to Lipper's Analytical Reports,
reports
produced by a
widely used independent research firm that
ranks mutual
funds by
overall performance, investment objectives
and assets,
or to
Wiesenberger Reports. Lipper Analytical
Services does
not
include sales charges in computing
performance.
Further
information on comparisons is contained in
the
Prospectus.
Performance rankings will be based on
historical
information and
are not intended to indicate future
performance.
In addition, the Trust may, from time to
time,
include the
average annual total return and the
cumulative total
return of
shares of a Fund in advertisements,
promotional
literature or
reports to shareholders or prospective
investors.
AVERAGE ANNUAL TOTAL RETURN. Quotations
of
standardized
average annual total return ("Standardized
Return") for
a
specific Class of shares of a Fund will be
expressed in
terms of
the average annual compounded rate of return
that would
cause a
hypothetical investment in that Class of a
Fund made on
the first
day of a designated period to equal the
ending
redeemable value
("ERV") of such hypothetical investment on
the last day
of the
designated period, according to the following
formula:
P(1 + T){superscript n} = ERV
Where: P = a hypothetical initial
payment of
$1,000 to
purchase shares of a
specific Class
T = the average annual total
return of
shares of
that Class
n = the number of years
ERV = the ending redeemable
value of a
hypothetical
$1,000 payment made at
the
beginning of the
period.
For purposes of the above computation
for a Fund,
it is
assumed that all dividends and capital gains
distributions made
by a Fund are reinvested at net asset value
in
additional shares
of the same Class during the designated
period. In
calculating
the ending redeemable value for Class A
shares and
assuming
complete redemption at the end of the
applicable
period, the
maximum 5.75% sales charge is deducted from
the initial
$1,000
payment and, for Class B shares and Class C
shares, the
applicable CDSC imposed upon redemption of
Class B
shares or
Class C shares held for the period is
deducted.
Standardized
Return quotations for the Funds do not take
into
account any
required payments for federal or state income
taxes.
Standardized Return quotations for Class B
shares for
periods of
over eight years will reflect conversion of
the Class B
shares to
Class A shares at the end of the eighth year.
Standardized
Return quotations are determined to the
nearest 1/100
of 1%.
A Fund may, from time to time, include
in
advertisements,
promotional literature or reports to
shareholders or
prospective
investors total return data that are not
calculated
according to
the formula set forth above
("Non-Standardized
Return"). Neither
initial nor CDSCs are taken into account in
calculating
Non-
Standardized Return; a sales charge, if
deducted, would
reduce
the return.
The following tables summarize the
calculation of
Standardized and Non-Standardized Return for
the Class
A, Class
B, Class C and Class I (for Ivy International
Fund)
shares of the
Funds for the periods indicated. In
determining the
average
annual total return for a specific Class of
shares of a
Fund,
recurring fees, if any, that are charged to
all
shareholder
accounts are taken into consideration. For
any account
fees that
vary with the size of the account of a Fund,
the
account fee used
for purposes of the following computations is
assumed
to be the
fee that would be charged to the mean account
size of
the
particular Fund. Shares of each of Ivy
Canada Fund and
Ivy
Global Fund outstanding as of March 31, 1994
were
designated
Class A shares of each respective Fund.
Shares of Ivy
International Fund outstanding as of October
22, 1993
have been
redesignated as "Class A" shares of the Fund.
IVY CANADA FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2]
CLASS C[6]
One year ended
December 31,
1995: .26% .74%
N/A
Five years ended
December 31,
1995: 3.29% N/A
N/A
Inception[#] to
December 31,
1995:[5] 1.18% (6.49)%
N/A
NON-STANDARDIZED RETURN[**]
CLASS A[3] CLASS B[4]
CLASS C[6]
One year ended
December 31,
1995: 6.37% 5.74%
N/A
Five years ended
December 31,
1995: 4.52% N/A
N/A
Inception[#] to
December 31,
1995:[5] 1.91% (4.28)%
N/A
_________________________
[*] The Standardized Return figures for
Class A shares
reflect
the deduction of the maximum initial
sales charge
of 5.75%.
The Standardized Return figures for
Class B shares
reflect
the deduction of the applicable CDSC
imposed on a
redemption
of Class B shares held for the period.
[**] The Non-Standardized Return figures do
not reflect
the
deduction of any initial sales charge or
CDSC.
[#] The inception date for Ivy Canada Fund
(and the
Class A
shares of the Fund) was November 17,
1987; the
inception
date for Class B shares of the Fund was
April 1,
1994. The
inception date for Class C shares of the
Fund is
April 30,
1996. Until December 31, 1994,
Mackenzie
Investment
Management, Inc. served as investment
adviser to
the Fund,
which until that date was a series of
the Company.
[1] The Standardized Return figures for
Class A shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class A shares
for the one
year
ended December 31, 1995, the five years
ended
December 31,
1995 and the period from inception
through
December 31, 1995
would have been (.08)%, 3.22% and .71%,
respectively.
[2] The Standardized Return figures for
Class B shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class B shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been .40% and
(6.67)%,
respectively. (Since the inception date
for Class
B shares
of the Fund was April 1, 1994, there
were no Class
B shares
outstanding for the duration of the five
year
period ending
December 31, 1995.)
[3] The Non-Standardized Return figures for
Class A
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class A
shares for the one year ended December
31, 1995,
the five
years ended December 31, 1995 and the
period from
inception
through December 31, 1995 would have
been 6.01%,
4.45% and
1.44%, respectively.
[4] The Non-Standardized Return figures for
Class B
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class B
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been 5.39% and (4.47)%, respectively.
(Since the
inception
date for Class B shares of the Fund was
April 1,
1994, there
were no Class B shares outstanding for
the
duration of the
five year period ending December 31,
1995.)
[5] The total return for a period less than
a full
year is
calculated on an aggregate basis and is
not
annualized.
[6] Since the inception date for Class C
shares of the
Fund is
April 30, 1996, there were no Class C
shares
outstanding
during any of the relevant time periods.
IVY CHINA REGION FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2]
CLASS C[6]
One year ended
December 31,
1995: (4.26)% (4.17)%
N/A
Inception[#] to
December 31,
1995:[5] (8.10)% (7.58)%
N/A
NON-STANDARDIZED RETURN[**]
CLASS A[3] CLASS B[4]
CLASS C[6]
One year ended
December 31,
1995: (1.59)% .83%
N/A
Inception[#] to
December 31,
1995:[5] (5.56)% (6.27)%
N/A
_________________________
[*] The Standardized Return figures for
Class A shares
reflect
the deduction of the maximum initial
sales charge
of 5.75%.
The Standardized Return figures for
Class B shares
reflect
the deduction of the applicable CDSC
imposed on a
redemption
of Class B shares held for the period.
[**] The Non-Standardized Return figures do
not reflect
the
deduction of any initial sales charge or
CDSC.
[#] The inception date for Ivy China Region
Fund
(Class A and
Class B shares) was October 23, 1993.
The
inception date
for Class C shares of the Fund is April
30, 1996.
[1] The Standardized Return figures for
Class A shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class A shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been (4.70)%
and
(8.57)%, respectively.
[2] The Standardized Return figures for
Class B shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class B shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been (4.62)%
and
(8.01)%, respectively.
[3] The Non-Standardized Return figures for
Class A
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class A
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been 1.11% and (6.06)%, respectively.
[4] The Non-Standardized Return figures for
Class B
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class B
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been .36% and (6.72)%, respectively.
[5] The total return for a period less than
a full
year is
calculated on an aggregate basis and is
not
annualized.
[6] Since the inception date for Class C
shares of the
Fund is
April 30, 1996, there were no Class C
shares
outstanding
during any of the relevant time periods.
IVY GLOBAL FUND:
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2]
CLASS C[6]
One year ended
December 31,
1995: 5.64% 6.25%
N/A
Inception[#] to
December 31,
1995:[5] 8.05% 3.00%
N/A
NON-STANDARDIZED RETURN[**]
CLASS A[3] CLASS B[4]
CLASS C[6]
One year ended
December 31,
1995: 12.08% 11.25%
N/A
Inception[#] to
December 31,
1995:[5] 9.42% 5.22%
N/A
_________________________
[*] The Standardized Return figures for
Class A shares
reflect
the deduction of the maximum initial
sales charge
of 5.75%.
The Standardized Return figures for
Class B shares
reflect
the deduction of the applicable CDSC
imposed on a
redemption
of Class B shares held for the period.
[**] The Non-Standardized Return figures do
not reflect
the
deduction of any initial sales charge or
CDSC.
[#] The inception date for Ivy Global Fund
(and Class
A shares
of the Fund) was April 18, 1991; the
inception
date for
Class B shares of the Fund was April 1,
1994; and
the
inception date for the Class C shares of
the Fund
is April
30, 1996. Until December 31, 1994,
Mackenzie
Investment
Management Inc. served as investment
adviser to
the Fund,
which until that date was a series of
the Company.
[1] The Standardized Return figures for
Class A shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class A shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been 5.37%
and 7.02%,
respectively.
[2] The Standardized Return figures for
Class B shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class B shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been 5.98%
and 2.84%,
respectively.
[3] The Non-Standardized Return figures for
Class A
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class A
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been 11.80% and 3.38%, respectively.
[4] The Non-Standardized Return figures for
Class B
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class B
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been 10.97% and 5.05%, respectively.
[5] The total return for a period less than
a full
year is
calculated on an aggregate basis and is
not
annualized.
[6] Since the inception date for Class C
shares of the
Fund is
April 30, 1996, there were no Class C
shares
outstanding
during any of the relevant time periods.
IVY INTERNATIONAL FUND
STANDARDIZED
RETURN[*]
CLASS A[1] CLASS B[2] CLASS
C[7]
CLASS I[5]
One year ended
December 31,
1995: 6.17% 6.62%
N/A
12.85%
Five years ended
December 31,
1995: 13.88% N/A
N/A
N/A
Inception[#] to
December 31,
1995:[6] 14.42% 8.57%
N/A
10.41%
NON-STANDARDIZED
RETURN[**]
CLASS A[3] CLASS B[4] CLASS
C[7]
CLASS I[5]
One year ended
December 31,
1995: 12.65% 11.62%
N/A
12.85%
Five years ended
December 31,
1995: 15.24% N/A
N/A
N/A
Inception[#] to
December 31,
1995:[6] 15.13% 10.21%
N/A
10.41%
_________________________
[*] The Standardized Return figures for
Class A shares
reflect
the deduction of the maximum initial
sales charge
of 5.75%.
The Standardized Return figures for
Class B shares
reflect
the deduction of the applicable CDSC
imposed on a
redemption
of Class B shares held for the period.
Class I
shares are
not subject to an initial or a CDSC;
therefore,
the Non-
Standardized Return figures would be
identical to
the
Standardized Return figures.
[**] The Non-Standardized Return figures do
not reflect
the
deduction of any initial sales charge or
CDSC.
[#] The inception date for Ivy International
Fund (and
the Class
A shares of the Fund) was April 21,
1986; the
inception date
for the Class B and Class I shares of
the Fund was
October 23, 1993; and the inception date
for the
Class C
shares of the Fund is April 30, 1996.
[1] The Standardized Return figures for
Class A shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class A shares
for the one
year
ended December 31, 1995, the five years
ended
December 31,
1995 and the period from inception
through
December 31, 1995
would have been 6.17%, 13.86% and
14.41%,
respectively.
[2] The Standardized Return figures for
Class B shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class B shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been 6.62%
and 8.57%,
respectively. (Since the inception date
for Class
B shares
of the Fund was October 23, 1993, there
were no
Class B
shares outstanding for the duration of
the five
year period
ending December 31, 1995.)
[3] The Non-Standardized Return figures for
Class A
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class A
shares for the one year ended December
31, 1995,
the five
years ended December 31, 1995 and the
period from
inception
through December 31, 1995 would have
been 12.65%,
15.21% and
15.11%, respectively.
[4] The Non-Standardized Return figures for
Class B
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class B
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been 11.62% and 10.21%, respectively.
(Since the
inception
date for Class B shares of the Fund was
October
23, 1993,
there were no Class B shares outstanding
for the
duration of
the five year period ending December 31,
1995.)
[5] Class I shares are not subject to an
initial sales
charge or
a CDSC, therefore the Non-Standardized
and
Standardized
Return figures are identical. (Since
the
inception date for
Class I shares of the Fund was October
23, 1993,
there were
no Class I shares outstanding for the
duration of
the five
year period ending December 31, 1995.)
[6] The total return for a period less than
a full
year is
calculated on an aggregate basis and is
not
annualized.
[7] Since the inception date for Class C
shares of the
Fund is
April 30, 1996, there were no Class C
shares
outstanding
during any of the relevant time periods.
IVY LATIN AMERICA STRATEGY FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2]
CLASS C[6]
One year ended
December 31,
1995: (22.04)% (22.90)%
N/A
Inception[#] to
December 31,
1995:[5] (30.65)% (30.06)%
N/A
NON-STANDARDIZED RETURN[**]
CLASS A[3] CLASS B[4]
CLASS C[6]
One year ended
December 31,
1995: (17.28)% (17.90)%
N/A
Inception[#] to
December 31,
1995:[5] (26.93)% (27.47)%
N/A
_________________________
[*] The Standardized Return figures for
Class A shares
reflect
the deduction of the maximum initial
sales charge
of 5.75%.
The Standardized Return figures for
Class B shares
reflect
the deduction of the applicable CDSC
imposed on a
redemption
of Class B shares held for the period.
[**] The Non-Standardized Return figures do
not reflect
the
deduction of any initial sales charge or
CDSC.
[#] The inception date for Ivy Latin America
Strategy
Fund
(Class A and Class B shares) was
November 1, 1994.
The
inception date for Class C shares of the
Fund is
April 30,
1996.
[1] The Standardized Return figures for
Class A shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class A shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been (28.49)%
and
(36.91)%, respectively.
[2] The Standardized Return figures for
Class B shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class B shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been (29.29)%
and
(36.10)%, respectively.
[3] The Non-Standardized Return figures for
Class A
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class A
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been (24.09)% and (33.57)%,
respectively.
[4] The Non-Standardized Return figures for
Class B
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class B
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been (24.67)% and (33.79)%,
respectively.
[5] The total return for a period less than
a full
year is
calculated on an aggregate basis and is
not
annualized.
[6] Since the inception date for Class C
shares of the
Fund is
April 30, 1996, there were no Class C
shares
outstanding
during any of the relevant time periods.
IVY NEW CENTURY FUND
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2]
CLASS C[6]
One year ended
December 31,
1995: .29% .62%
N/A
Inception[#] to
December 31,
1995:[5] (11.54)% (3.01)%
N/A
NON-STANDARDIZED RETURN[**]
CLASS A[3] CLASS B[4]
CLASS C[6]
One year ended
December 31,
1995: 6.40% 5.62%
N/A
Inception[#] to
December 31,
1995:[5] (6.88)% (7.56)%
N/A
_________________________
[*] The Standardized Return figures for
Class A shares
reflect
the deduction of the maximum initial
sales charge
of 5.75%.
The Standardized Return figures for
Class B shares
reflect
the deduction of the applicable CDSC
imposed on a
redemption
of Class B shares held for the period.
[**] The Non-Standardized Return figures do
not reflect
the
deduction of any initial sales charge or
CDSC.
[#] The inception date for Ivy New Century
Fund (Class
A and
Class B shares) was November 1, 1994.
The
inception date
for Class C shares of the Fund is April
30, 1996.
[1] The Standardized Return figures for
Class A shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class A shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been (3.34)%
and
(15.73)%, respectively.
[2] The Standardized Return figures for
Class B shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class B shares
for the one
year
ended December 31, 1995 and the period
from
inception
through December 31, 1995 would have
been (3.01)%
and
(15.28)%, respectively.
[3] The Non-Standardized Return figures for
Class A
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class A
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been 2.58% and (11.28)%, respectively.
[4] The Non-Standardized Return figures for
Class B
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class B
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been 1.82% and (11.93)%, respectively.
[5] The total return for a period less than
a full
year is
calculated on an aggregate basis and is
not
annualized.
[6] Since the inception date for Class C
shares of the
Fund is
April 30, 1996, there were no Class C
shares
outstanding
during any of the relevant time periods.
CUMULATIVE TOTAL RETURN. Cumulative
total return
is the
cumulative rate of return on a hypothetical
initial
investment of
$1,000 in a specific Class of shares of a
Fund for a
specified
period. Cumulative total return quotations
reflect
changes in
the price of a Fund's shares and assume that
all
dividends and
capital gains distributions during the period
were
reinvested in
the Fund shares. Cumulative total return is
calculated
by
computing the cumulative rates of return of a
hypothetical
investment in a specific Class of shares of a
Fund over
such
periods, according to the following formula
(cumulative
total
return is then expressed as a percentage):
C = (ERV/P) - 1
Where: C = cumulative total return
P = a hypothetical initial
investment
of $1,000
to purchase shares of a
specific
Class
ERV = ending redeemable value:
ERV is
the value,
at the end of the
applicable
period, of a
hypothetical $1,000
investment made
at the
beginning of the
applicable period.
IVY CANADA FUND. The following table
summarizes
the
calculation of Cumulative Total Return for
the periods
indicated
through December 31, 1995, assuming the
maximum 5.75%
sales
charge has been assessed.
SINCE
ONE YEAR FIVE YEARS
INCEPTION[*]
Class A .26% 17.56%
10.03%
Class B .74% N/A[**]
(11.08)%
Class C N/A[**] N/A[**]
N/A[**]
The following table summarizes the
calculation of
Cumulative
Total Return for the periods indicated
through December
31, 1995,
assuming the maximum 5.75% sales charge has
not been
assessed.
SINCE
ONE YEAR FIVE YEARS
INCEPTION[*]
Class A 6.37% 24.73%
16.74%
Class B 5.74% N/A[**]
(7.37)%
Class C N/A[**] N/A[**]
N/A[**]
___________________________
[*] The inception date for Ivy Canada Fund
(and the
Class A
shares of the Fund) was November 17,
1987; the
inception
date for the Class B shares of Ivy
Canada Fund was
April 1,
1994. Until December 31, 1994,
Mackenzie
Investment
Management, Inc. served as investment
adviser to
Ivy Canada
Fund, which until that date was a series
of the
Company.
[**] No such shares were outstanding for the
duration
of the time
period indicated.
IVY CHINA REGION FUND. The following
table
summarizes the
calculation of Cumulative Total Return for
the periods
indicated
through December 31, 1995, assuming the
maximum 5.75%
sales
charge has been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A (4.27)% (16.83)%
Class B (4.17)% (15.79)%
Class C N/A[**] N/A[**]
The following table summarizes the
calculation of
Cumulative
Total Return for the periods indicated
through December
31, 1995,
assuming the maximum 5.75% sales charge has
not been
assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A 1.59% (11.75)%
Class B .83% (13.19)%
Class C N/A[**] N/A[**]
___________________________
[*] The inception date for Ivy China Region
Fund was
October 23,
1993.
[**] No such shares were outstanding for the
duration
of the time
period indicated.
IVY GLOBAL FUND. The following table
summarizes
the
calculation of Cumulative Total Return for
the periods
indicated
through December 31, 1995, assuming the
maximum 5.75%
sales
charge has been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A 5.64% 44.00%
Class B 6.25% 5.31%
Class C N/A[**] N/A[**]
The following table summarizes the
calculation of
Cumulative
Total Return for the periods indicated
through December
31, 1995,
assuming the maximum 5.75% sales charge has
not been
assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A 12.08% 52.79%
Class B 11.25% 9.31%
Class C N/A[**] N/A[**]
___________________________
[*] The inception date for the Fund (and
Class A
shares of the
Fund) was April 18, 1991; the inception
date for
Class B
shares of the Fund was April 1, 1994.
Until
December 31,
1994, Mackenzie Investment Management
Inc. served
as
investment adviser to the Fund, which
until that
date was a
series of the Company.
[**] No such shares were outstanding for the
duration
of the time
period indicated.
IVY INTERNATIONAL FUND. The following
table
summarizes the
calculation of Cumulative Total Return for
the periods
indicated
through December 31, 1995, assuming the
maximum 5.75%
sales
charge has been assessed.
SINCE
ONE YEAR FIVE YEARS
INCEPTION[*]
Class A 6.17% 91.54%
268.32%
Class B 6.62% N/A[**]
20.72%
Class C N/A[**] N/A[**]
N/A[**]
Class I 12.85% N/A[**]
24.25%
The following table summarizes the
calculation of
Cumulative
Total Return for the periods indicated
through December
31, 1995,
assuming the maximum 5.75% sales charge has
not been
assessed.
SINCE
ONE YEAR FIVE YEARS
INCEPTION[*]
Class A 12.65% 103.22%
290.79%
Class B 11.62% N/A[**]
23.72%
Class C N/A[**] N/A[**]
N/A[**]
Class I 12.85% N/A[**]
24.25%
___________________________
[*] The inception date for Ivy International
Fund (and
the Class
A shares of the Fund) was April 21,
1986; the
inception date
for the Class B and Class I shares of
Ivy
International Fund
was October 23, 1993.
[**] No such shares were outstanding for the
duration
of the time
period indicated.
IVY LATIN AMERICA STRATEGY FUND. The
following
table
summarizes the calculation of Cumulative
Total Return
for the
periods indicated through December 31, 1995,
assuming
the maximum
5.75% sales charge has been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A (22.04)% (34.59)%
Class B (22.90)% (33.95)%
Class C N/A[**] N/A[**]
The following table summarizes the
calculation of
Cumulative
Total Return for the periods indicated
through December
31, 1995,
assuming the maximum 5.75% sales charge has
not been
assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A (17.28)% (30.60)%
Class B (17.90)% (31.20)%
Class C N/A[**] N/A[**]
___________________________
[*] The inception date for Ivy Latin America
Strategy
Fund was
November 1, 1994.
[**] No such shares were outstanding for the
duration
of the time
period indicated.
IVY NEW CENTURY FUND. The following
table
summarizes the
calculation of Cumulative Total Return for
the periods
indicated
through December 31, 1995, assuming the
maximum 5.75%
sales
charge has been assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A .29% (13.25)%
Class B .62% (12.40)%
Class C N/A[**] N/A[**]
The following table summarizes the
calculation of
Cumulative
Total Return for the periods indicated
through December
31, 1995,
assuming the maximum 5.75% sales charge has
not been
assessed.
SINCE
ONE YEAR INCEPTION[*]
Class A 6.40% (7.96)%
Class B 5.62% (8.75)%
Class C N/A[**] N/A[**]
___________________________
[*] The inception date for Ivy New Century
Fund was
November 1,
1994.
[**] No such shares were outstanding for the
duration
of the time
period indicated.
OTHER QUOTATIONS, COMPARISONS AND
GENERAL
INFORMATION. The
foregoing computation methods are prescribed
for
advertising and
other communications subject to SEC Rule 482.
Communications not
subject to this rule may contain a number of
different
measures
of performance, computation methods and
assumptions,
including
but not limited to: historical total
returns; results
of actual
or hypothetical investments; changes in
dividends,
distributions
or share values; or any graphic illustration
of such
data. These
data may cover any period of the Trust's
existence and
may or may
not include the impact of sales charges,
taxes or other
factors.
Performance quotations for a Fund will
vary from
time to
time depending on market conditions, the
composition of
the
Fund's portfolio and operating expenses of
that Fund.
These
factors and possible differences in the
methods used in
calculating performance quotations should be
considered
when
comparing performance information regarding a
Fund's
shares with
information published for other investment
companies
and other
investment vehicles. Performance quotations
should
also be
considered relative to changes in the value
of a Fund's
shares
and the risks associated with a Fund's
investment
objectives and
policies. At any time in the future,
performance
quotations may
be higher or lower than past performance
quotations and
there can
be no assurance that any historical
performance
quotation will
continue in the future.
The Funds may also cite endorsements or
use for
comparison
their performance rankings and listings
reported in
such
newspapers or business or consumer
publications as,
among others:
AAII Journal, Barron's, Boston Business
Journal, Boston
Globe,
Boston Herald, Business Week, Consumer's
Digest,
Consumer Guide
Publications, Changing Times, Financial
Planning,
Financial
World, Forbes, Fortune, Growth Fund Guide,
Houston
Post,
Institutional Investor, International Fund
Monitor,
Investor's
Daily, Los Angeles Times, Medical Economics,
Miami
Herald, Money
Mutual Fund Forecaster, Mutual Fund Letter,
Mutual Fund
Source
Book, Mutual Fund Values, National
Underwriter Nelson's
Director
of Investment Managers, New York Times,
Newsweek, No
Load Fund
Investor, No Load Fund* X, Oakland Tribune,
Pension
World,
Pensions and Investment Age, Personal
Investor, Rugg
and Steele,
Time, U.S. News and World Report, USA Today,
The Wall
Street
Journal, and Washington Post.
FINANCIAL STATEMENTS
The Funds' Portfolios of Investments as
of
December 31,
1995, Statements of Assets and Liabilities as
of
December 31,
1995, Statements of Operations for the fiscal
year
ended December
31, 1995, Statements of Changes in Net Assets
for the
fiscal
years ended December 31, 1995 and December
31, 1994,
Financial
Highlights, Notes to Financial Statements,
and Reports
of
Independent Accountants are included in each
Fund's
December 31,
1995 Annual Report to shareholders, which are
incorporated by
reference into this SAI.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S
CORPORATION
("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
CORPORATE
BOND AND
COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994
Issue
(Moody's
Investor Service, New York, 1994), and
"Standard &
Poor's
Municipal Ratings Handbook," October 1994
Issue (McGraw
Hill, New
York, 1994).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa
by Moody's
are judged
by Moody's to be of the best quality,
carrying the
smallest
degree of investment risk. Interest payments
are
protected by a
large or exceptionally stable margin and
principal is
secure.
Bonds rated Aa are judged by Moody's to be of
high
quality by all
standards. Aa bonds are rated lower than Aaa
bonds
because
margins of protection may not be as large as
those of
Aaa bonds,
or fluctuations of protective elements may be
of
greater
amplitude, or there may be other elements
present which
make the
long-term risks appear somewhat larger than
those
applicable to
Aaa securities. Bonds which are rated A by
Moody's
possess many
favorable investment attributes and are
considered as
upper
medium-grade obligations. Factors giving
security to
principal
and interest are considered adequate, but
elements may
be present
which suggest a susceptibility to impairment
sometime
in the
future.
Bonds rated Baa by Moody's are
considered
medium-grade
obligations, i.e., they are neither highly
protected
nor poorly
secured. Interest payments and principal
security
appear
adequate for the present, but certain
protective
elements may be
lacking or may be characteristically
unreliable over
any great
length of time. Such bonds lack outstanding
investment
characteristics and in fact have speculative
characteristics as
well. Bonds which are rated Ba are judged to
have
speculative
elements; their future cannot be considered
well-assured. Often
the protection of interest and principal
payments may
be very
moderate and thereby not well safeguarded
during both
good and
bad times over the future. Uncertainty of
position
characterizes
bonds in this class. Bonds which are rated B
generally
lack
characteristics of the desirable investment.
Assurance
of
interest and principal payments of or
maintenance of
other terms
of the contract over any long period of time
may be
small.
Bonds which are rated Caa are of poor
standing.
Such
issues may be in default or there may be
present
elements of
danger with respect to principal or interest.
Bonds
which are
rated Ca represent obligations which are
speculative in
a high
degree. Such issues are often in default or
have other
marked
shortcomings. Bonds which are rated C are
the lowest
rated class
of bonds and issues so rated can be regarded
as having
extremely
poor prospects of ever attaining any real
investment
standing.
(b) COMMERCIAL PAPER. The Prime rating
is the
highest
commercial paper rating assigned by Moody's.
Among the
factors
considered by Moody's in assigning ratings
are the
following:
(1) evaluation of the management of the
issuer; (2)
economic
evaluation of the issuer's industry or
industries and
an
appraisal of speculative-type risks which may
be
inherent in
certain areas; (3) evaluation of the issuer's
products
in
relation to competition and customer
acceptance; (4)
liquidity;
(5) amount and quality of long-term debt; (6)
trend of
earnings
over a period of ten years; (7) financial
strength of a
parent
company and the relationships which exist
with the
issuer; and
(8) recognition by management of obligations
which may
be present
or may arise as a result of public interest
questions
and
preparations to meet such obligations.
Issuers within
this Prime
category may be given ratings 1, 2 or 3,
depending on
the
relative strengths of these factors. The
designation
of Prime-1
indicates the highest quality repayment
capacity of the
rated
issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate
debt
rating is a
current assessment of the creditworthiness of
an
obligor with
respect to a specific obligation. The
ratings are
based on
current information furnished by the issuer
or obtained
by S&P
from other sources it considers reliable.
The ratings
described
below may be modified by the addition of a
plus or
minus sign to
show relative standing within the major
rating
categories.
Debt rated AAA by S&P is considered by
S&P to be
the highest
grade obligation. Capacity to pay interest
and repay
principal
is extremely strong. Debt rated AA is judged
by S&P to
have a
very strong capacity to pay interest and
repay
principal and
differs from the highest rated issues only in
small
degree. Debt
rated A by S&P has a strong capacity to pay
interest
and repay
principal, although it is somewhat more
susceptible to
the
adverse effects of changes in circumstances
and
economic
conditions than debt in higher rated
categories.
Debt rated BBB by S&P is regarded by S&P
as having
an
adequate capacity to pay interest and repay
principal.
Although
such bonds normally exhibit adequate
protection
parameters,
adverse economic conditions or changing
circumstances
are more
likely to lead to a weakened capacity to pay
interest
and repay
principal than debt in higher rated
categories.
Debt rated BB, B, CCC, CC and C is
regarded as
having
predominately speculative characteristics
with respect
to
capacity to pay interest and repay principal.
BB
indicates the
least degree of speculation and C the
highest. While
such debt
will likely have some quality and protective
characteristics,
these are outweighed by large uncertainties
or
exposures to
adverse conditions. Debt rated BB has less
near-term
vulnerability to default than other
speculative issues.
However,
it faces major ongoing uncertainties or
exposure to
adverse
business, financial or economic conditions
which could
lead to
inadequate capacity to meet timely interest
and
principal
payments. The BB rating category is also
used for debt
subordinated to senior debt that is assigned
an actual
or implied
BBB- rating. Debt rated B has a greater
vulnerability
to default
but currently has the capacity to meet
interest
payments and
principal repayments. Adverse business,
financial, or
economic
conditions will likely impair capacity or
willingness
to pay
interest and repay principal. The B rating
category is
also used
for debt subordinated to senior debt that is
assigned
an actual
or implied BB or BB- rating. Debt rated CCC
has a
currently
identifiable vulnerability to default, and is
dependent
upon
favorable business, financial, and economic
conditions
to meet
timely payment of interest and repayment of
principal.
In the
event of adverse business, financial or
economic
conditions, it
is not likely to have the capacity to pay
interest and
repay
principal. The CCC rating category is also
used for
debt
subordinated to senior debt that is assigned
an actual
or implied
B or B- rating. The rating CC typically is
applied to
debt
subordinated to senior debt which is assigned
an actual
or
implied CCC debt rating. The rating C
typically is
applied to
debt subordinated to senior debt which is
assigned an
actual or
implied CCC- debt rating. The C rating may
be used to
cover a
situation where a bankruptcy petition has
been filed,
but debt
service payments are continued.
(b) COMMERCIAL PAPER. An S&P
commercial paper
rating is a
current assessment of the likelihood of
timely payment
of debt
having an original maturity of no more than
365 days.
Commercial paper rated A by S&P has the
following
characteristics: (i) liquidity ratios are
adequate to
meet cash
requirements; (ii) long-term senior debt
rating should
be A or
better, although in some cases BBB credits
may be
allowed if
other factors outweigh the BBB; (iii) the
issuer should
have
access to at least one additional channel of
borrowing;
(iv)
basic earnings and cash flow should have an
upward
trend with
allowances made for unusual circumstances;
and (v)
typically the
issuer's industry should be well established
and the
issuer
should have a strong position within its
industry and
the
reliability and quality of management should
be
unquestioned.
Issues rated A are further referred to by use
of
numbers 1, 2 and
3 to denote relative strength within this
highest
classification.
For example, the A-1 designation indicates
that the
degree of
safety regarding timely payment of debt is
strong.
Issues rated B are regarded as having
only
speculative
capacity for timely payment. The C rating is
assigned
to short-
term debt obligations with a doubtful
capacity for
payment.
IVY MONEY MARKET FUND
a series of
IVY FUND
Via Mizner Financial Plaza,
Suite 300
700 South Federal Highway
Boca Raton, Florida
33432
STATEMENT OF ADDITIONAL
INFORMATION
April 30, 1996
_________________________________________________________________
Ivy Fund (the "Trust") is a diversified,
open-end
management
investment company that consists of thirteen
fully
managed
portfolios. This Statement of Additional
Information
describes
one of these portfolios: Ivy Money Market
Fund (the
"Fund").
The other twelve portfolios of the Trust are
described
in
separate Statements of Additional
Information.
This Statement of Additional Information
("SAI")
is not a
prospectus, and should be read in conjunction
with the
prospectus
for the Fund dated April 30, 1996 (the
"Prospectus"),
which may
be obtained upon request and without charge
from the
Trust at the
Distributor's address and telephone number
listed
below.
INVESTMENT MANAGER
Ivy Management, Inc.
("IMI")
Via Mizner Financial Plaza,
Suite 300
700 South Federal Highway
Boca Raton, Florida
33432
Telephone: (800)
777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors,
Inc.
Via Mizner Financial Plaza,
Suite 300
700 South Federal Highway
Boca Raton, Florida
33432
Telephone: (800)
456-5111
TABLE OF CONTENTS
PAGE
INVESTMENT OBJECTIVE AND POLICIES . . . . . .
. . . . .
. . . 4
U.S. GOVERNMENT SECURITIES . . . . . . .
. . . . .
. . . 4
COMMERCIAL PAPER . . . . . . . . . . . .
. . . . .
. . . 5
BANKING INDUSTRY AND SAVINGS AND LOAN
OBLIGATIONS
. . . 5
INVESTMENT RESTRICTIONS . . . . . . . . . . .
. . . . .
. . . 6
ADDITIONAL RESTRICTIONS . . . . . . . . . . .
. . . . .
. . . 7
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . .
. . . . .
. . . 8
AUTOMATIC INVESTMENT METHOD . . . . . .
. . . . .
. . . 9
EXCHANGE OF SHARES . . . . . . . . . . .
. . . . .
. . . 9
RETIREMENT PLANS . . . . . . . . . . . .
. . . . .
. . . 10
INDIVIDUAL RETIREMENT ACCOUNTS
(IRAS) . . . .
. . . 11
DEFERRED COMPENSATION FOR PUBLIC
SCHOOLS AND
CHARITABLE ORGANIZATIONS
("403(B)(7)
ACCOUNT") . . . . . . . . . .
. . . . .
. . . 13
SIMPLIFIED EMPLOYEE PENSION ("SEP")
IRAS . .
. . . 13
SYSTEMATIC WITHDRAWAL PLAN . . . . . . .
. . . . .
. . . 13
GROUP SYSTEMATIC INVESTMENT PROGRAM . .
. . . . .
. . . 14
BROKERAGE ALLOCATION . . . . . . . . . . . .
. . . . .
. . . 15
TRUSTEES AND OFFICERS . . . . . . . . . . . .
. . . . .
. . . 17
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
. . . . .
. . . 21
INVESTMENT ADVISORY AND OTHER SERVICES . . .
. . . . .
. . . 23
BUSINESS MANAGEMENT AND INVESTMENT
ADVISORY
SERVICES . . 23
DISTRIBUTION SERVICES . . . . . . . . .
. . . . .
. . . 25
CUSTODIAN . . . . . . . . . . . . . . .
. . . . .
. . . 28
FUND ACCOUNTING SERVICES . . . . . . . .
. . . . .
. . . 28
TRANSFER AND DIVIDEND PAYING AGENT . . .
. . . . .
. . . 28
ADMINISTRATOR . . . . . . . . . . . . .
. . . . .
. . . 28
AUDITORS . . . . . . . . . . . . . . . .
. . . . .
. . . 29
CAPITALIZATION AND VOTING RIGHTS . . . . . .
. . . . .
. . . 29
NET ASSET VALUE . . . . . . . . . . . . . . .
. . . . .
. . . 31
REDEMPTIONS . . . . . . . . . . . . . . . . .
. . . . .
. . . 32
TAXATION . . . . . . . . . . . . . . . . . .
. . . . .
. . . 33
GENERAL . . . . . . . . . . . . . . . .
. . . . .
. . . 34
DEBT SECURITIES ACQUIRED AT A DISCOUNT .
. . . . .
. . . 35
DISTRIBUTIONS . . . . . . . . . . . . .
. . . . .
. . . 35
DISPOSITION OF SHARES . . . . . . . . .
. . . . .
. . . 36
BACKUP WITHHOLDING . . . . . . . . . . .
. . . . .
. . . 37
OTHER INFORMATION . . . . . . . . . . .
. . . . .
. . . 37
CALCULATION OF YIELD . . . . . . . . . . . .
. . . . .
. . . 37
STANDARDIZED YIELD QUOTATIONS . . . . .
. . . . .
. . . 37
OTHER QUOTATIONS, COMPARISONS AND
GENERAL
INFORMATION . 38
FINANCIAL STATEMENTS . . . . . . . . . . . .
. . . . .
. . . 39
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S
CORPORATION
("S&P") AND
MOODY'S INVESTORS SERVICE, INC.
("MOODY'S")
CORPORATE
BOND AND COMMERCIAL PAPER RATINGS .
. . . . .
. . . 40
INVESTMENT OBJECTIVE AND
POLICIES
The Trust is a diversified open-end
management
investment
company organized as a Massachusetts business
trust on
December
21, 1983. The Fund's investment objective
and general
investment
policies are described in the Prospectus.
Additional
information
concerning the Fund's investments is set
forth below.
U.S. GOVERNMENT SECURITIES
The Fund may invest in U.S. Government
securities.
U.S.
Government securities are obligations of, or
guaranteed
by, the
U.S. Government, its agencies or
instrumentalities.
Securities
guaranteed by the U.S. Government include:
(1) direct
obligations
of the U.S. Treasury (such as Treasury bills,
notes,
and bonds),
and (2) Federal agency obligations guaranteed
as to
principal and
interest by the U.S. Treasury (such as GNMA
certificates, which
are mortgage-backed securities). The payment
of
principal and
interest on these securities is
unconditionally
guaranteed by the
U.S. Government, and thus they are of the
highest
possible credit
quality. Such securities are subject to
variations in
market
value due to fluctuations in interest rates,
but, if
held to
maturity, will be paid in full.
Mortgage-backed securities are
securities
representing part
ownership of a pool of mortgage loans. For
example,
GNMA
certificates are such securities on which the
timely
payment of
principal and interest is guaranteed by the
full faith
and credit
of the U.S. Government. Although the
mortgage loans in
the pool
will have maturities of up to 30 years, the
actual
average life
of the GNMA certificates typically will be
substantially less
because the mortgages will be subject to
normal
principal
amortization and may be prepaid prior to
maturity.
Prepayment
rates vary widely and may be affected by
changes in
market
interest rates. In periods of falling
interest rates,
the rate
of prepayment tends to increase, thereby
shortening the
actual
average life of the GNMA certificates.
Conversely,
when interest
rates are rising, the rate of prepayments
tends to
decrease,
thereby lengthening the actual average life
of the GNMA
certificates. Accordingly, it is not
possible to
predict
accurately the average life of a particular
pool.
Reinvestment
of prepayments may occur at higher or lower
rates than
the
original yield on the certificates. Due to
the
prepayment
feature and the need to reinvest prepayments
of
principal at
current rates, GNMA certificates can be less
effective
than
typical bonds of similar maturities at
"locking in"
yields during
periods of declining interest rates. GNMA
certificates
may
appreciate or decline in market value during
periods of
declining
or rising interest rates, respectively.
Securities issued by U.S. Government
instrumentalities and
certain federal agencies are neither direct
obligations
of nor
guaranteed by the U.S. Treasury. However,
they involve
Federal
sponsorship in one way or another; some are
backed by
specific
types of collateral; some are supported by
the issuer's
right to
borrow from the Treasury; some are supported
by the
discretionary
authority of the Treasury to purchase certain
obligations of the
issuer; and others are supported only by the
credit of
the
issuing government agency or instrumentality.
These
agencies and
instrumentalities include, but are not
limited to,
Federal Land
Banks, Farmers Home Administration, Central
Bank for
Cooperatives, Federal Intermediate Credit
Banks,
Federal Home
Loan Banks, Federal National Mortgage
Association, and
Student
Loan Marketing Association.
COMMERCIAL PAPER
The Fund may invest in high-quality
commercial
paper.
Commercial paper represents short-term
unsecured
promissory notes
issued in bearer form by bank holding
companies,
corporations and
finance companies. The Fund may invest in
commercial
paper that,
on the date of investment, is rated at least
A-2 by
Standard &
Poor's Corporation ("S&P") or P-2 by Moody's
Investors
Service,
Inc. ("Moody's") or, if not rated by S&P or
Moody's,
issued by
companies having an outstanding debt issue
rated AAA or
AA by S&P
or Aaa or Aa by Moody's, or judged by IMI to
be of at
least
equivalent quality.
BANKING INDUSTRY AND SAVINGS AND LOAN
OBLIGATIONS
The Fund may invest in bank obligations,
which may
include
certificates of deposit, bankers' acceptances
and other
short-
term debt obligations. Certificates of
deposit are
negotiable
certificates issued against funds deposited
in a
commercial bank
for a definite period of time and earning a
specified
return.
Bankers' acceptances are negotiable drafts or
bills of
exchange,
normally drawn by an importer or exporter to
pay for
specific
merchandise, that are "accepted" by a bank,
meaning, in
effect,
that the bank unconditionally agrees to pay
the face
value of the
instrument on maturity.
The Fund may invest in certificates of
deposit of
large
domestic banks (i.e., banks that at the time
of their
most recent
annual financial statements show total assets
in excess
of $1
billion), including foreign branches of such
domestic
banks, and
of smaller banks as described below. The
Fund will not
invest in
certificates of deposit of foreign banks.
Investment
in
certificates of deposit issued by foreign
branches of
domestic
banks involves investment risks that are
different in
some
respects from those associated with
investment in
certificates of
deposit issued by domestic banks, including
the
possible
imposition of withholding taxes on interest
income, the
possible
adoption of foreign governmental restrictions
which
might
adversely affect the payment of principal and
interest
on such
certificates of deposit, or other adverse
political or
economic
developments. In addition, it might be more
difficult
to obtain
and enforce a judgment against a foreign
branch of a
domestic
bank. Although the Trust recognizes that the
size of a
bank is
important, this fact alone is not necessarily
indicative of its
creditworthiness. The Fund may invest in
certificates
of deposit
issued by banks and savings and loan
institutions that
at the
time of their most recent annual financial
statements
had total
assets of less than $1 billion, provided that
(i) the
principal
amounts of such certificates of deposit are
insured by
an agency
of the U.S. Government, (ii) at no time will
the Fund
hold more
than $100,000 principal amount of
certificates of
deposit of any
one such bank, and (iii) at the time of
acquisition, no
more than
10% of the Fund's assets (taken at current
value) are
invested in
certificates of deposit of such banks having
total
assets not in
excess of $1 billion.
INVESTMENT RESTRICTIONS
The Fund's investment objectives as set
forth in
the
Prospectus under "Investment Objective and
Policies,"
together
with the investment restrictions set forth
below, are
fundamental
policies of the Fund and may not be changed
without the
approval
of a majority (as defined in the Investment
Company Act
of 1940,
as amended (the "1940 Act")) of the Fund's
outstanding
voting
shares. Under these restrictions, the Fund
may not:
(i) borrow money, except for
temporary
purposes where
investment transactions might
advantageously
require it. Any such loan may
not be
for a period
in excess of 60 days, and the
aggregate
amount of
all outstanding loans may not
at any
time exceed
10% of the value of the total
assets of
the Fund
at the time any such loan is
made;
(ii) purchase securities on margin;
(iii) sell securities short;
(iv) lend any funds or other
assets, except
that this
restriction shall not prohibit
(a) the
entry into
repurchase agreements or (b)
the
purchase of
publicly distributed bonds,
debentures
and other
securities of a similar type,
or
privately placed
municipal or corporate bonds,
debentures
and other
securities of a type
customarily
purchased by
institutional investors or
publicly
traded in the
securities markets;
(v) participate in an underwriting
or
selling group in
connection with the public
distribution
of
securities except for its own
capital
stock;
(vi) invest more than 5% of the
value of its
total
assets in the securities of
any one
issuer (except
obligations of domestic banks
or the
U.S.
Government, its agencies,
authorities
and
instrumentalities);
(vii) hold more than 10% of the
voting
securities of
any one issuer (except
obligations of
domestic
banks or the U.S. Government,
its
agencies,
authorities and
instrumentalities);
(viii) purchase from or sell to any
of its
officers or
trustees, or firms of which
any of them
are
members or which they control,
any
securities
(other than capital stock of
the Fund),
but such
persons or firms may act as
brokers for
the Fund
for customary commissions to
the extent
permitted
by the 1940 Act;
(ix) purchase or sell real estate
or
commodities and
commodity contracts;
(x) purchase the securities of any
other
open-end
investment company, except as
part of a
plan of
merger or consolidation;
(xi) make an investment in
securities of
companies in
any one industry (except
obligations of
domestic
banks or the U.S. Government,
its
agencies,
authorities, or
instrumentalities) if
such
investment would cause
investments in
such
industry to exceed 25% of the
market
value of the
Fund's total assets at the
time of such
investment; or
(xii) issue senior securities,
except as
appropriate to
evidence indebtedness which it
is
permitted to
incur, and except to the
extent that
shares of the
separate classes or series of
the Trust
may be
deemed to be senior
securities.
Under the 1940 Act, the Fund is
permitted, subject
to the
above investment restrictions, to borrow
money only
from banks.
The Trust has no current intention of
borrowing amounts
in excess
of 5% of the Fund's assets. The Fund will
continue to
interpret
fundamental investment restriction (ix) as
prohibiting
investment
in real estate limited partnership interests;
this
restriction
shall not, however, prohibit investment in
readily
marketable
securities of companies that invest in real
estate or
interests
therein, including real estate investment
trusts.
ADDITIONAL RESTRICTIONS
The Fund has adopted the following
additional
restrictions,
which are not fundamental and which may be
changed
without
shareholder approval to the extent permitted
by
applicable law,
regulation or regulatory policy. Under these
restrictions, the
Fund may not:
(i) invest in oil, gas or other
mineral
leases or
exploration or development
programs;
(ii) invest more than 5% of the
value of its
total
assets in the securities of
unseasoned
issuers,
including their predecessors,
which have
been in
operation for less than three
years;
(iii) invest more than 5% of the
value of its
total
assets in the securities of
issuers
which are not
readily marketable;
(iv) engage in the purchase and
sale of puts,
calls,
straddles or spreads (except
to the
extent
described in the Prospectus
and in this
SAI);
(v) invest in companies for the
purpose of
exercising
control of management;
(vi) purchase any security which it
is
restricted from
selling to the public without
registration under
the Securities Act of 1933; or
(vii) invest more than 5% of its
total assets
in
warrants, valued at the lower
of cost or
market,
or more than 2% of its total
assets in
warrants,
so valued, which are not
listed on
either the New
York or American Stock
Exchanges.
Whenever an investment objective, policy
or
restriction set
forth in the Prospectus or this SAI states a
maximum
percentage
of assets that may be invested in any
security or other
asset or
describes a policy regarding quality
standards, such
percentage
limitation or standard shall, unless
otherwise
indicated, apply
to the Fund only at the time a transaction is
entered
into.
Accordingly, if a percentage limitation is
adhered to
at the time
of investment, a later increase or decrease
in the
percentage
which results from circumstances not
involving any
affirmative
action by the Fund (such as a change in
market
conditions or a
change in the Fund's asset level or other
circumstances
beyond
the Fund's control) will not be considered a
violation.
ADDITIONAL RIGHTS AND
PRIVILEGES
The Trust offers to investors (and
except as noted
below,
bears the cost of providing) the following
rights and
privileges.
The Trust reserves the right to amend or
terminate any
one or
more of such rights and privileges. Notice
of
amendments to or
terminations of rights and privileges will be
provided
to
shareholders in accordance with applicable
law.
Certain of the rights and privileges
described
below apply
to other funds distributed by Ivy Mackenzie
Distributors, Inc.
("IMDI")(formerly known as Mackenzie Ivy
Funds
Distribution,
Inc.), which funds are not described in this
SAI.
These funds
are: Ivy Bond Fund, Ivy Canada Fund, Ivy
China Region
Fund, Ivy
Emerging Growth Fund, Ivy Global Fund, Ivy
Growth Fund,
Ivy
Growth with Income Fund, Ivy International
Fund, Ivy
International Bond Fund, Ivy Latin America
Strategy
Fund, Ivy New
Century Fund and Ivy Short-Term Bond Fund the
other
twelve series
of the Trust; and Mackenzie California
Municipal Fund,
Mackenzie
Limited Term Municipal Fund, Mackenzie
Florida Limited
Term
Municipal Fund, Mackenzie National Municipal
Fund and
Mackenzie
New York Municipal Fund, the five series of
Mackenzie
Series
Trust (collectively, with the Fund, the "Ivy
Mackenzie
Funds").
Before exercising any right or privilege that
may
relate to any
of these funds, investors should obtain the
fund's
current
prospectus.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method is
available for
Class A,
Class B and Class C shareholders. The
minimum initial
and
subsequent investment pursuant to this plan
is $50 per
month,
except in the case of a tax-qualified
retirement plan
for which
the minimum initial and subsequent investment
is $25
per month.
The Automatic Investment Method may be
discontinued at
any time
upon receipt of telephone instructions by The
Ivy
Mackenzie
Services Corp. ("IMSC") (formerly known as
The
Mackenzie Ivy
Investor Services Corp.) or written notice to
IMSC from
the
investor. See "Automatic Investment Method"
in the New
Account
Application.
EXCHANGE OF SHARES
As described in the Fund's Prospectus,
shareholders of the
Fund have an exchange privilege with certain
other Ivy
and
Mackenzie Funds. Before effecting an
exchange,
shareholders of
the Fund should obtain and read the currently
effective
prospectus for the Ivy or Mackenzie Fund into
which the
exchange
is to be made.
The minimum amount which may be
exchanged into an
Ivy or
Mackenzie Fund in which shares are not
already held is
$1,000.
No exchange out of the Fund (other than by a
complete
exchange of
all shares of the Fund) may be made if it
would reduce
the
shareholder's interest in the Fund to less
than $1,000.
Each exchange of Fund shares will be
made on the
basis of
the relative net asset value per share of
each Ivy or
Mackenzie
Fund (into which the exchange is being made)
next
computed
following receipt of telephone instructions
by IMSC or
a properly
executed request by IMSC. An exchange from
the Fund
into any
other funds into which exchanges are
permitted may be
subject to
a sales charge, unless such sales charge has
already
been paid.
Exchanges, whether written or telephonic,
must be
received by
IMSC by the close of regular trading on the
New York
Stock
Exchange (the "Exchange") (normally 4:00
p.m., Eastern
time) to
receive the price computed on the day of
receipt;
exchange
requests received after that time will
receive the
price next
determined following receipt of the request.
This
exchange
privilege may be modified or terminated at
any time,
upon at
least 60 days' notice when such notice is
required by
rules
adopted by the Securities and Exchange
Commission
("SEC"). See
"Redemptions."
An exchange of shares in any fund of the
Ivy
Mackenzie Funds
for shares in another fund generally will
result in a
taxable
gain or loss. Generally, any such taxable
gain or loss
will be a
capital gain or loss (long-term or
short-term,
depending on the
holding period of the shares) in the amount
of the
difference
between the net asset value of the shares
surrendered
and the
shareholder's tax basis for those shares.
However, in
certain
circumstances, shareholders will be
ineligible to take
sales
charges into account in computing taxable
gain or loss
on an
exchange. See "Taxation."
With limited exceptions, gain realized
by a
tax-deferred
retirement plan will not be taxable to the
plan and
will not be
taxed to the participant until distribution.
Each
investor
should consult his or her tax adviser
regarding the tax
consequences of an exchange transaction.
RETIREMENT PLANS
Shares of the Fund may be purchased in
connection
with
several types of tax-deferred retirement
plans. Shares
of more
than one fund distributed by IMDI may be
purchased in a
single
application establishing a single plan
account, and
shares held
in such an account may be exchanged among the
funds in
the Ivy
Mackenzie Funds in accordance with the terms
of the
applicable
plan and the exchange privilege available to
all
shareholders.
Initial and subsequent purchase payments in
connection
with tax-
deferred retirement plans must be at least
$25 per
participant.
The following fees will be charged to
individual
shareholder
accounts as described in the retirement
prototype plan
document:
Retirement Plan New Account Fee
No fee
Retirement Plan Annual Maintenance Fee
$10.00 per
account
For shareholders whose retirement accounts
are
diversified across
more than two funds in the Ivy Mackenzie
Funds, the
annual
maintenance fee will be limited to not more
than $20.
The following discussion describes in
general
terms the tax
treatment of certain tax-deferred retirement
plans
under current
Federal income tax law. State income tax
consequences
may vary.
An individual considering the establishment
of a
retirement plan
should consult with an attorney and/or an
accountant
with respect
to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS).
Shares of
the Trust
may be used as a funding medium for an
Individual
Retirement
Account ("IRA"). Eligible individuals may
establish an
IRA by
adopting a model custodial account available
from IMSC,
which may
impose a charge for establishing the account.
Individuals may
wish to consult their tax advisers before
investing IRA
assets in
a fund which primarily distributes
exempt-interest
dividends.
An individual who has not reached age
70-1/2 and
who
receives compensation or earned income is
eligible to
contribute
to an IRA, whether or not he or she is an
active
participant in a
retirement plan. An individual who receives
a
distribution from
another IRA, a qualified retirement plan, a
qualified
annuity
plan or a tax-sheltered annuity or custodial
account
("403(b)
plan") that qualifies for "rollover"
treatment is also
eligible
to establish an IRA by rolling over the
distribution
either
directly or within 60 days after its receipt.
Tax
advice should
be obtained in connection with planning a
rollover
contribution
to an IRA.
In general, an eligible individual may
contribute
up to the
lesser of $2,000 or 100% of his or her
compensation or
earned
income to an IRA each year. If a husband and
wife are
both
employed, and both are under age 70-1/2, each
may set
up his or
her own IRA within these limits. If both
earn at least
$2,000
per year, the maximum potential contribution
is $4,000
per year
for both. However, if one spouse has (or
elects to be
treated as
having) no earned income for IRA purposes for
a year,
the other
spouse may contribute to an IRA on his or her
behalf.
In such a
case, the working spouse may contribute up to
the
lesser of
$2,250 or 100% or his or her compensation or
earned
income for
the year to IRAs for both spouses, provided
that no
more than
$2,000 is contributed to the IRA of either
spouse.
Rollover
contributions are not subject to these
limits.
An individual may deduct his or her
annual
contributions to
an IRA in computing his or her Federal income
tax
within the
limits described above, provided he or she
(and his or
her
spouse, if they file a joint Federal income
tax return)
is not an
active participant in a qualified retirement
plan (such
as a
qualified corporate, sole proprietorship, or
partnership pension,
profit sharing, 401(k) or stock bonus plan),
qualified
annuity
plan, 403(b) plan, simplified employee
pension, or
government
plan. If he or she (or his or her spouse) is
an active
participant, a full deduction is only
available if he
or she has
adjusted gross income that is no greater than
a
specified level
($40,000 for married couples filing a joint
return,
$25,000 for
single individuals, and $0 for a married
individual
filing a
separate return). The deduction is phased
out ratably
for active
participants with adjusted gross income
between certain
levels
($40,000 and $50,000 for married individuals
filing a
joint
return, $25,000 and $35,000 for single
individuals, and
$0 and
$10,000 for married individuals filing
separate
returns).
Individuals with income above the specified
phase-out
level may
not deduct their IRA contributions. Rollover
contributions are
not includible in income for Federal income
tax
purposes and,
therefore, are not deductible from it.
Generally, earnings on an IRA are not
subject to
current
Federal income tax until distributed.
Distributions
attributable
to tax-deductible contributions and to IRA
earnings are
taxed as
ordinary income. Distributions of
non-deductible
contributions
are not subject to Federal income tax. In
general,
distributions
from an IRA to an individual before he or she
reaches
age 59-1/2
are subject to a nondeductible penalty tax
equal to 10%
of the
taxable amount of the distribution. The 10%
penalty
tax does not
apply to amounts withdrawn from an IRA after
the
individual
reaches age 59-1/2, becomes disabled or dies,
if
withdrawn in the
form of substantially equal payments over the
life or
life
expectancy of the individual and his or her
designated
beneficiary, if any, or rolled over into
another IRA.
Distributions must begin to be withdrawn not
later than
April 1
of the calendar year following the calendar
year in
which the
individual reaches age 70-1/2. Failure to
take certain
minimum
required distributions will result in the
imposition of
a 50%
non-deductible penalty tax. Extremely large
distributions in any
one year from an IRA (or from an IRA and
other
retirement plans)
may also result in a penalty tax.
QUALIFIED PLANS. For those
self-employed
individuals who
wish to purchase shares of one or more of the
funds in
the Ivy
Mackenzie Funds through a qualified
retirement plan, a
Retirement
Plan is available from IMSC. The Retirement
Plan may
be adopted
as a profit sharing plan or a money purchase
pension
plan. A
profit sharing plan permits an annual
contribution to
be made in
an amount determined each year by the
self-employed
individual
within certain limits prescribed by law. A
money
purchase
pension plan requires annual contributions at
the level
specified
in the Retirement Plan. There is no set-up
fee for
qualified
plans and the annual maintenance fee is
$20.00 per
account.
In general, if a self-employed
individual has any
common law
employees, employees who have met certain
minimum age
and service
requirements must be covered by the
Retirement Plan. A
self-
employed individual generally must contribute
the same
percentage
of income for common law employees as for
himself or
herself.
A self-employed individual may
contribute up to
the lesser
of $30,000 or 25% of compensation or earned
income to a
money
purchase pension plan or to a combination
profit
sharing and
money purchase pension plan arrangement each
year on
behalf of
each participant. To be deductible, total
contributions to a
profit sharing plan generally may not exceed
15% of the
total
compensation or earned income of all
participants in
the plan,
and total contributions to a combination
money
purchase-profit
sharing arrangement generally may not exceed
25% of the
total
compensation or earned income of all
participants. The
amount of
compensation or earned income of any one
participant
that may be
included in computing the deduction is
limited
(generally to
$150,000 for benefits accruing in plan years
beginning
after
1993, with annual inflation adjustments). A
self-employed
individual's contributions to a retirement
plan on his
or her own
behalf must be deducted in computing his or
her earned
income.
Corporate employers may also adopt the
Retirement
Plan for
the benefit of their eligible employees.
Similar
contribution
and deduction rules apply to corporate
employers.
Distributions from the Retirement Plan
generally
are made
after a participant's separation from
service. A 10%
penalty tax
generally applies to distributions to an
individual
before he or
she reaches age 59-1/2, unless the individual
(1) has
reached age
55 and separated from service; (2) dies; (3)
becomes
disabled;
(4) uses the withdrawal to pay tax-deductible
medical
expenses;
(5) takes the withdrawal as part of a series
of
substantially
equal payments over his or her life
expectancy or the
joint life
expectancy of himself or herself and a
designated
beneficiary; or
(6) rolls over the distribution.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS
AND
CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT"). Section
403(b)(7)
of the
Internal Revenue Code of 1986, as amended
(the "Code"),
permits
public school systems and certain charitable
organizations to use
mutual fund shares held in a custodial
account to fund
deferred
compensation arrangements with their
employees. A
custodial
account agreement is available for those
employers
whose
employees wish to purchase shares of the Fund
in
conjunction with
such an arrangement. The special application
for a
403(b)(7)
Account is available from IMSC.
Distributions from the 403(b)(7) Account
may be
made only
following death, disability, separation from
service,
attainment
of age 59-1/2, or incurring a financial
hardship. A
10% penalty
tax generally applies to distributions to an
individual
before he
or she reaches age 59-1/2, unless the
individual has
(1) reached
age 55 and separated from service; (2) died
or become
disabled;
(3) used the withdrawal to pay tax-deductible
medical
expenses;
(4) taken the withdrawal as part of a series
of
substantially
equal payments over his or her life
expectancy or the
joint life
expectancy of himself or herself and a
designated
beneficiary; or
(5) rolled over the distribution. There is
no set-up
fee for
403(b)(7) Accounts and the annual maintenance
fee is
$20.00 per
account.
SIMPLIFIED EMPLOYEE PENSION ("SEP")
IRAS. An
employer may
deduct contributions to a SEP up to the
lesser of
$30,000 or 15%
of compensation. SEP accounts generally are
subject to
all rules
applicable to IRA accounts, except the
deduction
limits, and are
subject to certain employee participation
requirements.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a Systematic
Withdrawal Plan
(the "Withdrawal Plan") by telephone
instructions to
IMSC or by
delivery to IMSC of a written election to so
redeem,
accompanied
by a surrender to IMSC of all share
certificates then
outstanding
in the name of such shareholder, properly
endorsed by
him. A
Withdrawal Plan may not be established if the
investor
is
currently participating in the Automatic
Investment
Method. The
Withdrawal Plan may involve the use of
principal and,
to the
extent that it does, depending on the amount
withdrawn,
the
investor's principal may be depleted.
A redemption under the Withdrawal Plan
is a
taxable event.
Investors contemplating participation in the
Withdrawal
Plan
should consult their tax advisers.
Additional investments in the Fund made
by
investors
participating in the Withdrawal Plan must
equal at
least $1,000
each while the Withdrawal Plan is in effect.
An investor may terminate his
participation in the
Withdrawal Plan at any time by delivering
written
notice to IMSC.
If all shares held by the investor are
liquidated at
any time,
the Withdrawal Plan will terminate
automatically. The
Trust or
MIMI may terminate the Withdrawal Plan at any
time
after
reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares of the Fund may be purchased in
connection
with
investment programs established by employee
or other
groups using
systematic payroll deductions or other
systematic
payment
arrangements. The Trust does not itself
organize,
offer or
administer any such programs. However, it
may,
depending upon
the size of the program, waive the minimum
initial and
additional
investment requirements for purchases by
individuals in
conjunction with programs organized and
offered by
others.
Unless shares of the Fund are purchased in
conjunction
with IRAs
(see "How to Buy Shares" in the Prospectus),
such group
systematic investment programs are not
entitled to
special tax
benefits under the Code. The Trust reserves
the right
to refuse
any purchase or suspend the offering of
shares in
connection with
group systematic investment programs at any
time and to
restrict
the offering of shareholder privileges, such
as Check
Writing and
other optional privileges, as described in
the
Prospectus, to
shareholders using group systematic
investment
programs.
With respect to each shareholder account
established on or
after September 15, 1972 under a group
systematic
investment
program, the Trust and IMI each currently
charge a
maintenance
fee of $3.00 (or portion thereof) for each
twelve-month
period
(or portion thereof) the account is
maintained. The
Trust may
collect such fee (and any fees due to IMI)
through a
deduction
from distributions to the shareholders
involved or by
causing on
the date the fee is assessed a redemption in
each such
shareholder account sufficient to pay such
fee. The
Trust
reserves the right to change these fees from
time to
time without
advance notice.
BROKERAGE ALLOCATION
Subject to the overall supervision of
the
President and the
Board of Trustees of the Trust, IMI places
orders for
the
purchase and sale of the Fund's portfolio
securities.
All
portfolio transactions are effected at the
best price
and
execution obtainable. Purchases and sales of
debt
securities are
usually principal transactions and therefore,
brokerage
commissions are usually not required to be
paid by the
Fund for
such purchases and sales, although the price
paid
generally
includes undisclosed compensation to the
dealer. The
prices paid
to underwriters of newly-issued securities
usually
include a
concession paid by the issuer to the
underwriter, and
purchases
of after-market securities from dealers
normally
reflect the
spread between the bid and asked prices. In
connection
with
over-the-counter ("OTC") transactions, IMI
attempts to
deal
directly with the principal market makers,
except in
those
circumstances where IMI believes that better
prices and
execution
are available elsewhere.
IMI selects broker-dealers to execute
transactions
and
evaluates the reasonableness of commissions
on the
basis of
quality, quantity, and the nature of the
firms'
professional
services. Commissions to be charged and the
rendering
of
investment services, including statistical,
research,
and
counseling services by brokerage firms, are
factors to
be
considered in placing of brokerage business.
The types
of
research services provided by brokers may
include
general
economic and industry data, and information
on
securities of
specific companies. Research services
provided by
brokers
through whom the Trust effects securities
transactions
may be
used by IMI in servicing all of its accounts.
In
addition, not
all of these services may be used by IMI in
connection
with the
services it provides to the Fund or the
Trust. IMI may
consider
sales of Fund shares as a factor in the
selection of
broker-
dealers and may select broker-dealers that
provide it
with
research services. IMI will not, however,
execute
brokerage
transactions other than at the best price and
execution.
The Fund may, under some circumstances,
accept
securities in
lieu of cash as payment for Fund shares. The
Fund will
consider
accepting securities only to increase its
holdings in a
portfolio
security or to take a new portfolio position
in a
security that
IMI deems to be a desirable investment for
the Fund.
While no
minimum has been established, it is expected
that the
Fund will
not accept securities having an aggregate
value of less
than $1
million. The Trust may reject in whole or in
part any
or all
offers to pay for Fund shares with securities
and may
discontinue
accepting securities as payment for Fund
shares at any
time
without notice. The Trust will value
accepted
securities in the
manner and at the same time provided for
valuing
portfolio
securities of the Fund, and Fund shares will
be sold
for net
asset value determined at the same time the
accepted
securities
are valued. The Trust will accept only
securities
which are
delivered in proper form and will not accept
securities
subject
to legal restrictions on transfer. The
acceptance of
securities
by the Trust must comply with applicable laws
of
certain states.
During the fiscal years ended December
31, 1993,
1994 and
1995, the Fund paid no brokerage commissions.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of
the Trust,
their
business addresses and principal occupations
during the
past five
years are:
POSITION
WITH THE
BUSINESS
AFFILIATIONS
NAME, ADDRESS, AGE TRUST AND
PRINCIPAL
OCCUPATIONS
John S. Anderegg, Jr. Trustee
Chairman,
Dynamics
60 Concord Street
Research Corp.
instruments
Wilmington, MA 01887 and
controls);
Director,
Age: 72
Burr-Brown Corp.
(operational
amplifiers);
Director,
Metritage
Incorporated
(level
measuring
instruments);
Trustee
of
Mackenzie Series
Trust
(1992-present).
Paul H. Broyhill Trustee
Chairman, BMC
Fund, Inc.
800 Hickory Blvd.
(1983-present);
Chairman,
Golfview Park
Broyhill Family
Foundation,
Lenoir, NC 28645 Inc.
(1983-Present);
Age: 72
Chairman and
President,
Broyhill
Investments, Inc.
(1983-present);
Chairman,
Broyhill Timber
Resources
(1983-present);
Management
of a
personal
portfolio of
fixed-income and
equity
investments
(1983-present);
Trustee
of
Mackenzie Series
Trust
(1988-present);
Director of The
Mackenzie
Funds
Inc.
(1988-1995).
Stanley Channick Trustee
President, The
Whitestone
11 Bala Avenue
Corporation
(insurance
Bala Cynwyd, PA 19004
agency);
President, Scott
Age: 71
Management
Company
(administrative
services
for
insurance
companies);
President, The
Channick
Group
(consultants to
insurance
companies and
national trade
associations);
Trustee of
Ivy
Fund
(1984-1993);
Director of The
Mackenzie
Funds
Inc.
(1994-1995).
Frank W. DeFriece, Jr. Trustee
Director, Manager
and Vice
The Landmark Centre
President,
Massengill-
113 Landmark Lane,
DeFriece
Foundation
Suite B
(charitable
organization)
Bristol, TN 37625
(1950-present);
Trustee and
Age: 75 Second
Vice
Chairman, East
Tennessee Public
Communications
Corp. (WSJK-
TV)
(1984-present); Trustee
of
Mackenzie
Series Trust
(1985-present);
Director of
The
Mackenzie
Funds Inc.
(1987-1995).
Roy J. Glauber Trustee
Mallinckrodt
Professor of
Lyman Laboratory
Physics, Harvard
of Physics
University (since
1974);
Harvard University Trustee
of Ivy
Fund (1961
Cambridge, MA 02138 -1991);
Trustee
of
Mackenzie Series
Trust
Age: 70
(1994-present).
Michael G. Landry Trustee
President,
Chairman and
700 South Federal Hwy. and
Director of
Mackenzie
Suite 300 President
Investment
Management
Boca Raton, FL 33432 Inc.
(1987-present);
Age: 49
President and
Director
[*Deemed to be an of Ivy
Management, Inc.
"interested person"
(1992-present);
Chairman
of the Trust, as and
Director of
defined under the
Mackenzie Ivy
Investor
1940 Act.]
Services Corp.
(1993-
present);
Director and
President of
Mackenzie Ivy
Funds
Distribution, Inc.
(1993-1994);
Chairman and
Director of
Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present);
Director
and
President of
The
Mackenzie Funds
Inc. (1987-
1995);
Trustee
and
President of
Mackenzie
Series
Trust
(1987-
present).
Michael R. Peers Trustee
Chairman of the
Board,
737 Periwinkle Way and Ivy
Management,
Inc.
Sanibel, FL 33957 Chairman
(1984-1991);
Chairman
Age: 66 of the of the
Board, Ivy
Fund
[*Deemed to be an Board
(1974-present);
Private
"interested person"
Investor.
of the Trust, as
defined under the
1940 Act.]
Joseph G. Rosenthal Trustee
Chartered
Accountant
110 Jardin Drive
(1958-present);
Trustee
Unit #12 of
Mackenzie
Series
Concord, Ontario Canada Trust
(1985-present);
L4K 2T7
Director of The
Mackenzie
Age: 61 Funds
Inc.
(1987-1995).
Richard N. Silverman Trustee
Formerly
President,
18 Bonnybrook Road Hy-Sil
Manufacturing
Waban, MA 02168
Company, a
division of
Age: 71 Van
Leer, U.S.A.,
Inc.
(gift
packaging
materials
and
metalized
film
products);
Formerly
Director, Waters
Manufacturing Co.
(manufacturer of
electronic
parts);
Director,
Panorama
Television
Network.
J. Brendan Swan Trustee
President,
Airspray
4701 North Federal Hwy.
International,
Inc.;
Suite 465 Joint
Managing
Director,
Pompano Beach, FL 33064
Airspray
International
Age: 65 B.V.
(an
environmentally
sensitive
packaging
company);
Director, The
Mackenzie Funds
Inc. (1992-
1995);
Trustee of
Mackenzie
Series
Trust
(1992-
present).
Keith J. Carlson Vice Senior
Vice
President
700 South Federal Hwy. President and
Director of
Mackenzie
Suite 300
Investment
Management,
Boca Raton, FL 33432 Inc.
(1994-present);
Age: 39 Senior
Vice
President,
Secretary and
Treasurer of
Mackenzie
Investment
Management Inc.
(1985-
1994);
Senior
Vice
President and
Director of
Ivy
Management,
Inc. (1994-
present); Senior
Vice
President,
Treasurer and
Director of Ivy
Management,
Inc.
(1992-1994);
Vice
President of The
Mackenzie
Funds
Inc.
(1987-1995);
President and
Director of
Mackenzie Ivy
Investor
Services Corp.
(1993-1996);
Vice
President of
Mackenzie
Series
Trust
(1994-
present);
Treasurer of
Mackenzie Series
Trust
(1985-1994);
President and
Director of
Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present);
Executive
Vice
President
and Director
of
Mackenzie Ivy
Funds
Distribution,
Inc. (1993-
1994).
C. William Ferris Secretary/ Senior
Vice
President,
700 South Federal Hwy. Treasurer
Secretary/Treasurer
Suite 300 and
Director of
Boca Raton, FL 33432
Mackenzie
Investment
Age: 51
Management Inc.
(1994-
present); Senior
Vice
President,
Finance and
Administration/Compliance
Officer
of
Mackenzie
Investment
Management Inc.
(1989-1994);
Senior Vice
President,
Secretary/
Treasurer and
Clerk of Ivy
Management, Inc.
(1994-
present); Senior
Vice
President,
Finance and
Administration/Compliance
Officer
of Ivy
Management,
Inc.
(1992-1994);
Senior
Vice
President,
Secretary/
Treasurer and
Clerk of Ivy
Management, Inc.
(1989-
1994);
Senior
Vice
President,
Secretary/
Treasurer of
Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present);
Secretary/
Treasurer and
Director of
Mackenzie Ivy
Funds
Distribution,
Inc. (1993-
1994);
Secretary/Treasurer
and
Director of
Mackenzie
Ivy
Investor
Services Corp.
(1993-1996);
President and
Director of
Mackenzie Ivy
Investor Services
Corp.
(1996-present);
Secretary/
Treasurer of The
Mackenzie
Funds
Inc.
(1993-1995);
Secretary/Treasurer of
Mackenzie Series
Trust
(1994-present).
As of March 23, 1996,the Officers
and
Trustees of the
Trust as a group owned beneficially or of
record 3.2%
of the
outstanding Class A and Class B shares of the
Fund.
There were
no Class C shares of the Fund outstanding as
of such
date.
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
Employees of IMI are permitted to make
personal
securities
transactions, subject to requirements and
restrictions
set forth
in IMI's Code of Ethics. The Code of Ethics
contains
provisions
and requirements designed to identify and
address
certain
conflicts of interest between personal
investment
activities and
the interests of investment advisory clients
such as
the Fund.
Among other things, the Code of Ethics, which
generally
complies
with standards recommended by the Investment
Company
Institute's
Advisory Group on Personal Investing,
prohibits certain
types of
transactions absent prior approval, imposes
time
periods during
which personal transactions may not be made
in certain
securities, and requires the submission of
duplicate
broker
confirmations and monthly reporting of
securities
transactions.
Additional restrictions apply to portfolio
managers,
traders,
research analysts and others involved in the
investment
advisory
process. Exceptions to these and other
provisions of
the Code of
Ethics may be granted in particular
circumstances after
review by
appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31,
1995)
TOTAL
PENSION OR
COMPENSA-
RETIREMENT
TION FROM
BENEFITS
ESTIMATED
TRUST AND
AGGREGATE ACCRUED AS
ANNUAL
FUND COM-
COMPENSA- PART OF
BENEFITS
PLEX PAID
NAME, TION FUND UPON
TO
POSITION FROM TRUST EXPENSES
RETIREMENT
TRUSTEES
John S. 7,112 N/A N/A
8,000
Anderegg, Jr.
(Trustee)
Paul H. 7,112 N/A N/A
8,000
Broyhill
(Trustee)
Stanley -0- N/A N/A
8,000
Channick[*]
(Trustee)
Frank W. 7,112 N/A N/A
8,000
DeFriece, Jr.
(Trustee)
Roy J. -0- N/A N/A
8,000
Glauber[*]
(Trustee)
Michael G. -0- N/A N/A
-0-
Landry
(Trustee and
President)
Michael R. -0- N/A N/A
-0-
Peers
(Trustee and
Chairman of
the Board)
Joseph G. 7,112 N/A N/A
8,000
Rosenthal
(Trustee)
Richard N. 8,000 N/A N/A
8,000
Silverman
(Trustee)
J. Brendan 7,112 N/A N/A
8,000
Swan
(Trustee)
Keith J. -0- N/A N/A
-0-
Carlson
(Vice President)
C. William -0- N/A N/A
-0-
Ferris
(Secretary/Treasurer)
[*] Appointed as a Trustee of the Trust at a
meeting
of the
Board of Trustees held on February 10,
1996.
INVESTMENT ADVISORY AND OTHER
SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY
SERVICES
Ivy Management, Inc. provides business
management
and
investment advisory services to the Fund
pursuant to a
Business
Management and Investment Advisory Agreement
with the
Trust (the
"Agreement"), which was approved by the
shareholders of
the Fund
on December 30, 1991. Prior to approval by
shareholders, the
Agreement was approved on October 28, 1991 by
the Board
of
Trustees, including a majority of the
Trustees who are
neither
"interested persons" (as defined in the 1940
Act) of
the Trust
nor have any direct or indirect financial
interest in
the
operation of the distribution plan (see
"Distribution
Services")
or in any related agreement (the "Independent
Trustees"). IMI
also acts as manager and investment adviser
to the
following
investment companies registered under the
1940 Act:
Ivy Bond
Fund, Ivy Canada Fund, Ivy China Region Fund,
Ivy
Emerging Growth
Fund, Ivy Global Fund, Ivy Growth Fund, Ivy
Growth with
Income
Fund, Ivy International Fund, Ivy
International Bond
Fund, Ivy
Latin America Strategy Fund, Ivy New Century
Fund and
Ivy Short-
Term Bond Fund. IMI is a wholly owned
subsidiary of
MIMI. MIMI
currently acts as manager of and investment
adviser to
the
following investment companies registered
under the
1940 Act:
Mackenzie National Municipal Fund, Mackenzie
California
Municipal
Fund, Mackenzie New York Municipal Fund,
Mackenzie
Limited Term
Municipal Fund and Mackenzie Florida Limited
Term
Municipal Fund.
MIMI is a subsidiary of Mackenzie Financial
Corporation
("MFC"),
150 Bloor Street West, Toronto, Ontario,
Canada, a
public
corporation organized under the laws of
Ontario whose
shares are
listed for trading on The Toronto Stock
Exchange. MFC
is
registered in Ontario as a mutual fund dealer
and
advises Ivy
Canada Fund.
The Agreement obligates IMI to make
investments
for the
account of the Fund in accordance with its
best
judgment and
within the investment objectives and
restrictions set
forth in
the Fund's current Prospectus, the 1940 Act
and the
provisions of
the Code relating to regulated investment
companies,
subject to
policy decisions adopted by the Trust's Board
of
Trustees. IMI
also determines the securities to be
purchased or sold
by the
Fund and places orders with brokers or
dealers who deal
in such
securities.
Under the Agreement, IMI also provides
certain
business
management services. IMI is obligated to (1)
coordinate with the
Fund's Custodian and monitor the services it
provides
to the
Fund; (2) coordinate with and monitor any
other third
parties
furnishing services to the Fund; (3) provide
the Fund
with the
necessary office space, telephones and other
communications
facilities as are adequate for the Fund's
needs; (4)
provide the
services of individuals competent to perform
administrative and
clerical functions which are not performed by
employees
or other
agents engaged by the Fund or by IMI acting
in some
other
capacity pursuant to a separate agreement or
arrangement with the
Fund; (5) maintain or supervise the
maintenance by
third parties
of such books and records of the Trust as may
be
required by
applicable Federal or state law; (6)
authorize and
permit IMI's
directors, officers and employees who may be
elected or
appointed
as trustees or officers of the Trust to serve
in such
capacities;
and (7) take such other action with respect
to the
Trust, after
approval by the Trust, as may be required by
applicable
law,
including without limitation the rules and
regulations
of the SEC
and of state securities commissions and other
regulatory
agencies.
For business management and investment
advisory
services,
the Fund pays IMI a monthly fee based on the
Fund's
average daily
net assets during the preceding month at an
annual rate
of 0.40%.
For the fiscal years ended December 31, 1995,
1994 and
1993, the
Fund paid IMI $110,748, $107,960 and $91,931,
respectively (of
which IMI reimbursed $148,768, $105,984 and
$164,323,
respectively, pursuant to the voluntary
expense
limitation
described below).
The Trust pays the following expenses
under the
Agreement:
(1) the fees and expenses of the Trust's
Independent
Trustees;
(2) the salaries and expenses of any of the
Trust's
officers or
employees who are not affiliated with IMI;
(3) interest
expenses;
(4) taxes and governmental fees, including
any original
issue
taxes or transfer taxes applicable to the
sale or
delivery of
shares or certificates therefor; (5)
brokerage
commissions and
other expenses incurred in acquiring or
disposing of
portfolio
securities; (6) the expenses of registering
and
qualifying shares
for sale with the SEC and with various state
securities
commissions; (7) accounting and legal costs;
(8)
insurance
premiums; (9) fees and expenses of the
Trust's
custodian and
transfer agent and any related services; (10)
expenses
of
obtaining quotations of portfolio securities
and of
pricing
shares; (11) expenses of maintaining the
Trust's legal
existence
and of shareholders' meetings; (12) expenses
of
preparation and
distribution to existing shareholders of
periodic
reports, proxy
materials and prospectuses; and (13) fees and
expenses
of
membership in industry organizations.
The Agreement provides that if the
Fund's total
expenses in
any fiscal year exceed the permissible limit
applicable
to the
Fund in any state in which its shares are
then
qualified for
sale, IMI will bear the excess expenses. At
the
present time,
the most restrictive state expense limitation
provision
limits
the Fund's annual expenses (excluding
interest, taxes,
distribution expenses, brokerage commissions
and
extraordinary
expenses, and other expenses subject to
approval by
state
securities administrators) to 2.5% of the
first $30
million of
its average daily net assets, 2.0% of the
next $70
million and
1.5% of its average daily net assets over
$100 million.
IMI has agreed to limit the Fund's total
operating
expenses
(excluding interest, taxes, brokerage
commissions,
litigation and
indemnification expenses, and other
extraordinary
expenses) to an
annual rate of 0.85% of the Fund's average
daily net
assets.
This voluntary expense limitation may be
terminated or
revised at
any time, at which time the Fund's expense
may increase
and its
yield may be reduced, depending on the total
assets of
the Fund.
On August 25, 1995, the Board of
Trustees,
including a
majority of the Independent Trustees, last
approved the
continuance of the Agreement. The Agreement
will
continue in
effect with respect to the Fund for more than
the
initial two-
year period only so long as the continuance
is
specifically
approved at least annually (i) by the vote of
a
majority of the
Independent Trustees and (ii) either (a) by
the vote of
a
majority of the outstanding voting securities
(as
defined in the
1940 Act) of the Fund or (b) by the vote of a
majority
of the
entire Board of Trustees. If the question of
continuance of the
Agreement (or adoption of any new agreement)
is
presented to
shareholders, continuance (or adoption) shall
be
effected only if
approved by the affirmative vote of a
majority of the
outstanding
voting securities of the Fund. See
"Capitalization and
Voting
Rights."
The Agreement may be terminated with
respect to
the Fund at
any time, without payment of any penalty, by
a vote of
a majority
of the Board of Trustees, or by a vote of a
majority of
the
outstanding voting securities of the Fund on
60 days'
written
notice to IMI, or by IMI on 60 days' written
notice to
the Trust.
The Agreement shall terminate automatically
in the
event of its
assignment.
DISTRIBUTION SERVICES
IMDI serves as the exclusive distributor
of the
Fund shares
under an Amended and Restated Distribution
Agreement
with the
Trust dated October 23, 1993 (the
"Distribution
Agreement").
[FN][Effective October 1, 1993, IMDI, a
wholly-owned
subsidiary
of MIMI, succeeded to and is continuing
MIMI's
broker-dealer
activities. The provisions of the Trust's
previous
Distribution
Agreement with MIMI remain unchanged by the
succession.] The
Distribution Agreement was last approved by
the Board
of Trustees
on August 25, 1996. IMDI distributes Fund
shares
through broker-
dealers who are members of the National
Association of
Securities
Dealers, Inc. and who have executed dealer
agreements
with IMDI.
IMDI distributes Fund shares on a continuous
basis, but
reserves
the right to suspend or discontinue
distribution on
such basis.
IMDI is not obligated to sell any specific
amount of
Fund shares.
Pursuant to the Distribution Agreement, the
Fund bears,
among
other expenses, the expenses of registering
and
qualifying its
shares for sale under federal and state
securities laws
and
preparing and distributing to existing
shareholders
periodic
reports, proxy materials and Prospectuses.
Shares of
the Fund
are sold at the Fund's net asset value per
share
without a sales
load.
The Distribution Agreement will continue
in effect
for
successive one-year periods, provided that
such
continuance is
specifically approved at least annually by
the vote of
a majority
of the Independent Trustees, cast in person
at a
meeting called
for that purpose and by the vote of either a
majority
of the
entire Board of Trustees or a majority of the
outstanding voting
securities of the Fund. The Distribution
Agreement may
be
terminated with respect to the Fund at any
time,
without payment
of any penalty, by IMDI on 60 days' written
notice to
the Trust
or by the Fund by the vote of either a
majority of the
outstanding voting securities of the Fund or
a majority
of the
Independent Trustees on 60 days' written
notice to
IMDI. The
Distribution Agreement shall terminate
automatically in
the event
of its assignment.
If the Distribution Agreement is
terminated (or
not renewed)
with respect to one or more funds of the
Trust, it may
continue
in effect with respect to any fund as to
which it has
not been
terminated (or has been renewed).
RULE 18F-3 PLAN. On February 23, 1995,
the SEC
adopted Rule
18f-3 under the 1940 Act, which permits a
registered
open-end
investment company whose shares are
registered on Form
N-1A to
issue multiple classes of shares in
accordance with a
written
plan approved by the investment company's
board of
directors/trustees and filed with the SEC.
At a
meeting held on
December 1-2, 1995, the Board of Trustees of
the Trust
adopted a
multi-class plan on behalf of the Fund and
authorized
the
redesignation of the Fund's shares into Class
A and
Class B,
respectively. On February 29, 1996, the
Trustees
resolved by
written consent to establish a new class of
shares,
designated as
"Class C," for all Ivy Fund portfolios (other
than Ivy
Short-Term
Bond Fund). The purpose of the Class B
redesignation
(and the
Class C designation) of shares for the Fund
is
primarily to
enable the transfer agent for the Ivy and
Mackenzie
funds to
track the contingent deferred sales charge
period that
applies to
Class B and Class C shares of Ivy and
Mackenzie funds
(other than
the Fund) that are being exchanged for shares
of the
Fund. In
all other relevant respects, the Fund's Class
A, Class
B and
Class C shares are identical (i.e., having
the same
arrangement
for shareholder services and the distribution
of
securities).
CUSTODIAN
Brown Brothers Harriman & Co. ("Brown
Brothers"),
a private
bank and member of the principal securities
exchanges,
located at
40 Water Street, Boston, Massachusetts 02109,
acts as
custodian
for the Trust's securities and cash pursuant
to a
Custodian
Agreement with the Trust. Its primary
responsibility
is to
maintain custody of the cash and securities
in the
Fund's
portfolio. Rules adopted under the 1940 Act
permit the
Trust to
maintain its foreign securities and cash in
the custody
of
certain eligible foreign banks and securities
depositories.
Pursuant to those rules, Brown Brothers
Harriman & Co.
has
entered into subcustodial agreements for the
holding of
the
Fund's foreign securities. Brown Brothers
may receive,
as
partial payment for its services, a portion
of the
Trust's
brokerage business, subject to its ability to
provide
best price
and execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services
Agreement
that became
effective March 1, 1992, MIMI provides
certain
accounting and
pricing services for the Fund, including
bookkeeping
and
computation of daily net asset value. As
compensation
for those
services, the Fund pays MIMI a monthly fee of
0.10% of
the Fund's
average daily net assets, plus out-of-pocket
expenses
as
incurred. For the fiscal years ended
December 31,
1993, 1994 and
1995, the Fund paid MIMI $27,783, $30,023 and
$30,957,
respectively, for such services.
TRANSFER AND DIVIDEND PAYING AGENT
IMSC, a wholly owned subsidiary of MIMI,
acts as
the Fund's
transfer agent pursuant to a Transfer Agency
and
Shareholder
Services Agreement. For transfer agency and
shareholder
services, the Fund pays IMSC an annual fee of
$22.00
per open
account and $4.36 for each account that is
closed. The
Fund also
reimburses IMSC monthly for out-of-pocket
expenses.
For the
fiscal year ended December 31, 1995, such
fees and
expenses for
the Fund totalled $124,309. Certain
broker-dealers
that maintain
shareholder accounts with the Fund through an
omnibus
account
provide transfer agent and other
shareholder-related
services
that would otherwise be provided by IMSC if
the
individual
accounts that comprise the omnibus account
were opened
by their
beneficial owners directly. IMSC pays such
broker-dealers a per
account fee for each open account within the
omnibus
account, or
a fixed rate (e.g., .10%) fee, based on the
average
daily net
asset value of the omnibus account (or a
combination
thereof).
ADMINISTRATOR
MIMI provides certain administrative
services to
the Fund
pursuant to an Administrative Services
Agreement, in
exchange for
a monthly fee at the annual rate of .10% of
the Fund's
average
daily net assets. For the fiscal years ended
December
31, 1995,
1994 and 1993, the Fund paid MIMI $27,687,
$26,990 and
$22,981,
respectively, for such services.
AUDITORS
Coopers & Lybrand L.L.P., independent
certified
public
accountants, 200 East Las Olas Boulevard,
Suite 1700,
Ft.
Lauderdale, Florida 33301, has been selected
as
auditors for the
Trust. The audit services performed by
Coopers &
Lybrand L.L.P.
include audits of the annual financial
statements of
each of the
funds of the Trust. Other services provided
primarily
relate to
filings with the SEC and the preparation of
the Trust's
tax
returns.
CAPITALIZATION AND VOTING
RIGHTS
The capitalization of the Trust consists
of an
unlimited
number of shares of beneficial interest (no
par value
per share).
When issued, shares of the Fund are fully
paid,
non-assessable,
redeemable and fully transferable. Shares do
not have
preemptive
rights or subscription rights.
The Amended and Restated Declaration of
Trust
permits the
Trustees to create separate series or
portfolios and to
divide
any series or portfolio into one or more
classes. The
Trustees
have authorized thirteen series, each of
which
represents a
separate investment portfolio. The Trustees
have
further
authorized the issuance of Classes A, B and C
shares
for the
Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy
China Region
Fund, Ivy
Emerging Growth Fund, Ivy Global Fund, Ivy
Growth Fund,
Ivy
Growth with Income Fund, Ivy International
Fund, Ivy
International Bond Fund and Ivy Latin America
Strategy
Fund and
Ivy New Century Fund, as well as Classes A, B
and I for
Ivy
Short-Term Bond Fund, Class I for Ivy
International
Fund and Ivy
Bond Fund, and Class D shares for Ivy Growth
with
Income Fund
[FN][The Class D shares of Ivy Growth with
Income Fund
were
initially issued as "Ivy Growth with Income
Fund --
Class C" to
shareholders of Mackenzie Growth & Income
Fund, a
former series
of the Company, in connection with the
reorganization
between
that fund and Ivy Growth with Income Fund,
and are not
offered
for sale to the public. On February 29,
1996, the
Trustees of
the Trust resolved by written consent to
establish a
new class of
shares designated as "Class C" for all Ivy
Fund
portfolios (other
than Ivy Short-Term Bond Fund), and to
redesignate the
shares of
beneficial interest of "Ivy Growth with
Income
Fund--Class C" as
shares of beneficial interest of "Ivy Growth
with
Income Fund--
Class D," which establishment and
redesignation,
respectively,
are to become effective on April 30, 1996.
The voting,
dividend,
liquidation and other rights, preferences,
powers,
restrictions,
limitations, qualifications, terms and
conditions of
the Class D
shares of Ivy Growth with Income Fund, as set
forth in
Ivy Fund's
Declaration of Trust, as amended from time to
time,
will not be
changed by this redesignation.].
Shareholders have the right to vote for
the
election of
Trustees of the Trust and on any and all
matters on
which they
may be entitled to vote by law or by the
provisions of
the
Amended and Restated Declaration of Trust.
Shares of
the Fund
entitle their holders to one vote per share
(with
proportionate
voting for fractional shares). Shareholders
of the
Trust vote
separately by Fund on any matter submitted to
shareholders,
except when otherwise required by the 1940
Act, in
which case the
shareholders of all funds of the Trust
affected by the
matter in
question will vote together. Approval of an
investment
advisory
agreement and a change in fundamental
policies would be
regarded
as matters requiring separate voting by the
shareholders of each
fund of the Trust. If the Trustees determine
that a
matter does
not affect the interests of the Fund, then
the
shareholders of
the Fund will not be entitled to vote on that
matter.
Matters
that affect the Trust in general, such as
ratification
of the
selection of independent public accountants,
will be
voted upon
collectively by the shareholders of all of
the funds
that
comprise the Trust.
As used in this SAI and the Fund's
Prospectus, the
phrase
"majority vote of the outstanding shares" of
the Fund
means the
vote of the lesser of: (1) 67% of the shares
of the
Fund (or of
the Trust) present at a meeting if the
holders of more
than 50%
of the outstanding shares are present in
person or by
proxy; or
(2) more than 50% of the outstanding shares
of the Fund
(or of
the Trust). With respect to the submission
to
shareholder vote
of a matter requiring separate voting by the
Fund, the
matter
shall have been effectively acted upon with
respect to
the Fund
if a majority of the outstanding voting
securities of
the Fund
votes for the approval of the matter,
notwithstanding
that:
(1) the matter has not been approved by a
majority of
the
outstanding voting securities of any other
fund of the
Trust; or
(2) the matter has not been approved by a
majority of
the
outstanding voting securities of the Trust.
Under Massachusetts law, the Trust's
shareholders
could,
under certain circumstances, be held
personally liable
for the
obligations of the Trust. However, the
Amended and
Restated
Declaration of Trust disclaims liability of
the
shareholders,
Trustees or officers of the Trust for acts or
obligations of the
Trust, which are binding only on the assets
and
property of the
Trust, and requires that notice of the
disclaimer be
given in
each contract or obligation entered into or
executed by
the Trust
or its Trustees. The Amended and Restated
Declaration
of Trust
provides for indemnification out of fund
property for
all loss
and expense of any shareholder of a Fund held
personally liable
for the obligations of that Fund. The risk
of a
shareholder of
the Trust incurring financial loss on account
of
shareholder
liability is limited to circumstances in
which the
Trust itself
would be unable to meet its obligations and,
thus,
should be
considered remote. No series of the Trust is
liable
for the
obligations of any other series of the Trust.
The Trust's shares do not have
cumulative voting
rights and
accordingly the holders of more than 50% of
the
outstanding
shares could elect the entire Board of
Trustees, in
which case
the holders of the remaining shares would not
be able
to elect
any Trustees.
To the knowledge of the Trust, as of
March 29,
1996, no
shareholder owned beneficially or of record
5% or more
of the
Fund's outstanding shares, except that of the
outstanding Class B
shares of the Fund, Janney Montgomery Scott
(custodian)
FBO Elisa
Pierce Lynch c/o Clark Capital Management,
1735 Market
Street,
Philadelphia, PA 19103, owned of record
108,518.910
shares
(7.12%), A G Edwards & Sons (custodian) FBO
Helen
Strauss, 402
West Borough Lane, Safety Harbor, FL 34695,
owned of
record
100,731.360 shares (6.61%), Smith Barney
Inc., 388
Greenwich
Street, New York, NY 10013, owned of record
87,616.640
shares
(5.75%), and Albert Chang, 311 2nd Street,
Suite 103,
Kirkland,
WA 98033, owned of record 87,323.840 shares
(5.73%).
NET ASSET VALUE
The market price at any given time for
each Fund
share is
its net asset value. The net asset value per
share for
the Fund
is computed by dividing the value of the
total assets
of the
Fund, less all of its liabilities, by the
total number
of shares
of the Fund outstanding. For the purposes of
determining the
aggregate net assets of the Fund, cash and
receivables
will be
valued at their realizable amounts. Pursuant
to a rule
of the
SEC, the Fund's portfolio securities are
valued using
the
amortized cost method of valuation in an
effort to
maintain a
constant net asset value of $1.00 per share,
which the
Board of
Trustees has determined to be in the best
interest of
the Fund
and its shareholders. The amortized cost
method
involves valuing
a security at cost on the date of acquisition
and
thereafter
assuming a constant rate of accretion of
discount or
amortization
of premium. While this method provides
certainty in
valuation,
it may result in periods during which value,
as
determined by
amortized cost, is higher or lower than the
price the
Fund would
receive if it sold the instrument. During
such
periods, the
yield to an investor in the Fund may differ
somewhat
from that
obtained in a similar investment company
which uses
available
market quotations to value all of its
portfolio
securities.
Portfolio securities are valued and net
asset
value per
share of the Fund is determined as of the
close of
regular
trading on the Exchange (normally 4:00 p.m.,
Eastern
time) every
Monday through Friday (exclusive of national
business
holidays).
The Trust's offices will be closed, and net
asset value
will not
be calculated, on the following national
business
holidays: New
Year's Day, President's Day, Good Friday,
Memorial Day,
Independence Day, Labor Day, Thanksgiving Day
and
Christmas Day.
On those days when either or both of the
Fund's
Custodian or the
New York Stock Exchange close early as a
result of such
day being
a partial holiday or otherwise, the right is
reserved
to advance
the time on that day by which purchase and
redemption
requests
must be received.
Fund shares will not be sold during any
period
when the
determination of the Fund's net asset value
is
suspended pursuant
to rules or orders of the SEC or by the Board
of
Trustees
whenever in its judgment it is in the best
interest of
the Fund
to do so.
REDEMPTIONS
Shares of the Fund are redeemed at their
net asset
value
next determined after a redemption request in
proper
form has
been received by IMSC. The Fund does not
assess a
contingent
deferred sales charge. However, if shares of
another
Ivy or
Mackenzie Fund that are subject to a
contingent
deferred sales
charge are exchanged for shares of the Fund,
the
contingent
deferred sales charge will carry over to the
investment
in the
Fund and may be assessed upon redemption.
Unless a shareholder requests that the
proceeds of
any
redemption be wired to his or her bank
account, payment
for
shares tendered for redemption is made by
check within
seven days
after tender in proper form, except that the
Trust
reserves the
right to suspend the right of redemption or
to postpone
the date
of payment upon redemption, to the extent
permitted by
Federal
securities laws, (i) for any period during
which the
Exchange is
closed (other than customary weekend and
holiday
closing) or
during which trading on the Exchange is
restricted,
(ii) for any
period during which an emergency exists as
determined
by the SEC
as a result of which disposal of securities
owned by
the Fund is
not reasonably practicable or it is not
reasonably
practicable
for the Fund fairly to determine the value of
its net
assets, or
(iii) for such other periods as the SEC may
by order
permit for
the protection of the Fund's shareholders.
Under unusual circumstances, when the
Board of
Trustees
deems it in the best interest of the Fund's
shareholders, the
Fund may pay for shares repurchased or
redeemed, in
whole or in
part, in securities of the Fund taken at
current value.
If any
such redemption in kind is to be made, the
Fund intends
to make
an election pursuant to Rule 18f-1 under the
1940 Act.
This will
require the Fund to redeem with cash at a
shareholder's
election
in any case where the redemption involves
less than
$250,000 (or
1% of the Fund's net asset value at the
beginning of
each 90-day
period during which such redemptions are in
effect, if
that
amount is less than $250,000). If payment is
made in
the form of
Fund securities, the redeeming shareholder
may incur
brokerage
costs in converting such securities to cash.
Subject to state law restrictions, the
Trust may
redeem
those accounts of shareholders who have
maintained an
investment
of less than $1,000 ($250 for retirement
plans) in the
Fund for a
period of more than 12 months. All accounts
below that
minimum
will be redeemed simultaneously when MIMI
deems it
advisable.
The $1,000 balance will be determined by
actual dollar
amounts
invested by the shareholder, unaffected by
market
fluctuations.
The Trust will notify any such shareholder by
certified
mail of
its intention to redeem such account, and the
shareholder shall
have 60 days from the date of such letter to
invest
such
additional sum as shall raise the value of
such account
above
that minimum. Should the shareholder fail to
forward
such sum
within 60 days of the date of the Trust's
letter of
notification,
the Trust will redeem the shares held in such
account
and
transmit the proceeds thereof to the
shareholder.
However, those
shareholders who are investing pursuant to
the
Automatic
Investment Method or Group Systematic
Investment
Program will not
be redeemed automatically unless they have
ceased
making payments
pursuant to the plan for a period of at least
six
consecutive
months, and these shareholders will be given
six
months' notice
by the Trust before such redemption.
Shareholders in a
qualified
retirement, pension or profit sharing plan
who wish to
avoid tax
consequences would have to "rollover" any sum
so
redeemed into
another qualified plan within 60 days. The
Trustees of
the Trust
may change the minimum account size.
If a shareholder has given authorization
for
telephonic
redemption privilege, shares can be redeemed
and
proceeds sent by
Federal wire to a single previously
designated bank
account.
Delivery of the proceeds of a wire redemption
request
of $250,000
or more may be delayed by the Fund for up to
seven days
if deemed
appropriate under then-current market
conditions. The
Trust
reserves the right to change this minimum or
to
terminate the
telephonic redemption privilege without prior
notice.
The Trust
cannot be responsible for the efficiency of
the Federal
wire
system of the shareholder's dealer of record
or bank.
The
shareholder is responsible for any charges by
the
shareholder's
bank.
The Fund employs reasonable procedures
that
require personal
identification prior to acting on redemption
or
exchange
instructions communicated by telephone to
confirm that
such
instructions are genuine. In the absence of
such
procedures, the
Fund may be liable for any losses due to
unauthorized
or
fraudulent telephone instructions.
TAXATION
The following is a general discussion of
certain
tax rules
thought to be applicable with respect to the
Fund. It
is merely
a summary and is not an exhaustive discussion
of all
possible
situations or of all potentially applicable
taxes.
Accordingly,
shareholders and prospective shareholders
should
consult a
competent tax advisor about the tax
consequences to
them of
investing in the Fund.
GENERAL. The Fund intends to be taxed
as a
regulated
investment company under Subchapter M of the
Code.
Accordingly,
the Fund must, among other things, (a) derive
in each
taxable
year at least 90% of its gross income from
dividends,
interest,
payments with respect to certain securities
loans, and
gains from
the sale or other disposition of stock,
securities or
foreign
currencies, or other income derived with
respect to its
business
of investing in such stock, securities or
currencies;
(b) derive
in each taxable year less than 30% of its
gross income
from the
sale or other disposition of certain assets
held less
than three
months, namely: (i) stock or securities;
(ii) options,
futures,
or forward contracts (other than those on
foreign
currencies); or
(iii) foreign currencies (or options,
futures, or
forward
contracts on foreign currencies) that are not
directly
related to
the Fund's principal business of investing in
stock or
securities
(or options and futures with respect to stock
or
securities) (the
"30% Limitation"); and (c) diversify its
holdings so
that, at the
end of each fiscal quarter, (i) at least 50%
of the
market value
of the Fund's assets is represented by cash,
U.S.
Government
securities, the securities of other regulated
investment
companies and other securities, with such
other
securities
limited, in respect of any one issuer, to an
amount not
greater
than 5% of the value of the Fund's total
assets and 10%
of the
outstanding voting securities of such issuer,
and (ii)
not more
than 25% of the value of its total assets is
invested
in the
securities of any one issuer (other than U.S.
Government
securities and the securities of other
regulated
investment
companies).
As a regulated investment company, the
Fund
generally will
not be subject to U.S. Federal income tax on
its income
and gains
that it distributes to shareholders, if at
least 90% of
its
investment company taxable income (which
includes,
among other
items, dividends, interest and the excess of
any
short-term
capital gains over long-term capital losses)
for the
taxable year
is distributed. The Fund intends to
distribute all
such income.
Amounts not distributed on a timely
basis in
accordance with
a calendar year distribution requirement are
subject to
a
nondeductible 4% excise tax at the Fund
level. To
avoid the tax,
the Fund must distribute during each calendar
year (1)
at least
98% of its ordinary income (not taking into
account any
capital
gains or losses) for the calendar year, (2)
at least
98% of its
capital gains in excess of its capital losses
(adjusted
for
certain ordinary losses) for the calendar
year, and (3)
all
ordinary income and capital gains for
previous years
that were
not distributed during such years. To avoid
application of the
excise tax, the Fund intends to make
distributions in
accordance
with the calendar year distribution
requirements. A
distribution
will be treated as paid on December 31 of the
current
calendar
year if it is declared by the Fund in
October, November
or
December of the year with a record date in
such a month
and paid
by the Fund during January of the following
year. Such
distributions will be taxable to shareholders
in the
calendar
year the distributions are declared, rather
than the
calendar
year in which the distributions are received.
DEBT SECURITIES ACQUIRED AT A DISCOUNT.
Some of
the debt
securities (with a fixed maturity date of
more than one
year from
the date of issuance) that may be acquired by
the Fund
may be
treated as debt securities that are issued
originally
at a
discount. Generally, the amount of the
original issue
discount
("OID") is treated as interest income and is
included
in income
over the term of the debt security, even
though payment
of that
amount is not received until a later time,
usually when
the debt
security matures.
Some of the debt securities (with a
fixed maturity
date of
more than one year from the date of issuance)
that may
be
acquired by the Fund in the secondary market
may be
treated as
having market discount. Generally, gain
recognized on
the
disposition of, and any partial payment of
principal
on, a debt
security having market discount is treated as
ordinary
income to
the extent the gain, or principal payment,
does not
exceed the
"accrued market discount" on such debt
security. In
addition,
the deduction of any interest expenses
attributable to
debt
securities having market discount may be
deferred.
Market
discount generally accrues in equal daily
installments.
The Fund
may make one or more of the elections
applicable to
debt
securities having market discount, which
could affect
the
character and timing of recognition of
income.
Some debt securities (with a fixed
maturity date
of one year
or less from the date of issuance) that may
be acquired
by the
Fund may be treated as having acquisition
discount, or
OID in the
case of certain types of debt securities.
Generally,
the Fund
will be required to include the acquisition
discount,
or OID, in
income over the term of the debt security,
even though
payment of
that amount is not received until a later
time, usually
when the
debt security matures. The Fund may make one
or more
of the
elections applicable to debt securities
having
acquisition
discount, or OID, which could affect the
character and
timing of
recognition of income.
The Fund generally will be required to
distribute
dividends
to shareholders representing discount on debt
securities that is
currently includible in income, even though
cash
representing
such income may not have been received by the
Fund.
Cash to pay
such dividends may be obtained from sales
proceeds of
securities
held by the Fund.
DISTRIBUTIONS. Distributions of
investment
company taxable
income are taxable to a U.S. shareholder as
ordinary
income,
whether paid in cash or shares. Dividends
paid by the
Fund to a
corporate shareholder, to the extent such
dividends are
attributable to dividends received from U.S.
corporations by the
Fund, may qualify for the dividends received
deduction.
However,
the revised alternative minimum tax
applicable to
corporations
may reduce the value of the dividends
received
deduction.
Distributions of net capital gains (the
excess of net
long-term
capital gains over net short-term capital
losses), if
any,
designated by the Fund as capital gain
dividends, are
taxable as
long-term capital gains, whether paid in cash
or in
shares,
regardless of how long the shareholder has
held the
Fund's shares
and are not eligible for the dividends
received
deduction.
Shareholders receiving distributions in the
form of
newly issued
shares will have a cost basis in each share
received
equal to the
net asset value of a share of the Fund on the
reinvestment date.
Shareholders will be notified annually as to
the U.S.
Federal tax
status of distributions and shareholders
receiving
distributions
in the form of newly issued shares will
receive a
report as to
the net asset value of the shares received.
If the net asset value of shares is
reduced below
a
shareholder's cost as a result of a
distribution by the
Fund,
such distribution generally will be taxable
even though
it
represents a return of invested capital.
Investors
should be
careful to consider the tax implications of
buying
shares just
prior to a distribution. The price of shares
purchased
at this
time may reflect the amount of the
forthcoming
distribution.
Those purchasing just prior to a distribution
will
receive a
distribution which generally will be taxable
to them.
DISPOSITION OF SHARES. Upon a
redemption, sale or
exchange
of his or her shares, a shareholder generally
will
realize a
taxable gain or loss depending upon his or
her basis in
the
shares. Such gain or loss will be treated as
capital
gain or
loss if the shares are capital assets in the
shareholder's hands
and generally will be long-term or
short-term,
depending upon the
shareholder's holding period for the shares.
Any loss
realized
on a redemption, sale or exchange will be
disallowed to
the
extent the shares disposed of are replaced
(including
through
reinvestment of dividends) within a period of
61 days
beginning
30 days before and ending 30 days after the
shares are
disposed
of. In such a case, the basis of the shares
acquired
will be
adjusted to reflect the disallowed loss. Any
loss
realized by a
shareholder on the sale of Fund shares held
by the
shareholder
for six months or less will be treated for
tax purposes
as a
long-term capital loss to the extent of any
distributions of
capital gain dividends received or treated as
having
been
received by the shareholder with respect to
such
shares.
In some cases, shareholders will not be
permitted
to take
all or a portion of their sales loads into
account for
purposes
of determining the amount of gain or loss
realized on
the
disposition of their shares. This
prohibition
generally applies
where (1) the shareholder incurs a sales load
in
acquiring the
shares of a Fund, (2) the shares are disposed
of before
the 91st
day after the date on which they were
acquired, and (3)
the
shareholder subsequently acquires shares in
the same
Fund or
another regulated investment company and the
otherwise
applicable
sales charge is reduced under a "reinvestment
right"
received
upon the initial purchase of Fund shares.
The term
"reinvestment
right" means any right to acquire shares of
one or more
regulated
investment companies without the payment of a
sales
load or with
the payment of a reduced sales charge. Sales
charges
affected by
this rule are treated as if they were
incurred with
respect to
the shares acquired under the reinvestment
right. This
provision
may be applied to successive acquisitions of
fund
shares.
BACKUP WITHHOLDING. The Fund will be
required to
report to
the Internal Revenue Service (the "IRS") all
distributions and,
in certain circumstances, gross proceeds from
the
redemption of
the Fund's shares, except in the case of
certain exempt
shareholders. All such distributions and
proceeds will
be
subject to withholding of Federal income tax
at a rate
of 31%
("backup withholding") in the case of
non-exempt
shareholders if
(1) the shareholder fails to furnish the Fund
with and
to certify
the shareholder's correct taxpayer
identification
number or
social security number, (2) the IRS notifies
the
shareholder or
the Fund that the shareholder has failed to
report
properly
certain interest and dividend income to the
IRS and to
respond to
notices to that effect, or (3) when required
to do so,
the
shareholder fails to certify that he or she
is not
subject to
backup withholding. If the withholding
provisions are
applicable, any such distributions or
proceeds, whether
reinvested in additional shares or taken in
cash, will
be reduced
by the amounts required to be withheld.
OTHER INFORMATION. Distributions may
also be
subject to
additional state, local and foreign taxes
depending on
each
shareholder's particular situation. Non-U.S.
shareholders may be
subject to U.S. tax rules that differ
significantly
from those
summarized above. This discussion does not
purport to
deal with
all of the tax consequences applicable to the
Fund or
its
shareholders. Shareholders are advised to
consult
their own tax
advisers with respect to the particular tax
consequences to them
of an investment in the Fund.
CALCULATION OF YIELD
The Fund's yield quotations as they may
appear in
the
Prospectus, this SAI, advertising or sales
literature
are
calculated by standard methods prescribed by
the SEC.
STANDARDIZED YIELD QUOTATIONS. The
Fund's current
yield
quotation is computed by determining the net
change,
exclusive of
capital changes (i.e., realized gains and
losses from
the sale of
securities and unrealized appreciation and
depreciation), in the
value of a hypothetical pre-existing account
having a
balance of
one share at the beginning of the base
period,
subtracting a
hypothetical charge reflecting expense
deductions from
the
hypothetical account, and dividing the
difference by
the value of
the account at the beginning of the base
period to
obtain the
base period return. This base period return
is then
multiplied
by 365/7 with the resulting yield figure
carried to the
nearest
100th of 1%. The determination of net change
in
account value
reflects the value of additional shares
purchased with
dividends
from the original share, dividends declared
on both the
original
share and any such additional shares, and all
fees,
other than
non-recurring account or sales charges, that
are
charged to all
shareholder accounts in the Fund in
proportion to the
length of
the base period. For any account fees that
vary with
the size of
the account in the Fund, the account fee used
for
purposes of the
yield computation is assumed to be the fee
that would
be charged
to the mean account size of the Fund. The
distribution
rate will
differ from the current yield computation
because it
may include
distributions to shareholders from sources
other than
dividends
and interest, short-term capital gains and
net
equalization
credits.
The Fund's current yield for the
seven-day period
ended
December 31, 1995 was 4.74%. IMI currently
reimburses
the Fund
to limit ordinary operating expenses to 0.85%
of
average net
assets. Without reimbursement, the Fund's
current
yield for this
period would have been 3.65%.
OTHER QUOTATIONS, COMPARISONS AND
GENERAL
INFORMATION. The
foregoing computation methods are prescribed
for
advertising and
other communications subject to SEC Rule 482.
Communications not
subject to this rule may contain a number of
different
measures
of performance, computation methods and
assumptions,
including
but not limited to: historical total
returns; results
of actual
or hypothetical investments; changes in
dividends,
distributions
or share values; or any graphic illustration
of such
data. These
data may cover any period of the Trust's
existence and
may or may
not include the impact of sales charges,
taxes or other
factors.
Performance quotations for the Fund will
vary from
time to
time depending on market conditions, the
composition of
the
Fund's portfolio and operating expenses of
the Fund.
The
voluntary expense reimbursement by IMI with
respect to
the Fund
has the effect of increasing yields of the
Fund. These
factors
and possible differences in the methods used
in
calculating
yields should be considered when comparing
performance
information regarding the Fund to information
published
for other
investment companies and other investment
vehicles.
Yields
should also be considered relative to changes
in the
value of the
Fund's shares and the risk associated with
the Fund's
investment
objective and policies. At any time in the
future,
yields may be
higher or lower than past yields and there
can be no
assurance
that any historical yield quotation will
continue in
the future.
The Fund may also cite endorsements or
use for
comparison
its performance rankings and listings
reported in such
newspapers
or business or consumer publications as,
among others:
AAII
Journal, Barron's, Boston Business Journal,
Boston
Globe, Boston
Herald, Business Week, Consumer's Digest,
Consumer
Guide
Publications, Changing Times, Financial
Planning,
Financial
World, Forbes, Fortune, Growth Fund Guide,
Houston
Post,
Institutional Investor, International Fund
Monitor,
Investor's
Daily, Los Angeles Times, Medical Economics,
Miami
Herald, Money
Mutual Fund Forecaster, Mutual Fund Letter,
Mutual Fund
Source
Book, Mutual Fund Values, National
Underwriter Nelson's
Director
of Investment Managers, New York Times,
Newsweek, No
Load Fund
Investor, No Load Fund* X, Oakland Tribune,
Pension
World,
Pensions and Investment Age, Personal
Investor, Rugg
and Steele,
Time, U.S. News and World Report, USA Today,
The Wall
Street
Journal, and Washington Post.
FINANCIAL STATEMENTS
The Fund's Portfolio of Investments as
of December
31, 1995,
the Statement of Assets and Liabilities as of
December
31, 1995,
the Statement of Operations for the fiscal
year ended
December
31, 1995, the Statement of Changes in Net
Assets for
the fiscal
years ended December 31, 1994 and 1995,the
Financial
Highlights,
Notes to Financial Statements, and Report of
Independent
Accountants are included in the Fund's
December 31,
1995 Annual
Report to Shareholders, which is incorporated
by
reference into
this SAI.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S
CORPORATION
("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
CORPORATE
BOND AND
COMMERCIAL PAPER RATINGS[FN][ From
"Moody's Bond
Record,"
November 1994 Issue (Moody's Investor
Service, New
York, 1994),
and "Standard & Poor's Municipal Ratings
Handbook,"
October 1994
Issue (McGraw Hill, New York, 1994).]
Moody's:
(a) CORPORATE BONDS. Bonds rated Aaa
by Moody's
are judged
by Moody's to be of the best quality,
carrying the
smallest
degree of investment risk. Interest payments
are
protected by a
large or exceptionally stable margin and
principal is
secure.
Bonds rated Aa are judged by Moody's to be of
high
quality by all
standards. Aa bonds are rated lower than Aaa
bonds
because
margins of protection may not be as large as
those of
Aaa bonds,
or fluctuations of protective elements may be
of
greater
amplitude, or there may be other elements
present which
make the
long-term risks appear somewhat larger than
those
applicable to
Aaa securities. Bonds which are rated A by
Moody's
possess many
favorable investment attributes and are
considered as
upper
medium-grade obligations. Factors giving
security to
principal
and interest are considered adequate, but
elements may
be present
which suggest a susceptibility to impairment
sometime
in the
future.
Bonds rated Baa by Moody's are
considered
medium-grade
obligations, i.e., they are neither highly
protected
nor poorly
secured. Interest payments and principal
security
appear
adequate for the present, but certain
protective
elements may be
lacking or may be characteristically
unreliable over
any great
length of time. Such bonds lack outstanding
investment
characteristics and in fact have speculative
characteristics as
well.
(b) COMMERCIAL PAPER. The Prime rating
is the
highest
commercial paper rating assigned by Moody's.
Among the
factors
considered by Moody's in assigning ratings
are the
following:
(1) evaluation of the management of the
issuer; (2)
economic
evaluation of the issuer's industry or
industries and
an
appraisal of speculative-type risks which may
be
inherent in
certain areas; (3) evaluation of the issuer's
products
in
relation to competition and customer
acceptance; (4)
liquidity;
(5) amount and quality of long-term debt; (6)
trend of
earnings
over a period of ten years; (7) financial
strength of a
parent
company and the relationships which exist
with the
issuer; and
(8) recognition by management of obligations
which may
be present
or may arise as a result of public interest
questions
and
preparations to meet such obligations.
Issuers within
this Prime
category may be given ratings 1, 2 or 3,
depending on
the
relative strengths of these factors. The
designation
of Prime-1
indicates the highest quality repayment
capacity of the
rated
issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate
debt
rating is a
current assessment of the creditworthiness of
an
obligor with
respect to a specific obligation. The
ratings are
based on
current information furnished by the issuer
or obtained
by S&P
from other sources it considers reliable.
The ratings
described
below may be modified by the addition of a
plus or
minus sign to
show relative standing within the major
rating
categories.
Debt rated AAA by S&P is considered by
S&P to be
the highest
grade obligation. Capacity to pay interest
and repay
principal
is extremely strong. Debt rated AA is judged
by S&P to
have a
very strong capacity to pay interest and
repay
principal and
differs from the highest rated issues only in
small
degree. Debt
rated A by S&P has a strong capacity to pay
interest
and repay
principal, although it is somewhat more
susceptible to
the
adverse effects of changes in circumstances
and
economic
conditions than debt in higher rated
categories.
Debt rated BBB by S&P is regarded by S&P
as having
an
adequate capacity to pay interest and repay
principal.
Although
such bonds normally exhibit adequate
protection
parameters,
adverse economic conditions or changing
circumstances
are more
likely to lead to a weakened capacity to pay
interest
and repay
principal than debt in higher rated
categories.
(b) COMMERCIAL PAPER. An S&P
commercial paper
rating is a
current assessment of the likelihood of
timely payment
of debt
having an original maturity of no more than
365 days.
Commercial paper rated A by S&P has the
following
characteristics: (i) liquidity ratios are
adequate to
meet cash
requirements; (ii) long-term senior debt
rating should
be A or
better, although in some cases BBB credits
may be
allowed if
other factors outweigh the BBB; (iii) the
issuer should
have
access to at least one additional channel of
borrowing;
(iv)
basic earnings and cash flow should have an
upward
trend with
allowances made for unusual circumstances;
and (v)
typically the
issuer's industry should be well established
and the
issuer
should have a strong position within its
industry and
the
reliability and quality of management should
be
unquestioned.
Issues rated A are further referred to by use
of
numbers 1, 2 and
3 to denote relative strength within this
highest
classification.
For example, the A-1 designation indicates
that the
degree of
safety regarding timely payment of debt is
strong.
Issues rated B are regarded as having
only
speculative
capacity for timely payment. The C rating is
assigned
to short-
term debt obligations with a doubtful
capacity for
payment.
IVY SHORT-TERM BOND FUND
a series of
IVY FUND
Via Mizner Financial Plaza,
Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL
INFORMATION
April 30, 1996
_________________________________________________________________
Ivy Fund (the "Trust") is a diversified,
open-end
management
investment company that currently consists of
thirteen
fully
managed portfolios. This Statement of
Additional
Information
("SAI") describes one of the portfolios, Ivy
Short-Term
Bond Fund
(the "Fund"). The other twelve portfolios of
the Trust
are
described in separate Statements of
Additional
Information.
This SAI is not a prospectus and should
be read in
conjunction with the prospectus for the Fund
dated
April 30, 1996
(the "Prospectus"), which may be obtained
upon request
and
without charge from the Trust at the
Distributor's
address and
telephone number listed below.
INVESTMENT MANAGER
Ivy Management, Inc.
("IMI")
Via Mizner Financial Plaza,
Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800)
777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors,
Inc.
Via Mizner Financial Plaza,
Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800)
456-5111
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES . . . . .
. . . . .
. . . 4
COMMERCIAL PAPER . . . . . . . . . . . .
. . . . .
. . . 4
BANKING INDUSTRY AND SAVINGS AND LOAN
OBLIGATIONS
. . . 4
REPURCHASE AGREEMENTS . . . . . . . . .
. . . . .
. . . 4
FIRM COMMITMENT AGREEMENTS AND
WHEN-ISSUED
SECURITIES . 5
U.S. GOVERNMENT SECURITIES . . . . . . .
. . . . .
. . . 5
MORTGAGE-RELATED SECURITIES . . . . . .
. . . . .
. . . 7
ADJUSTABLE RATE MORTGAGE
SECURITIES: . . . .
. . . 8
COLLATERALIZED MORTGAGE OBLIGATIONS
("CMOS")
. . . 9
CAPS AND FLOORS . . . . . . . . . .
. . . . .
. . . 10
LOANS OF PORTFOLIO SECURITIES . . . . .
. . . . .
. . . 10
BORROWING . . . . . . . . . . . . . . .
. . . . .
. . . 10
RESTRICTED AND ILLIQUID SECURITIES . . .
. . . . .
. . . 11
AMERICAN DEPOSITORY RECEIPTS (ADRS) . .
. . . . .
. . . 11
FOREIGN SECURITIES . . . . . . . . . . .
. . . . .
. . . 11
INVESTING IN EMERGING MARKETS . . . . . . . .
. . . . .
. . . 12
FORWARD FOREIGN CURRENCY CONTRACTS . . .
. . . . .
. . . 14
ADJUSTABLE RATE PREFERRED STOCKS . . . .
. . . . .
. . . 15
INVESTMENT GRADE DEBT SECURITIES . . . .
. . . . .
. . . 15
HIGH YIELD BONDS . . . . . . . . . . . .
. . . . .
. . . 15
ZERO COUPON BONDS . . . . . . . . . . .
. . . . .
. . . 16
OPTIONS TRANSACTIONS, FUTURES CONTRACTS
AND
OPTIONS ON
FUTURES CONTRACTS . . . . . . . . .
. . . . .
. . . 17
OPTIONS TRANSACTIONS . . . . . . .
. . . . .
. . . 17
GENERAL . . . . . . . . . . .
. . . . .
. . . 17
WRITING CALL OPTIONS ON
INDIVIDUAL
SECURITIES . . . . . . .
. . . . .
. . . 19
RISKS OF OPTIONS TRANSACTIONS
. . . . .
. . . 19
FUTURES CONTRACTS AND OPTIONS ON
FUTURES
CONTRACTS . . . . . . . . . .
. . . . .
. . . 20
GENERAL . . . . . . . . . . .
. . . . .
. . . 20
INTEREST RATE FUTURES
CONTRACTS . . . .
. . . 22
OPTIONS ON INTEREST RATE
FUTURES
CONTRACTS . . 23
FOREIGN CURRENCY FUTURES
CONTRACTS AND
RELATED OPTIONS . . . . .
. . . . .
. . . 23
RISKS ASSOCIATED WITH FUTURES
AND
RELATED
OPTIONS . . . . . . . . .
. . . . .
. . . 24
COMBINED TRANSACTIONS . . . . . . .
. . . . .
. . . 25
INVESTMENT RESTRICTIONS . . . . . . . . . . .
. . . . .
. . . 26
ADDITIONAL RESTRICTIONS . . . . . . . . . . .
. . . . .
. . . 27
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . .
. . . . .
. . . 28
AUTOMATIC INVESTMENT METHOD . . . . . .
. . . . .
. . . 29
EXCHANGE OF SHARES . . . . . . . . . . .
. . . . .
. . . 29
CLASS A . . . . . . . . . . . . . .
. . . . .
. . . 29
CLASS B . . . . . . . . . . . . . .
. . . . .
. . . 30
CLASS I . . . . . . . . . . . . . .
. . . . .
. . . 32
LETTER OF INTENT . . . . . . . . . . . .
. . . . .
. . . 32
RETIREMENT PLANS . . . . . . . . . . . .
. . . . .
. . . 33
INDIVIDUAL RETIREMENT ACCOUNTS . .
. . . . .
. . . 34
QUALIFIED PLANS . . . . . . . . . .
. . . . .
. . . 35
DEFERRED COMPENSATION FOR PUBLIC
SCHOOLS AND
CHARITABLE ORGANIZATIONS
("403(B)(7)
ACCOUNT") . . . . . . . . . .
. . . . .
. . . 36
SIMPLIFIED EMPLOYEE PENSION ("SEP")
IRAS . .
. . . 37
REINVESTMENT PRIVILEGE . . . . . . . . .
. . . . .
. . . 37
RIGHTS OF ACCUMULATION . . . . . . . . .
. . . . .
. . . 37
SYSTEMATIC WITHDRAWAL PLAN . . . . . . .
. . . . .
. . . 38
BROKERAGE ALLOCATION . . . . . . . . . . . .
. . . . .
. . . 39
TRUSTEES AND OFFICERS . . . . . . . . . . . .
. . . . .
. . . 41
PERSONAL INVESTMENTS BY EMPLOYEES OF THE
ADVISER . . .
. . . 45
COMPENSATION TABLE . . . . . . . . . . . . .
. . . . .
. . . 46
INVESTMENT ADVISORY AND OTHER SERVICES . . .
. . . . .
. . . 48
BUSINESS MANAGEMENT AND INVESTMENT
ADVISORY
SERVICES . . 48
DISTRIBUTION SERVICES . . . . . . . . .
. . . . .
. . . 50
CUSTODIAN . . . . . . . . . . . . . . .
. . . . .
. . . 54
FUND ACCOUNTING SERVICES . . . . . . . .
. . . . .
. . . 54
TRANSFER AGENT AND DIVIDEND PAYING AGENT
. . . . .
. . . 54
ADMINISTRATOR . . . . . . . . . . . . .
. . . . .
. . . 55
AUDITORS . . . . . . . . . . . . . . . .
. . . . .
. . . 55
CAPITALIZATION AND VOTING RIGHTS . . . . . .
. . . . .
. . . 55
NET ASSET VALUE . . . . . . . . . . . . . . .
. . . . .
. . . 58
PORTFOLIO TURNOVER . . . . . . . . . . . . .
. . . . .
. . . 60
REDEMPTIONS . . . . . . . . . . . . . . . . .
. . . . .
. . . 60
TAXATION . . . . . . . . . . . . . . . . . .
. . . . .
. . . 62
DISTRIBUTIONS . . . . . . . . . . . . .
. . . . .
. . . 63
DISPOSITION OF SHARES . . . . . . . . .
. . . . .
. . . 64
DEBT SECURITIES ACQUIRED AT A DISCOUNT .
. . . . .
. . . 64
OPTIONS AND HEDGING TRANSACTIONS . . . .
. . . . .
. . . 65
CURRENCY FLUCTUATIONS - "SECTION 988"
GAINS OR
LOSSES . 67
FOREIGN WITHHOLDING TAXES . . . . . . .
. . . . .
. . . 67
INVESTMENT IN PASSIVE FOREIGN INVESTMENT
COMPANIES
. . . 67
BACKUP WITHHOLDING . . . . . . . . . . .
. . . . .
. . . 68
PERFORMANCE INFORMATION . . . . . . . . . . .
. . . . .
. . . 69
YIELD . . . . . . . . . . . . . . . . .
. . . . .
. . . 69
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS .
. . . . .
. . . 70
CUMULATIVE TOTAL RETURN . . . . . . . .
. . . . .
. . . 73
OTHER QUOTATIONS, COMPARISONS AND
GENERAL
INFORMATION . 74
FINANCIAL STATEMENTS . . . . . . . . . . . .
. . . . .
. . . 75
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S
CORPORATION
("S&P") AND
MOODY'S INVESTORS SERVICE, INC.
("MOODY'S")
CORPORATE BOND
AND COMMERCIAL PAPER
RATINGS . . . .
. . . 76
INVESTMENT OBJECTIVES AND
POLICIES
The Fund's investment objectives and
general
investment
policies are described in the Fund's
Prospectus.
Additional
information concerning the characteristics of
the
Fund's
investments is set forth below.
COMMERCIAL PAPER
Commercial paper represents short-term
unsecured
promissory
notes issued in bearer form by bank holding
companies,
corporations and finance companies. The Fund
may
invest in
commercial paper that, at the date of
investment, is
rated A-1 by
Standard & Poor's Corporation ("S&P") or
Prime-1 by
Moody's
Investors Service, Inc. ("Moody's") or, if
not rated by
Moody's
or S&P, issued by companies having an
outstanding debt
issue
rated AAA or AA by S&P or Aaa or Aa by
Moody's.
BANKING INDUSTRY AND SAVINGS AND LOAN
OBLIGATIONS
Certificates of deposit are negotiable
certificates issued
against funds deposited in a commercial bank
(or a
savings and
loan institution) for a definite period of
time and
earning a
specified return. Time deposits are
generally similar
to
certificates of deposits, but are
uncertificated.
Bankers'
acceptances are negotiable drafts or bills of
exchange,
normally
drawn by an importer or exporter to pay for
specific
merchandise,
which are "accepted" by a bank, meaning, in
effect,
that the bank
unconditionally agrees to pay the face value
of the
instrument on
maturity. The Fund may invest in
certificates of
deposit, time
deposits and bankers' acceptances subject to
the
requirements set
forth in the Fund's Prospectus.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase
agreements.
Repurchase
agreements are contracts under which the Fund
buys a
money market
instrument and obtains a simultaneous
commitment from
the seller
to repurchase the instrument at a specified
time and at
an
agreed-upon yield. The Fund may not enter
into a
repurchase
agreement with more than seven days to
maturity if, as
a result,
more than 10% of the Fund's net assets would
be
invested in
illiquid securities, including such
repurchase
agreements. Under
guidelines approved by the Trust's Board of
Trustees,
the Fund is
permitted to enter into repurchase agreements
only if
the
repurchase agreements are at least fully
collateralized
with U.S.
Government securities or other securities
that Ivy
Management,
Inc., the Fund's investment adviser ("IMI")
has
approved for use
as collateral for repurchase agreements and
the
collateral must
be marked to market daily. The Fund will
enter into
repurchase
agreements only with banks and broker-dealers
deemed to
be
creditworthy by IMI under guidelines approved
by the
Board of
Trustees. In the unlikely event of failure
of the
executing bank
or broker-dealer, the Fund could experience
some delay
in
obtaining direct ownership of the underlying
collateral
and might
incur a loss if the value of the security
should
decline, as well
as costs in disposing of the security.
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED
SECURITIES
The Fund may purchase securities on a
firm
commitment or
when-issued basis. New issues of certain
debt
securities are
often offered on a when-issued basis; that
is, the
payment
obligation and the interest rate are fixed at
the time
the buyer
enters into the commitment, but delivery and
payment
for the
securities normally take place after the date
of the
commitment
to purchase. Firm commitment agreements call
for the
purchase of
securities at an agreed-upon price on a
specified
future date.
The transactions are entered into in order to
secure
what is
considered to be an advantageous price and
yield to the
Fund and
not for purposes of leveraging the Fund's
assets. The
Fund will
maintain in a segregated account with its
custodian
liquid
assets, such as cash, U.S. Government
securities, or
other
appropriate high grade debt obligations equal
(on a
daily marked-
to-market basis) to the amount of its
commitment to
purchase the
securities on a when-issued or firm
commitment basis.
Securities purchased on a when-issued
basis and
the
securities held in the Fund's portfolio are
subject to
changes in
market value based upon various factors
including
changes in the
level of market interest rates. Generally,
the value
of such
securities will fluctuate inversely to
changes in
interest rates,
I.E., they will appreciate in value when
market
interest rates
decline and decrease in value when market
interest
rates rise.
For this reason, placing securities rather
than cash in
the
segregated account may have a leveraging
effect on the
Fund's net
assets. That is, to the extent that the Fund
remains
substantially fully invested in securities at
the same
time that
it has committed to purchase securities on a
when-issued basis,
there will be greater fluctuations in its net
assets
than if it
had set aside cash to satisfy its purchase
commitment.
Upon the settlement date of the
when-issued
securities, the
Fund ordinarily will meet its obligation to
purchase
the
securities from available cash flow, use of
the cash
(or
liquidation of securities) held in the
segregated
account or sale
of other securities. Although it would not
normally
expect to do
so, the Fund also may meet its obligation
from the sale
of the
when-issued securities themselves (which may
have a
current
market value greater or less than the Fund's
payment
obligation).
The sale of securities to meet such
obligations carries
with it a
greater potential for the realization of
capital gains.
U.S. GOVERNMENT SECURITIES
The Fund may invest in U.S. government
securities.
U.S.
government securities are obligations of, or
guaranteed
by, the
U.S. government, its agencies or
instrumentalities.
Securities
guaranteed by the U.S. government include:
(1) direct
obligations of the U.S. Treasury (such as
Treasury
bills, notes,
and bonds), and (2) federal agency
obligations
guaranteed as to
principal and interest by the U.S. Treasury
(such as
GNMA
certificates, as described below). In these
securities, the
payment of principal and interest is
unconditionally
guaranteed
by the U.S. government, and thus they are of
the
highest possible
credit quality. Such securities are subject
to
variations in
market value due to fluctuations in interest
rates,
but, if held
to maturity, will be paid in full.
Mortgage-backed securities are
securities
representing part
ownership of a pool of mortgage loans. For
example,
GNMA
certificates are such securities in which the
timely
payment of
principal and interest is guaranteed by the
full faith
and credit
of the U.S. government. Although the
mortgage loans in
the pool
will have maturities of up to 30 years, the
actual
average life
of the GNMA certificates typically will be
substantially less
because the mortgages will be subject to
normal
principal
amortization and may be prepaid prior to
maturity.
Prepayment
rates vary widely and may be affected by
changes in
market
interest rates. In periods of falling
interest rates,
the rate
of prepayment tends to increase, thereby
shortening the
actual
average life of the GNMA certificates.
Conversely,
when interest
rates are rising, the rate of prepayments
tends to
decrease,
thereby lengthening the actual average life
of the GNMA
certificates. Accordingly, it is not
possible to
predict
accurately the average life of a particular
pool.
Reinvestment
of prepayments may occur at higher or lower
rates than
the
original yield on the certificates. Due to
the
prepayment
feature and the need to reinvest prepayments
of
principal at
current rates, GNMA certificates can be less
effective
than
typical bonds of similar maturities at
"locking in"
yields during
periods of declining interest rates. GNMA
certificates
may
appreciate or decline in market value during
periods of
declining
or rising interest rates, respectively.
The Fund may invest in securities issued
by U.S.
government
instrumentalities and certain federal
agencies that are
neither
direct obligations of nor guaranteed by the
U.S.
Treasury.
However, they involve federal sponsorship in
one way or
another,
some are backed by specific types of
collateral; some
are
supported by the issuer's right to borrow
from the
Treasury; some
are supported by the discretionary authority
of the
Treasury to
purchase certain obligations of the issuer;
others are
supported
only by the credit of the issuing government
agency or
instrumentality. These agencies and
instrumentalities
include,
but are not limited to, Federal Land Banks,
Farmers
Home
Administration, Bank for Cooperatives
(including
Central Bank for
Cooperatives), Federal Intermediate Credit
Banks,
Federal Home
Loan Banks, Federal National Mortgage
Association,
Student Loan
Marketing Association, Tennessee Valley
Authority,
Export-Import
Bank of the United States, Commodity Credit
Corporation, Federal
Financing Bank, Federal Home Loan Mortgage
Corporation,
Small
Business Administration and National Credit
Union
Administration.
MORTGAGE-RELATED SECURITIES
The Fund may invest in mortgage-related
securities. A
mortgage-related security is an interest in a
pool of
mortgage
loans. Most mortgage-related securities are
pass-through
securities, which means that they provide
investors
with payments
consisting of both principal and interest as
mortgages
in the
underlying mortgage pool are paid off by the
borrowers.
The
dominant issuers or guarantors of
mortgage-related
securities
today are the Government National Mortgage
Association
("GNMA"),
the Federal National Mortgage Association
("FNMA"), and
the
Federal Home Loan Mortgage Corporation
("FHLMC"). GNMA
creates
mortgage securities from pools of
Government-guaranteed
or
insured (Federal Housing Authority or
Veterans
Administration)
mortgages originated by mortgage bankers,
commercial
banks, and
savings and loan associations. FNMA and
FHLMC issue
mortgage
securities from pools of conventional and
federal
insured and/or
guaranteed residential mortgages obtained
from various
entities,
including savings and loan associations,
savings banks,
commercial banks, credit unions and mortgage
bankers.
The mortgage-related securities either
issued or
guaranteed
by GNMA, FHLMC, or FNMA ("Certificates") are
called
pass-through
Certificates because a pro rata share of both
regular
interest
and principal payments (less GNMA's, FHLMC's
or FNMA's
fees and
any applicable loan servicing fees), as well
as
unscheduled early
prepayments on the underlying mortgage pool,
are passed
through
monthly to the holder of the Certificate
(i.e., the
Fund). The
principal and interest on GNMA securities are
guaranteed by GNMA
and backed by the full faith and credit of
the U.S.
government.
FNMA guarantees full and timely payment of
all interest
and
principal, while FHLMC guarantees timely
payment of
interest and
ultimate collection of principal. Mortgage
securities
from FNMA
and FHLMC are not backed by the full faith
and credit
of the U.S.
government, but are supported by the
discretionary
authority of
the U.S. government to purchase certain
obligations of
the
particular agency. The yields provided by
these
mortgage
securities have historically exceeded the
yields on
other types
of U.S. government securities with comparable
maturities.
However, these securities generally have the
potential
for
greater fluctuations in yield as their prices
will not
generally
fluctuate as much as more traditional
fixed-rate debt
securities.
Recently, the originators of mortgages
have been
making
mortgage loans that carry an adjustable rate
of
interest as well
as the older, more traditional fixed-rate
loans. These
adjustable rate mortgages have become an
increasingly
important
form of residential financing. Generally,
adjustable
rate
mortgages are mortgages originated by thrift
institutions that
have a specified maturity date and which
amortize
principal in
much the same way as a fixed-rate mortgage.
As a
result, in
periods of declining interest rates there is
a
reasonable
likelihood that ARMS will behave like
fixed-rate
mortgage
securities in that current levels of
prepayments of
principal on
the underlying mortgages could accelerate.
However,
one
difference between ARMS and fixed rate
mortgage
securities is
that for certain types of ARMS, the rate of
amortization of
principal, as well as interest payments, can
and does
change in
accordance with movements in a particular,
pre-specified,
published interest rate index. The amount of
interest
due to an
ARM security holder is calculated by adding a
specified
additional amount, the "margin," to the
index, subject
to
limitations or "caps" on the maximum and
minimum
interest that is
charged to the mortgage during the life of
the mortgage
or to
maximum and minimum changes to that interest
rate
during a given
period. It is these special characteristics
which are
unique to
adjustable rate mortgages that IMI believes
make them
attractive
investments in seeking to accomplish the
Fund's
objective.
ADJUSTABLE RATE MORTGAGE SECURITIES:
ARMS are
pass-through
mortgage securities which are collateralized
by
mortgages with
adjustable rather than fixed interest rates.
The ARMS
in which
the Fund invests are issued primarily by
GNMA, FNMA and
FHLMC and
are actively traded in the secondary market.
The
underlying
mortgages which collateralize ARMS issued by
GNMA are
fully
guaranteed by the Federal Housing
Administration
("FHA") or the
Veterans Administration ("VA"), while those
collateralizing ARMS
issued by FHLMC or FNMA are typically
conventional
residential
mortgages conforming to standard underwriting
size and
maturity
constraints.
Unlike fixed-rate mortgages which
generally
decline in value
during periods of rising interest rates, ARMS
allow the
Fund to
participate in increases in interest rates
through
periodic
adjustments in the coupons of the underlying
mortgages,
resulting
in both higher current yields and lower price
fluctuations.
Furthermore, if prepayments of principal are
made on
the
underlying mortgages during periods of rising
interest
rates, the
Fund generally will be able to reinvest such
amounts in
mortgage
securities with a higher current rate of
return.
However, the
Fund will not benefit from increases in
interest rates
to the
extent that interest rates rise to the point
where they
cause the
current coupon of adjustable rate mortgages
held as
investments
to exceed the maximum allowable annual or
lifetime
reset limits
(or "cap rates") for a particular mortgage.
Also, the
Fund's net
asset value could vary to the extent that
current
yields on
mortgage securities are different than market
yields
during
interim periods between coupon reset dates.
The adjustable interest rate feature of
the
underlying
mortgages generally will act as a buffer to
reduce
sharp changes
in the Fund's net asset value in response to
normal
interest rate
fluctuations. As the interest rates on the
mortgages
underlying
the Fund's investments are reset
periodically, yields
of
portfolio securities will gradually align
themselves to
reflect
changes in market rates and should cause the
net asset
value of
the Fund to fluctuate less dramatically than
it would
if the Fund
invested in more traditional long-term,
fixed-rate debt
securities. However, during periods of
rising interest
rates,
changes in the coupon rate lag behind changes
in the
market rate
resulting in possibly a slightly lower net
asset value
until the
coupon resets to market rates. Thus,
investors could
suffer some
principal loss if they sold their shares of
the Fund
before the
interest rates on the underlying mortgages
are adjusted
to
reflect current market rates. During periods
of
extreme
fluctuations in interest rates, the Fund's
net asset
value will
fluctuate as well. Since most mortgage
securities in
the Fund's
portfolio will generally have annual reset
caps of 100
to 200
basis points, fluctuation in interest rates
above these
levels
could cause such mortgage securities to "cap
out" and
to behave
more like long-term fixed-rate debt
securities.
COLLATERALIZED MORTGAGE OBLIGATIONS
("CMOS"): The
Fund may
also invest in CMOs, which generally are
bonds issued
by single-
purpose, stand-alone finance subsidiaries or
trusts of
financial
institutions, government agencies, investment
bankers,
or other
similar institutions. CMOs purchased by the
Fund may
be:
(1) collateralized by pools of
mortgages in which
each
mortgage is guaranteed as to payment of
principal and
interest by
an agency or instrumentality of the U.S.
government;
(2) collateralized by pools of
mortgages in which
payment
of principal and interest are guaranteed by
the issuer
and the
guarantee is collateralized by U.S.
government
securities; or
(3) securities in which the proceeds of
the
issuance are
invested in mortgage securities and payment
of the
principal and
interest are supported by the credit of an
agency or
instrumentality of the U.S. government.
All CMOs purchased by the Fund will be
either
issued by a
U.S. government agency or rated AAA by S&P or
Aaa by
Moody's.
A decline in interest rates may lead to
a faster
rate of
repayment of the mortgages underlying CMO's
held by the
Fund, and
expose the Fund to a lower rate of return
upon
reinvestment. To
the extent that CMO's are held by the Fund,
the
prepayment right
of mortgagors may limit the increase in net
asset value
of the
Fund because the value of the CMO's held by
the Fund
may not
appreciate as rapidly as the price of
non-callable debt
securities.
The interest rates paid on the ARMS and
CMOs in
which the
Fund invests generally are readjusted at
intervals of
one year or
less to an increment over some predetermined
interest
rate index.
There are two main categories of indices;
those based
on U.S.
Treasury securities and those derived from a
calculated
measure
such as a cost of funds index or a moving
average of
mortgages
rates. Commonly utilized indices include the
one-year,
three-
year and five-year constant maturity Treasury
rates,
the three-
month Treasury Bill rate, the 180-day
Treasury Bill
rate, rates
on longer-term Treasury securities, the 11th
District
Federal
Home Loan Bank Cost of Funds, the National
Median Cost
of Funds,
the one-month, three-month, six-month or
one-year
London
Interbank Offered Rate (LIBOR), the prime
rate on a
specific
bank, or commercial paper rates. Some
indices, such as
the one-
year constant maturity Treasury rate, closely
mirror
changes in
market interest rate levels. Other, such as
the 11th
District
Home Loan Bank Cost of Funds index, tend to
lag behind
changes in
market rate levels and tend to be somewhat
less
volatile.
CAPS AND FLOORS: The underlying
mortgages that
collateralize the ARMS and CMOs in which the
Fund
invests will
frequently have caps and floors that limit
the maximum
amount by
which the loan rate to the residential
borrower may
change up or
down (1) per reset or adjustment interval and
(2) over
the life
of the loan. Some residential mortgage loans
restrict
periodic
adjustments by limiting changes in the
borrower's
monthly
principal and interest payments rather than
limiting
interest
rate changes. These payment caps may result
in
negative
amortization.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend its investment
securities to
brokers,
dealers and financial institutions for the
purpose of
realizing
additional income. Loans of securities by
the Fund
will be
collateralized by cash, letters of credit, or
securities issued
or guaranteed by the U.S Government or its
agencies or
instrumentalities. The collateral will equal
(on a
daily marked-
to-market basis) at least 100% of the current
market
value of the
loaned securities. The aggregate market
value of the
securities
loaned will not at any time exceed 30% of the
total
assets of the
Fund. The risks in lending portfolio
securities, as
with other
extensions of credit, consist of possible
loss of
rights in the
collateral should the borrower fail
financially. In
determining
whether to lend securities, IMI will consider
all
relevant facts
and circumstances, including the
creditworthiness of
the
borrower.
BORROWING
As a fundamental policy, the Fund may
borrow from
banks as a
temporary measure for extraordinary or
emergency
purposes. The
Fund may borrow in amounts up to 10% of its
total
assets taken at
cost or market value, whichever is lower.
All
borrowings will be
repaid before any additional investments are
made. The
Fund may
not mortgage, pledge or in any other manner
transfer
any of its
assets as security for any indebtedness.
Borrowing may
exaggerate the effect on the Fund's net asset
value of
any
increase or decrease in the value of the
Fund's
portfolio
securities. Money borrowed will be subject
to interest
costs
(which may include commitment fees and/or the
cost of
maintaining
minimum average balances).
RESTRICTED AND ILLIQUID SECURITIES
It is the Fund's policy that restricted
securities,
including restricted securities offered and
sold to
"qualified
institutional buyers" under Rule 144A under
the
Securities Act of
1933, as amended (the "1933 Act"), and any
other
illiquid
securities (including repurchase agreements
of more
than seven
days duration and other securities which are
not
readily
marketable) may not constitute, at the time
of
purchase, more
than 10% of the value of the Fund's net
assets.
Issuers of
restricted securities may not be subject to
the
disclosure and
other investor protection requirements that
would be
applicable
if their securities were publicly traded.
Restricted
securities
may be sold only in privately negotiated
transactions
or in a
public offering with respect to which a
registration
statement is
in effect under the 1933 Act. Where a
registration
statement is
required, the Fund may be required to bear
all or part
of the
registration expenses. There may be a lapse
of time
between the
Fund's decision to sell a restricted or
illiquid
security and the
point at which the Fund is permitted or able
to sell
such
security. If, during such a period, adverse
market
conditions
were to develop, the Fund might obtain a
price less
favorable
than the price that prevailed when it decided
to sell.
Since it
is not possible to predict with assurance
that the
market for
securities eligible for resale under Rule
144A will
continue to
be liquid, the Fund will carefully monitor
each of its
investments in these securities, focusing on
such
important
factors, among others, as valuation,
liquidity and
availability
of information. This investment practice
could have
the effect
of increasing the level of illiquidity in the
Fund to
the extent
that qualified institutional buyers become
for a time
uninterested in purchasing these restricted
securities.
AMERICAN DEPOSITORY RECEIPTS (ADRS)
The Fund may purchase sponsored or
unsponsored
American
Depository Receipts ("ADRs"). ADRs are
dollar-denominated
receipts issued generally by U.S. banks that
represent
the
deposit with the bank of a foreign company's
security.
ADRs are
publicly traded on exchanges or
over-the-counter
("OTC") in the
United States. Ownership of unsponsored ADRs
may not
entitle the
Fund to financial or other reports from the
issuer to
which it
might otherwise be entitled as the owner of
sponsored
ADRs.
FOREIGN SECURITIES
The Fund may invest in debt securities
of foreign
issuers,
including non-U.S. dollar-denominated debt
securities,
Eurodollar
securities and debt securities issued,
assumed or
guaranteed by
foreign governments or political subdivisions
or the
instrumentalities thereof. Investors should
consider
carefully
the substantial risks involved in investing
in
securities issued
by companies and governments of foreign
nations, which
are in
addition to the usual risks inherent in the
domestic
investments.
Although the Fund intends to invest only in
nations
that IMI
considers to have relatively stable and
friendly
governments,
there is the possibility of expropriation,
nationalization or
confiscatory taxation, taxation of income
earned in a
foreign
country and other foreign taxes, foreign
exchange
controls (which
may include suspension of the ability to
transfer
currency from a
given country), default in foreign government
securities,
political or social instability or diplomatic
developments which
could affect investments in securities of
issuers in
those
nations. In addition, in many countries
there is less
publicly
available information about issuers than is
available
in reports
about companies in the United States. For
example,
ownership of
unsponsored ADRs may not entitle the owner to
financial
or other
reports from the issuer to which it might
otherwise be
entitled
as the owner of a sponsored ADR. Moreover,
foreign
companies are
not generally subject to uniform accounting,
auditing
and
financial reporting standards, and auditing
practices
and
requirements may not be comparable to those
applicable
to U.S.
companies. In many foreign countries, there
is less
government
supervision and regulation of business and
industry
practices,
stock exchanges, brokers and listed companies
than in
the United
Sates. Foreign securities transactions may
be subject
to higher
brokerage costs than domestic securities
transactions.
The
foreign securities markets of many of the
countries in
which the
Fund may invest may also be smaller, less
liquid and
subject to
greater price volatility than those in the
United
States.
Further, the Fund may encounter difficulties
or be
unable to
pursue legal remedies and obtain judgment in
foreign
courts.
INVESTING IN EMERGING MARKETS
Investors should recognize that
investing in
certain foreign
securities involves certain special
considerations,
including
those set forth below , that are not
typically
associated with
investing in United States securities and
that may
affect the
Fund's performance favorably or unfavorably.
(See also
"Foreign
Securities" under the caption "Risk Factors
and
Investment
Techniques" in the Prospectus.)
Foreign stock markets have different
clearance and
settlement procedures and in certain markets
there have
been
times when settlements have been unable to
keep pace
with the
volume of securities transactions, making it
difficult
to conduct
such transactions. Delays in settlement
could result
in
temporary periods when assets of the Fund are
uninvested and no
return is earned thereon. The inability of
the Fund to
make
intended security purchases due to settlement
problems
could
cause the Fund to miss attractive investment
opportunities.
Further, the inability to dispose of
portfolio
securities due to
settlement problems could result either in
losses to
the Fund
because of subsequent declines in the value
of the
portfolio
security or, if the Fund has entered into a
contract to
sell the
security, in possible liability to the
purchaser.
Fixed
commissions on some foreign securities
exchanges are
generally
higher than negotiated commissions on U.S.
exchanges,
although
IMI will endeavor to achieve the most
favorable net
results on
the Fund's portfolio transactions. In
addition, the
Fund may
encounter difficulties or be unable to pursue
legal
remedies and
obtain judgment in foreign courts. It may be
more
difficult for
the Fund's agents to keep currently informed
about
corporate
actions such as stock dividends or other
matters which
may affect
the prices of portfolio securities.
Communications
between the
United States and foreign countries may be
less
reliable than
within the United States, thus increasing the
risk of
delayed
settlements of portfolio transactions or loss
of
certificates for
portfolio securities. Moreover, individual
foreign
economies may
differ favorably or unfavorably from the
United States
economy in
such respects as growth of gross national
product, rate
of
inflation, capital reinvestment, resource
self-sufficiency and
balance of payments position. IMI seeks to
mitigate
the risks to
the Fund associated with the foregoing
considerations
through
investment variation and continuous
professional
management.
Investments in companies domiciled in
developing
countries
may be subject to potentially higher risks
than
investments in
developed countries. These risks include (i)
less
social,
political and economic stability; (ii) the
small
current size of
the markets for such securities and the
currently low
or
nonexistent volume of trading, which result
in a lack
of
liquidity and in greater price volatility;
(iii)
certain national
policies which may restrict the Fund's
investment
opportunities,
including restrictions on investment in
issuers or
industries
deemed sensitive to national interests; (iv)
foreign
taxation;
(v) the absence of developed structures
governing
private or
foreign investment or allowing for judicial
redress for
injury to
private property; (vi) the absence, until
relatively
recently in
certain Eastern European countries, of a
capital market
structure
or market-oriented economy; (vii) the
possibility that
recent
favorable economic developments in Eastern
Europe may
be slowed
or reversed by unanticipated political or
social events
in such
countries; and (viii) the possibility that
currency
devaluations
could adversely affect the value of the
Fund's
investments.
Despite the dissolution of the Soviet
Union, the
Communist
Party may continue to exercise a significant
role in
certain
Eastern European countries. To the extent of
the
Communist
Party's influence, investments in such
countries will
involve
risks of nationalization, expropriation and
confiscatory
taxation. The communist governments of a
number of
Eastern
European countries expropriated large amounts
of
private property
in the past, in many cases without adequate
compensation, and
there can be no assurance that such
expropriation will
not occur
in the future. In the event of such
expropriation, the
Fund
could lose a substantial portion of any
investments it
has made
in the affected countries. Further, few (if
any)
accounting
standards exist in Eastern European
countries.
Finally, even
though certain Eastern European currencies
may be
convertible
into U.S. dollars, the conversion rates may
be
artificial in
relation to the actual market values and may
be adverse
to Fund
Shareholders.
Certain Eastern European countries that
do not
have market
economies are characterized by an absence of
developed
legal
structures governing private and foreign
investments
and private
property. In addition, certain countries
require
governmental
approval prior to investments by foreign
persons, or
limit the
amount of investment by foreign persons in a
particular
company,
or limit the investment of foreign persons to
only a
specific
class of securities of a company that may
have less
advantageous
terms than securities of the company
available for
purchase by
nationals.
Authoritarian governments in certain
Eastern
European
countries may require that a governmental or
quasi-governmental
authority act as custodian of the Fund's
assets
invested in such
country. To the extent such governmental or
quasi-governmental
authorities do not satisfy the requirements
of the
Investment
Company Act of 1940, as amended (the "1940
Act"), to
act as
foreign custodians of the Fund's cash and
securities,
the Fund's
investment in such countries may be limited
or may be
required to
be effected through intermediaries. The risk
of loss
through
governmental confiscation may be increased in
such
countries.
FORWARD FOREIGN CURRENCY CONTRACTS
The Fund may enter into forward foreign
currency
exchange
contracts in order to protect against
uncertainty in
the level of
future foreign exchange rates in the purchase
and sale
of
securities, but not for speculative purposes.
A
forward foreign
currency exchange contract involves an
obligation to
purchase or
sell a specific currency at a future date,
which may be
any fixed
number of days from the date of the contract
agreed
upon by the
parties, at a price set at the time of the
contract.
These
contracts may be bought or sold to protect
the Fund
against a
possible loss resulting from an adverse
change in the
relation-
ship between foreign currencies and the U.S.
dollar.
Although
such contracts are intended to minimize the
risk of
loss due to a
decline in the value of the hedged
currencies, at the
same time,
they tend to limit any potential gain that
might result
should
the value of such currencies increase.
The Fund will not enter into forward
contracts or
maintain a
net exposure to such contracts where the
consummation
of the
contract would obligate the Fund to deliver
an amount
of currency
in excess of the value of the Fund's
portfolio
securities or
other assets denominated in that currency.
Further,
the Fund
generally will not enter into a forward
contract with a
term of
greater than one year.
To the extent required by applicable
law, the Fund
will hold
liquid assets, such as cash, U.S. Government
securities, or other
appropriate high grade debt obligations, in a
segregated account
with its Custodian in an amount equal (on a
daily
marked-to-
market basis) to the amount of the
commitments under
these
contracts. At the maturity of a forward
contract, the
Fund may
either accept or make delivery of the
currency
specified in the
contract, or, prior to maturity, enter into a
closing
purchase
transaction involving the purchase or sale of
an
offsetting
contract. Closing purchase transactions with
respect
to forward
contracts are usually effected with the
currency trader
who is a
party to the original forward contract.
ADJUSTABLE RATE PREFERRED STOCKS
The Fund may invest in adjustable rate
preferred
stocks.
Adjustable rate preferred stocks have a
variable
dividend,
generally determined on a quarterly basis
according to
a formula
based upon a specified premium or discount to
the yield
on a
particular U.S. Treasury security rather than
a
dividend which is
set for the life of the issue. Although the
dividend
rates on
these stocks are adjusted quarterly and their
market
value should
therefore be less sensitive to interest rate
fluctuations than
are other fixed income securities and
preferred stocks,
the
market values of adjustable rate preferred
stocks have
fluctuated
and can be expected to continue to do so in
the future.
INVESTMENT GRADE DEBT SECURITIES
Bonds rated Aaa by Moody's and AAA by
S&P are
judged to be
of the best quality (i.e., capacity to pay
interest and
repay
principal is extremely strong). Bonds rated
Aa/AA are
considered
to be of high quality (i.e., capacity to pay
interest
and repay
interest is very strong and differs from the
highest
rated issues
only to a small degree). Bonds rated A are
viewed as
having many
favorable investment attributes, but elements
may be
present that
suggest a susceptibility to the adverse
effects of
changes in
circumstances and economic conditions than
debt in
higher rated
categories. Bonds rated Baa/BBB (considered
by Moody's
to be
"medium grade" obligations) are considered to
have an
adequate
capacity to pay interest and repay principal,
but
certain
protective elements may be lacking (i.e.,
such bonds
lack
outstanding investment characteristics and
have some
speculative
characteristics).
HIGH YIELD BONDS
The Fund may invest in corporate debt
securities
rated Ba or
lower by Moody's or BB or lower by S&P. The
Fund will
not,
however, invest in securities that, at the
time of
investment,
are rated lower than C by either Moody's or
S&P.
Securities
rated Ba or BB (and comparable unrated
securities),
commonly
referred to as "high yield" or "junk" bonds,
are
considered by
major credit-rating organizations to have
predominantly
speculative elements with respect to the
issuer's
continuing
ability to meet principal and interest
payments. The
lower the
ratings of corporate debt securities, the
more their
risks render
them like equity securities. See Appendix A
for a more
complete
description of the ratings assigned by
Moody's and S&P
and their
respective characteristics.
While IMI may refer to ratings issued by
established credit
rating agencies, it is not IMI's policy to
rely
exclusively on
such ratings, but rather to supplement such
ratings
with its own
independent and ongoing review of credit
quality. The
Fund's
achievement of its investment objective may,
to the
extent of its
investment in high yield bonds, be more
dependent upon
IMI's
credit analysis than would be the case if the
Fund were
investing
in higher quality bonds. Should the rating
of a
portfolio
security be downgraded, IMI will determine
whether it
is in the
Fund's best interest to retain or dispose of
the
security.
However, should any individual bond held by
the Fund be
downgraded below a rating of C, IMI currently
intends
to dispose
of such bond based on then existing market
conditions.
The secondary market on which high yield
bonds are
traded
may be less liquid than the market for higher
grade
bonds. Less
liquidity in the secondary trading market
could
adversely affect
the price at which the Fund could sell a high
yield
bond, and
could adversely affect and cause large
fluctuations in
the daily
net asset value of the Fund's shares.
Adverse
publicity and
investor perceptions, whether or not based on
fundamental
analysis, may decrease the values and
liquidity of high
yield
bonds, especially in a thinly traded market.
When
secondary
markets for high yield securities are less
liquid than
the
markets for higher grade securities, it may
be more
difficult to
value the securities because such valuation
may require
more
research, and elements of judgment may play a
greater
role in the
valuation because there is less reliable,
objective
data
available.
Furthermore, prices for high yield bonds
may be
affected by
legislative and regulatory developments. For
example,
federal
rules require savings and loan institutions
to reduce
gradually
their holdings of this type of security.
ZERO COUPON BONDS
The Fund may purchase zero coupon bonds
in
accordance with
the Fund's credit quality standards. Zero
coupon bonds
are debt
obligations issued without any requirement
for the
periodic
payment of interest. Zero coupon bonds are
issued at a
significant discount from face value. The
discount
approximates
the total amount of interest the bonds would
accrue and
compound
over the period until maturity at a rate of
interest
reflecting
the market rate at the time of issuance. If
the Fund
holds zero
coupon bonds in its portfolio, however, it
would
recognize income
currently for federal income tax purposes in
the amount
of the
unpaid, accrued interest and generally would
be
required to
distribute dividends representing such income
to
shareholders
currently, even though funds representing
such income
would not
have been received by the Fund. Cash to pay
dividends
representing unpaid, accrued interest may be
obtained
from sales
proceeds of portfolio securities and Fund
shares and
from loan
proceeds. The potential sale of portfolio
securities
to pay cash
distributions from income earned on zero
coupon bonds
may result
in the Fund being forced to sell portfolio
securities
at a time
when the Fund might otherwise choose not to
sell these
securities
and when the Fund might incur a capital loss
on such
sales.
Because interest on zero coupon obligations
is not
distributed to
the Fund on a current basis but is in effect
compounded, the
value of the securities of this type is
subject to
greater
fluctuations in response to changing interest
rates
than the
value of debt obligations which distribute
income
regularly.
OPTIONS TRANSACTIONS, FUTURES CONTRACTS AND
OPTIONS ON
FUTURES
CONTRACTS
The Fund can use various techniques to
increase or
decrease
its exposure to changing security prices,
interest
rates,
currency exchange rates, commodity prices, or
other
factors that
affect security values. These techniques may
involve
derivative
transactions such as selling call options and
purchasing put and
call options on U.S. government securities,
interest
rate
futures, foreign currency futures and foreign
currencies that are
traded on an exchange or board of trade. IMI
can use
these
practices to adjust the risk and return
characteristics
of the
Fund's portfolio of investments. If IMI
judges market
conditions
incorrectly or employs a strategy that does
not
correlate well
with the Fund's investments, these techniques
could
result in a
loss. These techniques may increase the
volatility of
the Fund
and may involve a small investment of cash
relative to
the
magnitude of the risk assumed. In addition,
these
techniques
could result in a loss if the counterparty to
the
transaction
does not perform as promised.
OPTIONS TRANSACTIONS
GENERAL. The Fund may sell (write)
exchange-listed call
options and purchase put and call options in
accordance
with its
investment objectives and policies. A call
option is a
short-
term contract (having a duration of less than
one year)
pursuant
to which the purchaser, in return for the
premium paid,
has the
right to buy the security underlying the
option at the
specified
exercise price at any time during the term of
the
option. The
writer of the call option, who receives the
premium,
has the
obligation, upon exercise of the option, to
deliver the
underlying security against payment of the
exercise
price. A put
option is a similar contract pursuant to
which the
purchaser, in
return for the premium paid, has the right to
sell the
security
underlying the option at the specified
exercise price
at any time
during the term of the option. The writer of
the put
option, who
receives the premium, has the obligation,
upon exercise
of the
option, to buy the underlying security at the
exercise
price.
The premium paid by the purchaser of an
option will
reflect,
among other things, the relationship of the
exercise
price to the
market price and volatility of the underlying
security,
the time
remaining to expiration of the option, supply
and
demand, and
interest rates.
If the writer of an option wishes to
terminate the
obligation, he or she may effect a "closing
purchase
transaction." This is accomplished by buying
an option
of the
same series as the option previously written.
The
effect of the
purchase is that the writer's position will
be
cancelled by the
Options Clearing Corporation. However, a
writer may
not effect a
closing purchase transaction after it has
been notified
of the
exercise of an option. Likewise, an investor
who is
the holder
of an option may liquidate his or her
position by
effecting a
"closing sale transaction." This is
accomplished by
selling an
option of the same series as the option
previously
purchased.
There is no guarantee that either a closing
purchase or
a closing
sale transaction can be effected. If any
call or put
is not
exercised or sold, it will become worthless
on its
expiration
date.
The Fund will realize a gain (or a loss)
on a
closing
purchase transaction with respect to a call
or a put
previously
written by the Fund if the premium, plus
commission
costs, paid
by the Fund to purchase the call or put is
less (or
greater) than
the premium, less commission costs, received
by the
Fund on the
sale of the call or the put. A gain also
will be
realized if a
call or put which the Fund has written lapses
unexercised,
because the Fund would retain the premium.
Any such
gains (or
losses) are considered short-term capital
gains (or
losses) for
federal income tax purposes. Net short-term
capital
gains, when
distributed by the Fund, are taxable as
ordinary
income. See
"Taxation."
A gain (or a loss) will be realized by
the Fund on
a closing
sale transaction with respect to a call or a
put
previously
purchased by the Fund if the premium, less
commission
costs,
received by the Fund on the sale of the call
or the put
is
greater (or less) than the premium, plus
commission
costs, paid
by the Fund to purchase the call or the put.
If a put
or a call
expires unexercised, it will become worthless
on the
expiration
date, and the Fund will realize a loss in the
amount of
the
premium paid, plus commission costs. Any
such gain or
loss will
be long-term or short-term capital gain or
loss,
depending upon
the Fund's holding period for the option.
The Fund will not purchase put or call
options if
the
aggregate premium paid for such options would
exceed
10% of its
net assets at the time of purchase.
WRITING CALL OPTIONS ON INDIVIDUAL
SECURITIES.
The Fund may
write (sell) covered call options as
described in the
Prospectus.
Covered call options provide the Fund with
additional
income on
its portfolio securities or partially protect
against
declines in
the value of those securities. A "covered"
call option
means
generally that so long as the Fund is
obligated as the
writer of
a call option, the Fund will either own the
underlying
securities
subject to the option, or hold a call at the
same
exercise price,
for the same exercise period, and on the same
securities as the
call written. Although the Fund receives
premium
income from
these activities, any appreciation realized
on an
underlying
security will be limited by the terms of the
call
option.
RISKS OF OPTIONS TRANSACTIONS. The
purchase and
writing of
options involves certain risks. During the
option
period, the
covered call writer has, in return for the
premium on
the option,
given up the opportunity to profit from a
price
increase in the
underlying securities above the exercise
price, but, as
long as
its obligation as a writer continues, has
retained the
risk of
loss should the price of the underlying
security
decline. The
writer of an option has no control over the
time when
it may be
required to fulfill its obligation as a
writer of the
option.
Once an option writer has received an
exercise notice,
it cannot
effect a closing purchase transaction in
order to
terminate its
obligation under the option and must deliver
the
underlying
securities at the exercise price. If a put
or call
option
purchased by the Fund is not sold when it has
remaining
value,
and if the market price of the underlying
security, in
the case
of a put, remains equal to or greater than
the exercise
price or,
in the case of a call, remains less than or
equal to
the exercise
price, the Fund will lose its entire
investment in the
option.
Also, where a put or call option on a
particular
security is
purchased to hedge against price movements in
a related
security,
the price of the put or call option may move
more or
less than
the price of the related security. In this
regard,
trading in
options on certain securities (such as U.S.
Government
securities) is relatively new, so that it is
impossible
to
predict to what extent liquid markets will
develop or
continue.
Furthermore, if trading restrictions or
suspensions are
imposed
on the options markets, the Fund may be
unable to close
out a
position. Finally, trading could be
interrupted, for
example,
because of supply and demand imbalances
arising from a
lack of
either buyers or sellers, or the options
exchange could
suspend
trading after the price has risen or fallen
more than
the maximum
amount specified by the exchange. Although
the Fund
may be able
to offset to some extent any adverse effects
of being
unable to
liquidate an option position, the Fund may
experience
losses in
some cases as a result of such inability.
The Fund may employ hedging strategies
with
options on
currencies before the Fund purchases a
foreign security
denominated in the hedged currency that the
Fund
anticipates
acquiring, during the period the Fund holds
the foreign
security,
or between the date the foreign security is
purchased
or sold and
the date on which payment therefor is made or
received.
Hedging
against a change in the value of a foreign
currency in
the
foregoing manner does not eliminate
fluctuations in the
prices of
portfolio securities or prevent losses if the
prices of
such
securities decline. Furthermore, such
hedging
transactions
reduce or preclude the opportunity for gain
if the
value of the
hedged currency should change relative to the
U.S.
dollar. With
respect to transactions in surrogate
currencies, there
is a risk
of loss if there is not a correlation between
the
currency in
which the hedge is desired and the surrogate
currency.
A position on an option on foreign
currencies may
be closed
out only on an exchange which provides a
secondary
market for an
option of the same series. Although the Fund
will
purchase only
exchange-traded options, there is no
assurance that a
liquid
secondary market on an exchange will exist
for any
particular
option, or at any particular time. In the
event no
liquid
secondary market exists, it might not be
possible to
effect
closing transactions in particular options.
If the
Fund cannot
close out an exchange-traded option which it
holds, it
would have
to exercise its option in order to realize
any profit
and would
incur transactional costs on the sale of the
underlying
assets.
The Fund's options activities also may
have an
impact upon
the level of its portfolio turnover and
brokerage
commissions.
See "Portfolio Turnover."
The Fund's success in using options
techniques
depends,
among other things, on IMI's ability to
predict
accurately the
direction and volatility of price movements
in the
options
markets as well as the securities markets and
on IMI's
ability to
select the proper type, time and duration of
options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS
GENERAL. The Fund may enter into
futures
contracts and
options on futures contracts. When a
purchase or sale
of a
futures contract is made by the Fund, the
Fund is
required to
deposit with its custodian (or broker, if
legally
permitted) a
specified amount of cash or U.S. Government
securities
("initial
margin"). The margin required for a futures
contract
is set by
the exchange on which the contract is traded
and may be
modified
during the term of the contract. The initial
margin is
in the
nature of a performance bond or good faith
deposit on
the futures
contract which is returned to the Fund upon
termination
of the
contract, assuming all contractual
obligations have
been
satisfied. A futures contract held by the
Fund is
valued daily
at the official settlement price of the
exchange on
which it is
traded. Each day the Fund pays or receives
cash,
called
"variation margin," equal to the daily change
in value
of the
futures contract. This process is known as
"marking
to market."
Variation margin does not represent a
borrowing or loan
by the
Fund but is instead a settlement between the
Fund and
the broker
of the amount one would owe the other if the
futures
contract
expired. In computing daily net asset value,
the Fund
will mark-
to-market its open futures position.
The Fund is also required to deposit and
maintain
margin
with respect to put and call options on
futures
contracts written
by it. Such margin deposits will vary
depending on the
nature of
the underlying futures contract (and the
related
initial margin
requirements), the current market value of
the option,
and other
futures positions held by the Fund.
Although some futures contracts call for
making or
taking
delivery of the underlying securities,
generally these
obligations are closed out prior to delivery
by
offsetting
purchases or sales of matching futures
contracts (same
exchange,
underlying security or index, and delivery
month). If
an
offsetting purchase price is less than the
original
sale price,
the Fund generally realizes a capital gain,
or if it is
more, the
Fund generally realizes a capital loss.
Conversely, if
an
offsetting sale price is more than the
original
purchase price,
the Fund generally realizes a capital gain,
or if it is
less, the
Fund generally realizes a capital loss. The
transaction costs
must also be included in these calculations.
When purchasing a futures contract, the
Fund will
maintain
with its Custodian (and mark-to-market on a
daily
basis) cash,
U.S. Government securities, or other high
grade debt
securities
that, when added to the amounts deposited
with a
futures
commission merchant ("FCM") as margin, are
equal to the
market
value of the futures contract.
Alternatively, the Fund
may
"cover" its position by purchasing a put
option on the
same
futures contract with a strike price as high
as or
higher than
the price of the contract held by the Fund.
When selling a futures contact, the Fund
will
maintain with
its custodian (and mark-to-market on a daily
basis)
liquid assets
that, when added to the amounts deposited
with an FCM
as margin,
are equal to the market value of the
instruments
underlying the
contract. Alternatively, the Fund may
"cover" its
position by
owning the instruments underlying the
contract (or, in
the case
of an index futures contract, a portfolio
with a
volatility
substantially similar to that of the index on
which the
futures
contract is based), or by holding a call
option
permitting the
Fund to purchase the same futures contract at
a price
no higher
than the price of the contract written by the
Fund (or
at a
higher price if the difference is maintained
in liquid
assets
with the Fund's custodian).
When selling a call option on a futures
contract,
the Fund
will maintain with its custodian (and
mark-to-market on
a daily
basis) cash, U.S. Government securities, or
other high
grade debt
securities that, when added to the amounts
deposited
with an FCM
as margin, equal the total market value of
the futures
contract
underlying the call option. Alternatively,
the Fund
may cover
its position by entering into a long position
in the
same futures
contract at a price no higher than the strike
price of
the call
option, by owning the instruments underlying
the
futures
contract, or by holding a separate call
option
permitting the
Fund to purchase the same futures contract at
a price
not higher
than the strike price of the call option sold
by the
Fund.
When selling a put option on a futures
contract,
the Fund
will maintain with its custodian (and
mark-to-market on
a daily
basis) cash, U.S. Government securities, or
other high
grade debt
securities that equal the purchase price of
the futures
contract
less any margin on deposit. Alternatively,
the Fund
may cover
the position either by entering into a short
position
in the same
futures contract, or by owning a separate put
option
permitting
it to sell the same futures contract so long
as the
strike price
of the purchased put option is the same or
higher than
the strike
price of the put option sold by the Fund.
The requirements for qualification as a
regulated
investment
company also may limit the extent to which
the Fund may
enter
into futures and futures options.
INTEREST RATE FUTURES CONTRACTS. The
Fund may
engage in
interest rate futures contracts transactions
for
hedging purposes
only. An interest rate futures contract is
an
agreement between
parties to buy or sell a specified debt
security at a
set price
on a future date. The financial instruments
that
underlie
interest rate futures contracts include
long-term U.S.
Treasury
bonds, U.S. Treasury notes, GNMA
certificates, and
three-month
U.S. Treasury bills. In the case of futures
contracts
traded on
U.S. exchanges, the exchange itself or an
affiliated
clearing
corporation assumes the opposite side of each
transaction (I.E.,
as buyer or seller). A futures contract may
be
satisfied or
closed out by delivery or purchase, as the
case may be,
in the
cash financial instrument or by payment of
the change
in the cash
value of the index. Frequently, using
futures to
effect a
particular strategy instead of using the
underlying or
related
security will result in lower transaction
costs being
incurred.
The Fund may sell interest rate futures
contracts
in order
to hedge its portfolio securities whose value
may be
sensitive to
changes in interest rates. In addition, the
Fund could
purchase
and sell these futures contracts in order to
hedge its
holdings
in certain common stocks (such as utilities,
banks and
savings
and loans) whose value may be sensitive to
changes in
interest
rates. The Fund could sell interest rate
futures
contracts in
anticipation of or during a market decline to
attempt
to offset
the decrease in market value of its
securities that
might
otherwise result. When the Fund is not fully
invested
in
securities, it could purchase interest rate
futures in
order to
gain rapid market exposure that may in part
or entirely
offset
increases in the cost of securities that it
intends to
purchase.
As such purchases are made, an equivalent
amount of
interest rate
futures contracts will be terminated by
offsetting
sales. In a
substantial majority of these transactions,
the Fund
would
purchase such securities upon termination of
the
futures position
whether the futures position results from the
purchase
of an
interest rate futures contract or the
purchase of a
call option
on an interest rate futures contract, but
under unusual
market
conditions, a futures position may be
terminated
without the
corresponding purchase of securities.
OPTIONS ON INTEREST RATE FUTURES
CONTRACTS. For
hedging
purposes, the Fund may also purchase and
write put and
call
options on interest rate futures contracts
which are
traded on a
U.S. exchange or board of trade and sell or
purchase
such options
to terminate an existing position. Options
on interest
rate
futures give the purchaser the right (but not
the
obligation), in
return for the premium paid, to assume a
position in an
interest
rate futures contract at a specified exercise
price at
a time
during the period of the option.
Transactions in options on interest rate
futures
would
enable the Fund to hedge against the
possibility that
fluctuations in interest rates and other
factors may
result in a
general decline in prices of debt securities
owned by
the Fund.
Assuming that any decline in the securities
being
hedged is
accomplished by a rise in interest rates, the
purchase
of put
options and sale of call options on the
futures
contracts may
generate gains which can partially offset any
decline
in the
value of the Fund's portfolio securities
which have
been hedged.
However, if after the Fund purchases or sells
an option
on a
futures contract, the value of the securities
being
hedged moves
in the opposite direction from that
contemplated, the
Fund may
experience losses in the form of premiums on
such
options which
would partially offset gains the Fund would
have.
FOREIGN CURRENCY FUTURES CONTRACTS AND
RELATED
OPTIONS. The
Fund may engage in foreign currency futures
contracts
and related
options transactions for hedging purposes. A
foreign
currency
futures contract provides for the future sale
by one
party and
purchase by another party of a specified
quantity of a
foreign
currency at a specified price and time.
An option on a foreign currency futures
contract
gives the
holder the right, in return for the premium
paid, to
assume a
long position (call) or short position (put)
in a
futures
contract at a specified exercise price at any
time
during the
period of the option. Upon the exercise of a
call
option, the
holder acquires a long position in the
futures contract
and the
writer is assigned the opposite short
position. In the
case of a
put option, the opposite is true.
The Fund may purchase call and put
options on
foreign
currencies as a hedge against changes in the
value of
the U.S.
dollar (or another currency) in relation to a
foreign
currency in
which portfolio securities of the Fund may be
denominated. A
call option on a foreign currency gives the
buyer the
right to
buy, and a put option the right to sell, a
certain
amount of
foreign currency at a specified price during
a fixed
period of
time. The Fund may invest in options on
foreign
currency which
are either listed on a domestic securities
exchange or
traded on
a recognized foreign exchange.
In those situations where foreign
currency options
may not
be readily purchased (or where such options
may be
deemed
illiquid) in the currency in which the hedge
is
desired, the
hedge may be obtained by purchasing an option
on a
"surrogate"
currency, i.e., a currency where there is
tangible
evidence of a
direct correlation in the trading value of
the two
currencies. A
surrogate currency's exchange rate movements
parallel
that of the
primary currency. Surrogate currencies are
used to
hedge an
illiquid currency risk, when no liquid hedge
instruments exist in
world currency markets for the primary
currency.
The Fund will only enter into futures
contracts
and futures
options which are standardized and traded on
a U.S. or
foreign
exchange, board of trade, or similar entity
or quoted
on an
automated quotation system. The Fund will
not enter
into a
futures contract or purchase an option
thereon if,
immediately
thereafter, the aggregate initial margin
deposits for
futures
contracts held by the Fund plus premiums paid
by it for
open
futures option positions, less the amount by
which any
such
positions are "in-the-money," would exceed 5%
of the
liquidation
value of the Fund's portfolio (or the Fund's
net asset
value),
after taking into account unrealized profits
and
unrealized
losses on any such contracts the Fund has
entered into.
A call
option is "in-the-money" if the value of the
futures
contract
that is the subject of the option exceeds the
exercise
price. A
put option is "in the money" if the exercise
price
exceeds the
value of the futures contract that is the
subject of
the option.
For additional information about margin
deposits
required with
respect to futures contracts and options
thereon, see
"Futures
Contracts and Options on Futures Contracts".
RISKS ASSOCIATED WITH FUTURES AND
RELATED OPTIONS.
There
are several risks associated with the use of
futures
contracts
and futures options as hedging techniques. A
purchase
or sale of
a futures contract may result in losses in
excess of
the amount
invested in the futures contract. There can
be no
guarantee that
there will be a correlation between price
movements in
the
hedging vehicle and in the Fund's portfolio
securities
being
hedged. In addition, there are significant
differences
between
the securities and futures markets that could
result in
an
imperfect correlation between the markets,
causing a
given hedge
not to achieve its objectives. The degree of
imperfection of
correlation depends on circumstances such as
variations
in
speculative market demand for futures and
futures
options on
securities, including technical influences in
futures
trading and
futures options, and differences between the
financial
instruments being hedged and the instruments
underlying
the
standard contracts available for trading in
such
respects as
interest rate levels, maturities, and
creditworthiness
of
issuers. A decision as to whether, when and
how to
hedge
involves the exercise of skill and judgment,
and even a
well-
conceived hedge may be unsuccessful to some
degree
because of
market behavior or unexpected interest rate
trends.
Futures exchanges may limit the amount
of
fluctuation
permitted in certain futures contract prices
during a
single
trading day. The daily limit establishes the
maximum
amount that
the price of a futures contract may vary
either up or
down from
the previous day's settlement price at the
end of the
current
trading session. Once the daily limit has
been reached
in a
futures contract subject to the limit, no
more trades
may be made
on that day at a price beyond that limit.
The daily
limit
governs only price movements during a
particular
trading day and
therefore does not limit potential losses
because the
limit may
work to prevent the liquidation of
unfavorable
positions. For
example, futures prices have occasionally
moved to the
daily
limit for several consecutive trading days
with little
or no
trading, thereby preventing prompt
liquidation of
positions and
subjecting some holders of futures contracts
to
substantial
losses.
There can be no assurance that a liquid
market
will exist at
a time when the Fund seeks to close out a
futures or a
futures
option position, and the Fund would remain
obligated to
meet
margin requirements until the position is
closed. In
addition,
there can be no assurance that an active
secondary
market will
continue to exist.
Currency futures contracts and options
thereon may
be traded
on foreign exchanges. Such transactions may
not be
regulated as
effectively as similar transactions in the
United
States; may not
involve a clearing mechanism and related
guarantees;
and are
subject to the risk of governmental actions
affecting
trading in,
or the prices of, foreign securities. The
value of
such position
also could be adversely affected by (i) other
complex
foreign
political, legal and economic factors, (ii)
lesser
availability
than in the United States of data on which to
make
trading
decisions, (iii) delays in a Fund's ability
to act upon
economic
events occurring in foreign markets during
non business
hours in
the United States, (iv) the imposition of
different
exercise and
settlement terms and procedures and margin
requirements
than in
the United States, and (v) lesser trading
volume.
COMBINED TRANSACTIONS. The Fund may
enter into
multiple
transactions, including multiple options
transactions,
multiple
futures transactions, multiple currency
transactions
(including
forward currency contracts) and multiple
interest rate
transactions and any combination of futures,
options,
currency
and interest rate transactions ("component"
transactions),
instead of a single transaction, as part of a
single or
combined
strategy when, in the opinion of IMI, it is
in the best
interests
of a Fund to do so. A combined transaction
will
usually contain
elements of risk that are present in each of
its
component
transactions. Although combined transactions
are
normally
entered into based on IMI's judgment that the
combined
strategies
will reduce risk or otherwise more
effectively achieve
the
desired portfolio management goal, it is
possible that
the
combination will instead increase such risks
or hinder
achievement of the management objective.
INVESTMENT RESTRICTIONS
The Fund's investment objectives as set
forth in
the
Prospectus under "Investment Objectives and
Policies,"
together
with the investment restrictions set forth
below, are
fundamental
policies of the Fund and may not be changed
without the
approval
of a majority of the outstanding voting
shares. Under
these
restrictions, the Fund may not:
(i) With respect to 75% of its total
assets,
purchase
the securities of any one
issuer, other
than
securities issued by the U.S.
Government
or its
agencies or instrumentalities,
if
immediately after
such purchase more than 5% of
the value of
the total
assets of the Fund would be
invested in
securities
of such issuer;
(ii) Invest in real estate, real
estate
mortgage loans,
commodities, commodity futures
contracts
or
interests in oil, gas and/or
mineral
exploration or
development programs, although
the Fund
may purchase
and sell (a) securities which
are secured
by real
estate, (b) securities of
issuers which
invest or
deal in real estate, and (c)
futures
contracts as
described in the Fund's
Prospectus;
(iii) Make investments in securities
for the
purpose of
exercising control over or
management of
the issuer;
(iv) Participate on a joint or a
joint and
several basis
in any trading account in
securities. The
"bunching" of orders of the Fund
and of
other
accounts under the investment
management
of the
Fund's Manager for the sale or
purchase of
portfolio
securities shall not be
considered
participation in
a joint securities trading
account;
(v) Purchase the securities of any
one issuer
if,
immediately after such purchase,
the Fund
would own
more than 10% of the outstanding
voting
securities
of such issuer;
(vi) Purchase securities on margin,
except such
short-
term credits as are necessary
for the
clearance of
transactions;
(vii) Make loans, except this
restriction shall
not
prohibit (a) the purchase and
holding of a
portion
of an issue of publicly
distributed debt
securities,
(b) entry into repurchase
agreements with
banks or
broker-dealers, or (c) the
lending of its
portfolio
securities in accordance with
applicable
guidelines
established by the Securities
and Exchange
Commission (the "SEC") and any
guidelines
established by the Trust's
Trustees;
(viii) Borrow amounts in excess of 10%
of its
total assets,
taken at the lower of cost or
market
value, and then
only from banks as a temporary
measure for
extraordinary or emergency
purposes. All
borrowings
will be repaid before any
additional
investments are
made;
(ix) Purchase the securities of
issuers
conducting their
principal business activities in
the same
industry
if immediately after such
purchase the
value of the
Fund's investments in such
industry would
exceed 25%
of the value of the total assets
of the
Fund;
(x) Act as an underwriter of
securities,
except to the
extent that, in connection with
the sale
of
securities, it may be deemed to
be an
underwriter
under applicable securities
laws; or
(xi) Issue senior securities, except
insofar as
the Fund
may be deemed to have issued a
senior
security in
connection with any repurchase
agreement
or any
permitted borrowing.
ADDITIONAL RESTRICTIONS
The Fund has adopted the following
additional
restrictions,
which are not fundamental and which may be
changed
without
shareholder approval, to the extent permitted
by
applicable law,
regulation or regulatory policy. Under these
restrictions, the
Fund may not:
(i) purchase or sell real estate
limited
partnership
interests;
(ii) purchase or sell interests in
oil, gas or
mineral
leases (other than securities of
companies
that
invest in or sponsor such
programs);
(iii) purchase any security if, as a
result, the
Fund
would then have more than 5% of
its total
assets
(taken at current value)
invested in
securities of
companies (including
predecessors) less
than three
years old;
(iv) purchase or retain securities of
any
company if
officers and Trustees of the
Trust and
officers and
directors of the Manager and the
Manager
who
individually own more than 1/2
of 1% of
the
securities of that company,
together own
beneficially more than 5% of
such
securities; or
(v) purchase securities of any
open-end
investment
company, or securities of
closed-end
companies,
except by purchase in the open
market
where no
commission or profit to a
sponsor or
dealer results
from such purchases, or except
when such
purchase is
part of a merger, consolidation,
reorganization or
sale of assets, and except that
the Fund
may
purchase shares of other
investment
companies
subject to such restrictions as
may be
imposed by
the Investment Company Act of
1940 and
rules
thereunder or by any state in
which shares
of the
Fund are registered.
In addition, the Fund may not make short
sales of
securities
or maintain a short position. Moreover, so
long as it
remains a
restriction of the Ohio Division of
Securities, the
Fund will
treat securities eligible for resale under
Rule 144A of
the
Securities Act of 1933 as subject to the
Fund's
restriction on
investing in restricted securities, unless
the Board
determines
that such securities are liquid. (see
"Restricted and
Illiquid
Securities" under "Investment Objectives and
Policies,"
above).
Whenever an investment policy or
investment
restriction set
forth in the Prospectus or this SAI states a
maximum
percentage
of assets that may be invested in any
security or other
asset or
describes a policy regarding quality
standards, such
percentage
limitation or standard shall, unless
otherwise
indicated, apply
to the Fund only at the time a transaction is
entered
into.
Accordingly, if a percentage limitation is
adhered to
at the time
of investment, a later increase or decrease
in the
percentage
which results from a relative change in
values or from
a change
in the Fund's net assets or other
circumstances will
not be
considered a violation.
ADDITIONAL RIGHTS AND
PRIVILEGES
The Trust offers to investors, and
(except as
noted below)
bears the cost of providing, the following
rights and
privileges.
The Trust reserves the right to amend or
terminate any
one or
more of such rights and privileges. Notice
of
amendments to or
terminations of rights and privileges will be
provided
to
shareholders in accordance with applicable
law.
Certain of the rights and privileges
described
below
reference other funds distributed by Ivy
Mackenzie
Distributors,
Inc. ("IMDI")(formerly known as Mackenzie Ivy
Funds
Distribution,
Inc.), which funds are not described in this
SAI.
These funds
are: Ivy Growth Fund, Ivy Growth with Income
Fund, Ivy
Emerging
Growth Fund, Ivy International Fund, Ivy
China Region
Fund, Ivy
Latin America Strategy Fund, Ivy New Century
Fund, Ivy
International Bond Fund, Ivy Canada Fund, Ivy
Global
Fund, Ivy
Bond Fund and Ivy Money Market Fund, the
twelve other
series of
Ivy Fund; and Mackenzie California Municipal
Fund,
Mackenzie
Florida Limited Term Municipal Fund,
Mackenzie Limited
Term
Municipal Fund, Mackenzie National Municipal
Fund and
Mackenzie
New York Municipal Fund, the five series of
Mackenzie
Series
Trust (collectively, with the Fund, the "Ivy
Mackenzie
Funds").
Investors should obtain a current prospectus
before
exercising
any right or privilege that may relate to
these funds.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method is
available for
Class A and
Class B shareholders of the Fund. The
minimum initial
and
subsequent investment pursuant to this plan
is $50 per
month,
except in the case of a tax qualified
retirement plan
for which
the minimum initial and subsequent investment
is $25
per month.
The Automatic Investment Method may be
discontinued at
any time
upon receipt by The Ivy Mackenzie Services
Corp.
("IMSC")
(formerly known as The Mackenzie Ivy Investor
Services
Corp.) of
telephone instructions or written notice to
IMSC from
the
investor. See "Automatic Investment Method"
in the
Account
Application.
EXCHANGE OF SHARES
As described in the Fund's Prospectus,
shareholders of the
Fund have an exchange privilege with certain
other Ivy
and
Mackenzie Funds. Before effecting an
exchange,
shareholders of
the Fund should obtain and read the currently
effective
prospectus for the Ivy or Mackenzie Fund into
which the
exchange
is to be made.
CLASS A: Class A shareholders may
exchange their
Class A
shares ("outstanding Class A shares") for
Class A
shares of
another Ivy or Mackenzie Fund (or for shares
of another
Ivy or
Mackenzie Fund that currently offers only a
single
class of
shares) ("new Class A shares") on the basis
of the
relative net
asset value per Class A share, plus an amount
equal to
the
difference, if any, between the sales charge
previously
paid on
the outstanding Class A shares and the sales
charge
payable at
the time of the exchange on the new Class A
shares.
(The
additional sales charge will be waived for
outstanding
Class A
shares that have been invested for a period
of 12
months or
longer.) Class A shareholders may also
exchange their
Class A
shares for Class A shares of Ivy Money Market
Fund (no
initial
sales charge will be assessed at the time of
such an
exchange).
For purposes of computing the contingent
deferred
sales
charge that may be payable upon the
redemption of the
new Class A
shares, the holding period of the outstanding
Class A
shares is
"tacked" onto the holding period of the new
Class A
shares.
CLASS B: Class B shareholders may
exchange their
Class B
shares ("outstanding Class B shares") for
Class B
shares of
another Ivy or Mackenzie Fund ("new Class B
shares") on
the basis
of the relative net asset value per Class B
share,
without the
payment of any contingent deferred sales
charge that
would
otherwise be due upon the redemption of the
outstanding
Class B
shares. Class B shareholders of the Fund
exercising
the exchange
privilege will continue to be subject to the
Fund's
contingent
deferred sales charge period following an
exchange if
such period
is longer than the contingent deferred sales
charge
period
applicable to the new Class B shares.
Class B shares of the Fund acquired
through an
exchange of
Class B shares of another Ivy or Mackenzie
Fund will be
subject
to the Fund's contingent deferred sales
charge schedule
(or
period) if such schedule is higher (or such
period is
longer)
than the contingent deferred sales charge
schedule (or
period)
applicable to the Ivy or Mackenzie Fund from
which the
exchange
was made.
For purposes of both the conversion
feature and
computing
the contingent deferred sales charge that may
be
payable upon the
redemption of the new Class B shares (prior
to
conversion), the
holding period of the outstanding Class B
shares is
"tacked" onto
the holding period of the new Class B shares.
The following contingent deferred sales
charge
table ("Table
1") applies to Class B shares of the Fund,
Ivy Growth
Fund, Ivy
Growth with Income Fund, Ivy Emerging Growth
Fund, Ivy
International Fund, Ivy China Region Fund,
Ivy Latin
America
Strategy Fund, Ivy New Century Fund, Ivy
International
Bond Fund,
Ivy Canada Fund, Ivy Global Fund, Ivy Bond
Fund,
Mackenzie
California Municipal Fund, Mackenzie National
Municipal
Fund and
Mackenzie New York Municipal Fund ("Table 1
Funds"):
CONTINGENT
DEFERRED SALES
CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
SUBJECT
YEAR SINCE PURCHASE TO
CHARGE
First
5%
Second
4%
Third
3%
Fourth
3%
Fifth
2%
Sixth
1%
Seventh and thereafter
0%
The following contingent deferred sales
charge
table ("Table
2") applies to Class B shares of the Fund,
Mackenzie
Florida
Limited Term Municipal Fund and Mackenzie
Limited Term
Municipal
Fund ("Table 2 Funds"):
CONTINGENT
DEFERRED SALES
CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
SUBJECT
YEAR SINCE PURCHASE TO
CHARGE
First
3%
Second
2 1/2%
Third
2%
Fourth
1 1/2%
Fifth
1%
Sixth and thereafter
0%
The contingent deferred sales charge
schedule for
Table 1
Funds is higher (and the period is longer)
than the
contingent
deferred sales charge schedule (and period)
for Table 2
Funds.
If a shareholder exchanges Class B
shares of a
Table 1 Fund
for Class B shares of a Table 2 Fund, Table 1
will
continue to
apply to the Class B shares following the
exchange.
For example,
an investor may decide to exchange Class B
shares of a
Table 1
Fund ("outstanding Class B shares") for Class
B shares
of a Table
2 Fund ("new Class B shares") after having
held the
outstanding
Class B shares for two years. The 4%
contingent
deferred sales
charge that generally would apply to a
redemption of
outstanding
Class B shares held for two years would not
be deducted
at the
time of the exchange. If, three years later,
the
investor
redeems the new Class B shares, a 1%
contingent
deferred sales
charge will be assessed upon the redemption
because by
"tacking"
the two year holding period of the
outstanding Class B
shares
onto the three year holding period of the new
Class B
shares, the
investor will be deemed to have held the new
Class B
shares for
five years.
If a shareholder exchanges Class B
shares of a
Table 2 Fund
for Class B shares of a Table 1 Fund, Table 1
will
apply to the
Class B shares following the exchange. For
example, an
investor
may decide to exchange Class B shares of a
Table 2 Fund
("outstanding Class B shares") for Class B
shares of a
Table 1
Fund ("new Class B shares") after having held
the
outstanding
Class B shares for two years. The 2 1/2%
contingent
deferred
sales charge that generally would apply to a
redemption
of
outstanding Class B shares held for two years
would not
be
deducted at the time of the exchange. If,
three years
later, the
investor redeems the new Class B shares, a 2%
contingent deferred
sales charge will be assessed upon the
redemption
because by
"tacking" the two year holding period of the
outstanding Class B
shares onto the three year holding period of
the new
Class B
shares, the investor will be deemed to have
held the
new Class B
shares for five years.
CLASS I: Class I shareholders may
exchange their
Class I
shares for Class I shares of another Ivy or
Mackenzie
Fund on the
basis of the relative net asset value per
Class I
share.
The minimum amount which may be
exchanged into a
fund of the
Ivy Mackenzie Funds in which shares are not
already
held is
$1,000 ($5,000,000 in the case of Class I of
the Fund).
No
exchange out of the Fund (other than by a
complete
exchange of
all shares of the Fund) may be made if it
would reduce
the
shareholder's interest in the Fund to less
than $1,000.
Exchanges are available only in states where
the
exchange can be
legally made.
Each exchange will be made on the basis
of the
relative net
asset values per share of each fund of the
Ivy
Mackenzie Funds
next computed following receipt of telephone
instructions by IMSC
or a properly executed request by IMSC. An
exchange
from the
Fund into any other fund into which exchanges
are
permitted may
be subject to a sales charge as described in
its
Prospectus.
Exchanges, whether written or telephonic,
must be
received by
IMSC by the close of regular trading on the
New York
Stock
Exchange (the "Exchange") (normally 4:00
p.m., eastern
time) to
receive the price computed on the day of
receipt;
exchange
requests received after that time will
receive the
price next
determined following receipt of the request.
This
exchange
privilege may be modified or terminated at
any time,
upon at
least 60 days' notice when such notice is
required by
SEC rules.
See "Redemptions."
An exchange of shares in any fund of the
Ivy
Mackenzie Funds
for shares in another fund will result in a
taxable
gain or loss.
Generally, any such taxable gain or loss will
be a
capital gain
or loss (long-term or short-term, depending
on the
holding period
of the shares) in the amount of the
difference between
the net
asset value of the shares surrendered and the
shareholder's tax
basis for those shares. However, in certain
circumstances,
shareholders will be ineligible to take sales
charges
into
account in computing taxable gain or loss on
an
exchange. See
"Taxation."
With limited exceptions, any gain
realized by a
tax-deferred
retirement plan will not be taxable to the
plan and
will not be
taxed to the participant until distribution.
Each
investor
should consult his or her tax adviser
regarding the tax
consequences of an exchange transaction.
LETTER OF INTENT
Reduced sales charges apply to initial
investments
in Class
A shares of the Fund made pursuant to a
non-binding
Letter of
Intent. A Letter of Intent may be submitted
by an
individual,
his or her spouse and children under the age
of 21, or
a trustee
or other fiduciary of a single trust estate
or single
fiduciary
account. See the Account Application in the
Fund's
Prospectus.
Any investor may submit a Letter of Intent
stating that
he or she
will invest, over a period of 13 months, at
least
$1,000,000 in
Class A shares of the Fund. A Letter of
Intent may be
submitted
at the time of an initial purchase of Class A
shares of
the Fund
or within 90 days of the initial purchase, in
which
case the
Letter of Intent will be back dated. A
shareholder may
include
the value (at the applicable offering price)
of all
Class A
shares of the Fund, Ivy Canada Fund, Ivy
Global Fund,
Ivy Growth
Fund, Ivy Growth with Income Fund, Ivy
Emerging Growth
Fund, Ivy
International Fund, Ivy China Region Fund,
Ivy Latin
America
Strategy Fund, Ivy New Century Fund, Ivy
International
Bond Fund,
Ivy Bond Fund, Mackenzie National Municipal
Fund,
Mackenzie
Florida Limited Term Municipal Fund,
Mackenzie Limited
Term
Municipal Fund, Mackenzie California
Municipal Fund and
Mackenzie
New York Municipal Fund (and shares that have
been
exchanged into
Ivy Money Market Fund from any of the other
funds in
the Ivy
Mackenzie Funds) held of record by him or her
as of the
date of
his or her Letter of Intent as an
accumulation credit
toward the
completion of such Letter. During the term
of the
Letter of
Intent, the Transfer Agent will hold Class A
shares
representing
5% of the indicated amount (less any
accumulation
credit value)
in escrow. The escrowed Class A shares will
be
released when the
full indicated amount has been purchased. If
the full
indicated
amount is not purchased during the term of
the Letter
of Intent,
the investor is required to pay IMDI an
amount equal to
the
difference between the dollar amount of sales
charge
which he or
she has paid and that which he or she would
have paid
on his or
her aggregate purchases if the total of such
purchases
had been
made at a single time. Such payment will be
made by an
automatic
liquidation of Class A shares in the escrow
account. A
Letter of
Intent does not obligate the investor to buy
or the
Trust to sell
the indicated amount of Class A shares, and
the
investor should
read carefully all the provisions thereof
before
signing.
RETIREMENT PLANS
Shares may be purchased in connection
with several
types of
tax-deferred retirement plans. Shares of
more than one
fund
distributed by IMDI may be purchased in a
single
application
establishing a single plan account, and
shares held in
such an
account may be exchanged among the funds in
the Ivy
Mackenzie
Funds in accordance with the terms of the
applicable
plan and the
exchange privilege available to all
shareholders.
Initial and
subsequent purchase payments in connection
with
tax-deferred
retirement plans must be at least $25 per
participant.
The following fees will be charged to
individual
shareholder
accounts as described in the retirement
prototype plan
document:
Retirement Plan New Account Fee
no fee
Retirement Plan Annual Maintenance Fee
$10.00
per account
For shareholders whose retirement accounts
are
diversified across
several funds of the Ivy Mackenzie Funds, the
annual
maintenance
fee will be limited to not more than $20.
The following discussion describes the
tax
treatment of
certain tax-deferred retirement plans under
current
Federal
income tax law. State income tax
consequences may
vary. An
individual considering the establishment of a
retirement plan
should consult with an attorney and/or an
accountant
with respect
to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares
of the
Fund may be
used as a funding medium for an Individual
Retirement
Account
("IRA"). Eligible individuals may establish
an IRA by
adopting a
model custodial account available from IMSC,
who may
impose a
charge for establishing the account.
Individuals may
wish to
consult their tax advisers before investing
IRA assets
in a Fund
which primarily distributes exempt-interest
dividends.
An individual who has not reached age
70-1/2 and
who
receives compensation or earned income is
eligible to
contribute
to an IRA, whether or not he or she is an
active
participant in a
retirement plan. An individual who receives
a
distribution from
another IRA, a qualified retirement plan, a
qualified
annuity
plan or a tax-sheltered annuity or custodial
account
("403(b)
plan") that qualifies for "rollover"
treatment is also
eligible
to establish an IRA by rolling over the
distribution
either
directly or within 60 days after its receipt.
Tax
advice should
be obtained in connection with planning a
rollover
contribution
to an IRA.
In general, an eligible individual may
contribute
up to the
lesser of $2,000 or 100% of his or her
compensation or
earned
income to an IRA each year. If a husband and
wife are
both
employed, and both are under age 70-1/2, each
may set
up his or
her own IRA within these limits. If both
earn at least
$2,000
per year, the maximum potential contribution
is $4,000
per year
for both. However, if one spouse has (or
elects to be
treated as
having) no earned income for IRA purposes for
a year,
the other
spouse may contribute to an IRA on his or her
behalf.
In such a
case, the working spouse may contribute up to
the
lesser of
$2,250 or 100% of his or her compensation or
earned
income for
the year to IRAs for both spouses, provided
that no
more than
$2,000 is contributed to the IRA of one
spouse.
Rollover
contributions are not subject to these
limits.
An individual may deduct his or her
annual
contributions to
an IRA in computing his or her Federal income
tax
within the
limits described above, provided he or she
(or his or
her spouse,
if they file a joint Federal income tax
return) is not
an active
participant in a qualified retirement plan
(such as a
qualified
corporate, sole proprietorship, or
partnership pension,
profit
sharing, 401(k) or stock bonus plan),
qualified annuity
plan,
403(b) plan, simplified employee pension, or
government
plan. If
he or she (or his or her spouse) is an active
participant, a full
deduction is only available if he or she has
adjusted
gross
income that is no greater than a specified
level
($40,000 for
married couples filing a joint return,
$25,000 for
single
individuals, and $0 for a married individual
filing a
separate
return). The deduction is phased out ratably
for
active
participants with adjusted gross income
between certain
levels
($40,000 and $50,000 for married individuals
filing a
joint
return, $25,000 and $35,000 for single
individuals, and
$0 and
$10,000 for married individuals filing
separate
returns).
Individuals with income above the specified
phase-out
level may
not deduct their IRA contributions. Rollover
contributions are
not includible in income for Federal income
tax
purposes and
therefore are not deductible from it.
Generally, earnings on an IRA are not
subject to
current
Federal income tax until distributed.
Distributions
attributable
to tax-deductible contributions and to IRA
earnings are
taxed as
ordinary income. Distributions of
non-deductible
contributions
are not subject to Federal income tax. In
general,
distributions
from an IRA to an individual before he or she
reaches
age 59-1/2
are subject to a nondeductible penalty tax
equal to 10%
of the
taxable amount of the distribution. The 10%
penalty
tax does not
apply to amounts withdrawn from an IRA after
the
individual
reaches age 59-1/2, becomes disabled or dies,
or if
withdrawn in
the form of substantially equal payments over
the life
or life
expectancy of the individual and his or her
designated
beneficiary, if any, or rolled over into
another IRA.
Distributions must begin to be withdrawn not
later than
April 1
of the calendar year following the calendar
year in
which the
individual reaches age 70-1/2. Failure to
take certain
minimum
required distributions will result in the
imposition of
a 50%
non-deductible penalty tax. Extremely large
distributions in any
one year from an IRA (or from an IRA and
other
retirement plans)
may also result in a penalty tax.
QUALIFIED PLANS: For those
self-employed
individuals who
wish to purchase shares of one or more of the
funds in
the Ivy
Mackenzie Funds through a qualified
retirement plan, a
Custodial
Agreement and a Retirement Plan are available
from
IMSC. The
Retirement Plan may be adopted as a profit
sharing plan
or a
money purchase pension plan. A profit
sharing plan
permits an
annual contribution to be made in an amount
determined
each year
by the self-employed individual within
certain limits
prescribed
by law. A money purchase pension plan
requires annual
contributions at the level specified in the
Custodial
Agreement.
There is no set-up fee for qualified plans
and the
annual account
maintenance fee is $20.00 per account.
In general, if a self-employed
individual has any
common law
employees, employees who have met certain
minimum age
and service
requirements must be covered by the
Retirement Plan. A
self-
employed individual generally must contribute
the same
percentage
of income for common law employees as for
himself or
herself.
A self-employed individual may
contribute up to
the lesser
of $30,000 or 25% of compensation or earned
income to a
money
purchase pension plan or to a combination
profit
sharing and
money purchase pension plan arrangement each
year on
behalf of
each participant. To be deductible, total
contributions to a
profit sharing plan generally may not exceed
15% of the
total
compensation or earned income of all
participants in
the plan,
and total contributions to a combination
money
purchase-profit
sharing arrangement generally may not exceed
25% of the
total
compensation or earned income of all
participants. The
amount of
compensation or earned income of any one
participant
that may be
taken into account under the plan is limited
(generally
to
$150,000 for benefits accruing in plan years
beginning
after
1993, with annual inflation adjustments). A
self-employed
individual's contributions to a retirement
plan on his
or her own
behalf must be deducted in computing his or
her earned
income.
Corporate employers may also adopt the
Custodial
Agreement
and Retirement Plan for the benefit of their
eligible
employees.
Similar contribution and deduction rules
apply to
corporate
employers.
Distributions from the Retirement Plan
generally
are made
after a participant's separation from
service. A 10%
penalty tax
generally applies to distributions to an
individual
before he or
she reaches age 59 1/2, unless the individual
(1) has
reached age
55 and separated from service; (2) dies; (3)
becomes
disabled;
(4) uses the withdrawal to pay tax-deductible
medical
expenses;
(5) takes the withdrawal as part of a series
of
substantially
equal payments over his or her life
expectancy or the
joint life
expectancy of himself or herself and a
designated
beneficiary; or
(6) rolls over the distribution.
The Transfer Agent will furnish
custodial services
to the
employer and any participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS
AND
CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT"): Section
403(b)(7)
of the
Internal Revenue Code of 1986, as amended
(the "Code"),
permits
public school systems and certain charitable
organizations to use
mutual fund shares held in a custodial
account to fund
deferred
compensation arrangements with their
employees. A
custodial
account agreement is available for those
employers
whose
employees wish to purchase shares of the
Trust in
conjunction
with such an arrangement. Sales charges for
such
purchases are
the same as those set forth under "Purchase
of Shares"
in the
Prospectus. The special application for a
403(b)(7)
Account is
available from IMSC.
Distributions from the 403(b)(7) Account
may be
made only
following death, disability, separation from
service,
attainment
of age 59-1/2, or incurring a financial
hardship. A
10% penalty
tax generally applies to distributions to an
individual
before he
or she reaches age 59-1/2, unless the
individual (1)
has reached
age 55 and separated from service; (2) dies;
(3)
becomes
disabled; (4) uses the withdrawal to pay
tax-deductible
medical
expenses; (5) takes the withdrawal as part of
a series
of
substantially equal payments over his or her
life
expectancy or
the joint life expectancy of himself or
herself and a
designated
beneficiary; or (6) rolls over the
distribution. There
is no
set-up fee for 403(b)(7) Accounts and the
annual
maintenance fee
is $20.00 per account.
SIMPLIFIED EMPLOYEE PENSION ("SEP")
IRAS: An
employer may
deduct contributions to a SEP up to the
lesser of
$30,000 or 15%
of compensation. SEP accounts generally are
subject to
all rules
applicable to IRA accounts, except the
deduction
limits, and are
subject to certain employee participation
requirements.
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A
shares of the
Fund may
reinvest all or a part of the proceeds of the
redemption back
into Class A shares of the Fund at net asset
value
(without a
sales charge) within 24 months from the date
of
redemption.
There is no limit on the number of times this
privilege
may be
exercised. The reinvestment will be made at
the net
asset value
next determined after receipt by the Transfer
Agent of
the
reinvestment order accompanied by the funds
to be
reinvested. No
compensation will be paid to any sales
personnel or
dealer in
connection with the transaction.
Any redemption is a taxable event. A
loss
realized on a
redemption generally may be disallowed for
tax purposes
if the
reinvestment privilege is exercised within 30
days
after the
redemption. In certain circumstances,
shareholders
will be
ineligible to take sales charges into account
in
computing
taxable gain or loss on a redemption if the
reinvestment
privilege is exercised. See "Taxation."
RIGHTS OF ACCUMULATION
A scale of reduced sales charges applies
to any
investment
of $1,000,000 or more in Class A shares of
the Fund.
See the
"Initial Sales Charge Alternative--Class A
Shares" in
the
Prospectus for the Fund. The reduced sales
charge is
applicable
to investments made at one time by an
individual, his
or her
spouse and children under the age of 21, or a
trustee
or other
fiduciary of a single trust estate or single
fiduciary
account
(including a pension, profit sharing or other
employee
benefit
trust created pursuant to a plan qualified
under
Section 401 of
the Code). It is also applicable to current
purchases
of all of
the funds in the Ivy Mackenzie Funds (except
Ivy Money
Market
Fund) by any of the persons enumerated above,
where the
aggregate
quantity of Class A shares of the Fund, Ivy
Growth
Fund, Ivy
Growth with Income Fund, Ivy Emerging Growth
Fund, Ivy
International Fund, Ivy China Region Fund,
Ivy Latin
America
Strategy Fund, Ivy New Century Fund, Ivy
International
Bond Fund,
Ivy Canada Fund, Ivy Global Fund, Ivy Bond
Fund,
Mackenzie
National Municipal Fund, Mackenzie California
Municipal
Fund,
Mackenzie Florida Limited Term Municipal
Fund,
Mackenzie Limited
Term Municipal Fund and Mackenzie New York
Municipal
Fund (and
shares that have been exchanged into Ivy
Money Market
Fund from
any of the other funds in the Ivy Mackenzie
Funds) and
of any
other investment company distributed by IMDI,
previously
purchased or acquired and currently owned,
determined
at the
higher of current offering price or amount
invested,
plus the
Class A shares being purchased, amounts to
$50,000 or
more for
Ivy Global Fund, Ivy Canada Fund, Ivy Growth
Fund, Ivy
Growth
with Income Fund, Ivy Emerging Growth Fund,
Ivy
International
Fund, Ivy Latin America Strategy Fund, Ivy
New Century
Fund, and
Ivy China Region Fund; $100,000 or more for
Ivy
International
Bond Fund, Ivy Bond Fund, Mackenzie National
Municipal
Fund,
Mackenzie California Municipal Fund and
Mackenzie New
York
Municipal Fund; $25,000 or more for Mackenzie
Florida
Limited
Term Municipal Fund and Mackenzie Limited
Term
Municipal Fund; or
$1,000,000 or more for the Fund.
At the time an investment takes places,
IMSC must
be
notified by the investor or his or her dealer
that the
investment
qualifies for the reduced sales charge on the
basis of
previous
investments. The reduced sales charge is
subject to
confirmation
of the investor's holdings through a check of
the
Fund's records.
SYSTEMATIC WITHDRAWAL PLAN
A Class A shareholder may establish a
Systematic
Withdrawal
Plan (a "Withdrawal Plan") by telephone
instructions to
IMSC or
by delivery to IMSC of a written election to
so redeem,
accompanied by a surrender to IMSC of all
share
certificates then
outstanding in the name of such shareholder,
properly
endorsed by
him or her. To be eligible, a shareholder
must have at
least
$5,000 in the shareholder's account. A
Withdrawal Plan
may not
be established if the investor is currently
participating in the
Automatic Investment Method. A Withdrawal
Plan may
involve the
use of principal and, to the extent that it
does,
depending on
the amount withdrawn, the investor's
principal may be
depleted.
A redemption under the Withdrawal Plan
is a
taxable event.
Investors contemplating participation in the
Withdrawal
Plan
should consult their tax advisers.
Additional investments in Class A or
Class B
shares of the
Fund made by investors participating in a
Withdrawal
Plan must
equal at least $1,000 each while the
Withdrawal Plan is
in
effect. Making additional purchases while
the
Withdrawal Plan is
in effect may be disadvantageous to the
investor
because of
applicable initial or contingent deferred
sales
charges.
An investor may terminate his or her
participation
in the
Withdrawal Plan at any time by delivering
written
notice to the
Transfer Agent. If all shares held by the
investor are
liquidated at any time, participation in the
Withdrawal
Plan will
terminate automatically. The Trust or IMSC
may
terminate the
Withdrawal Plan at any time after reasonable
notice to
shareholders.
BROKERAGE ALLOCATION
Subject to the overall supervision of
the
President and the
Board of Trustees of the Trust, IMI places
orders for
the
purchase and sale of the Fund's portfolio
securities.
All
portfolio transactions are effected at the
best price
and
execution obtainable. Purchases and sales of
debt
securities are
usually principal transactions and,
therefore,
brokerage
commissions are usually not required to be
paid by the
Fund for
such purchases and sales, although the price
paid
generally
includes undisclosed compensation to the
dealer. The
prices paid
to underwriters of newly-issued securities
usually
include a
concession paid by the issuer to the
underwriter, and
purchases
of after-market securities from dealers
normally
reflect the
spread between the bid and asked prices. In
connection
with OTC
transactions, IMI attempts to deal directly
with the
principal
market makers, except in those circumstances
where it
believes
that better prices and execution are
available
elsewhere.
IMI selects broker-dealers to execute
transactions
and
evaluates the reasonableness of commissions
on the
basis of
quality, quantity, and the nature of the
firms'
professional
services. Commissions to be charged and the
rendering
of
investment services, including statistical,
research,
and
counseling services by brokerage firms, are
factors to
be
considered in the placing of brokerage
business. The
types of
research services provided by brokers may
include
general
economic and industry data, and information
on
securities of
specific companies. Research services
furnished by
brokers
through whom the Trust effect securities
transactions
may be used
by IMI in servicing all of its accounts. In
addition,
not all of
these services may be used by the Investment
Adviser in
connection with the services it provides to
the Fund or
the
Trust. IMI may consider sales of shares of
the Fund as
a factor
in the selection of broker-dealers and may
select
broker-dealers
who provide it with research services. IMI
will not,
however,
execute brokerage transactions other than at
the best
price and
execution.
The Fund may, under some circumstances,
accept
securities in
lieu of cash as payment for Fund shares. The
Fund will
consider
accepting securities only to increase its
holdings in a
portfolio
security or to take a new portfolio position
in a
security that
IMI deems to be a desirable investment for
the Fund.
While no
minimum has been established, it is expected
that the
Fund will
not accept securities having an aggregate
value of less
than $1
million. The Trust may reject in whole or in
part any
or all
offers to pay for Fund shares with securities
and may
discontinue
accepting securities as payment for Fund
shares at any
time
without notice. The Trust will value
accepted
securities in the
manner and at the same time provided for
valuing
portfolio
securities of the Fund, and Fund shares will
be sold
for net
asset value determined at the same time the
accepted
securities
are valued. The Trust will accept only
securities
which are
delivered in proper form and will not accept
securities
subject
to legal restrictions on transfer. The
acceptance of
securities
by the Trust must comply with applicable laws
of
certain states.
During the fiscal years ended June 30,
1993 and
June 30,
1994, the Fund paid no brokerage commissions.
During
the six-
month period ended December 31, 1994 the Fund
paid
brokerage
commissions of $2,063. During the fiscal
year ended
December 31,
1995, the fund paid brokerage commissions of
$313.
Fluctuations
in the Fund's portfolio turnover rate are due
to the
Fund's
responding to changes in economic and market
developments.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of
the Trust,
their
business addresses and principal occupations
during the
past five
years are:
POSITION
WITH THE
BUSINESS
AFFILIATIONS
NAME, ADDRESS, AGE TRUST AND
PRINCIPAL
OCCUPATIONS
John S. Anderegg, Jr. Trustee
Chairman,
Dynamics
60 Concord Street
Research Corp.
instruments
Wilmington, MA 01887 and
controls);
Director,
Age: 72
Burr-Brown Corp.
(operational
amplifiers);
Director,
Metritage
Incorporated
(level
measuring
instruments);
Trustee
of
Mackenzie Series
Trust
(1992-present).
Paul H. Broyhill Trustee
Chairman, BMC
Fund, Inc.
800 Hickory Blvd.
(1983-present);
Chairman,
Golfview Park
Broyhill Family
Foundation,
Lenoir, NC 28645 Inc.
(1983-Present);
Age: 72
Chairman and
President,
Broyhill
Investments, Inc.
(1983-present);
Chairman,
Broyhill Timber
Resources
(1983-present);
Management
of a
personal
portfolio of
fixed-income and
equity
investments
(1983-present);
Trustee
of
Mackenzie Series
Trust
(1988-present);
Director of The
Mackenzie
Funds
Inc.
(1988-1995).
Stanley Channick Trustee
President, The
Whitestone
11 Bala Avenue
Corporation
(insurance
Bala Cynwyd, PA 19004
agency);
President, Scott
Age: 71
Management
Company
(administrative
services
for
insurance
companies);
President, The
Channick
Group
(consultants to
insurance
companies and
national trade
associations);
Trustee of
Ivy
Fund
(1984-1993);
Director of The
Mackenzie
Funds
Inc.
(1994-1995).
Frank W. DeFriece, Jr. Trustee
Director, Manager
and Vice
The Landmark Centre
President,
Massengill-
113 Landmark Lane,
DeFriece
Foundation
Suite B
(charitable
organization)
Bristol, TN 37625
(1950-present);
Trustee and
Age: 75 Second
Vice
Chairman, East
Tennessee Public
Communications
Corp. (WSJK-
TV)
(1984-present); Trustee
of
Mackenzie
Series Trust
(1985-present);
Director of
The
Mackenzie
Funds Inc.
(1987-1995).
Roy J. Glauber Trustee
Mallinckrodt
Professor of
Lyman Laboratory
Physics, Harvard
of Physics
University (since
1974);
Harvard University Trustee
of Ivy
Fund (1961
Cambridge, MA 02138 -1991);
Trustee
of
Mackenzie Series
Trust
Age: 70
(1994-present).
Michael G. Landry Trustee
President,
Chairman and
700 South Federal Hwy. and
Director of
Mackenzie
Suite 300 President
Investment
Management
Boca Raton, FL 33432 Inc.
(1987-present);
Age: 49
President and
Director
[*Deemed to be an of Ivy
Management, Inc.
"interested person"
(1992-present);
Chairman
of the Trust, as and
Director of
defined under the
Mackenzie Ivy
Investor
1940 Act.]
Services Corp.
(1993-
present);
Director and
President of
Mackenzie Ivy
Funds
Distribution, Inc.
(1993-1994);
Chairman and
Director of
Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present);
Director
and
President of
The
Mackenzie Funds
Inc. (1987-
1995);
Trustee
and
President of
Mackenzie
Series
Trust
(1987-
present).
Michael R. Peers Trustee
Chairman of the
Board,
737 Periwinkle Way and Ivy
Management,
Inc.
Sanibel, FL 33957 Chairman
(1984-1991);
Chairman
Age: 66 of the of the
Board, Ivy
Fund
[*Deemed to be an Board
(1974-present);
Private
"interested person"
Investor.
of the Trust, as
defined under the
1940 Act.]
Joseph G. Rosenthal Trustee
Chartered
Accountant
110 Jardin Drive
(1958-present);
Trustee
Unit #12 of
Mackenzie
Series
Concord, Ontario Canada Trust
(1985-present);
L4K 2T7
Director of The
Mackenzie
Age: 61 Funds
Inc.
(1987-1995).
Richard N. Silverman Trustee
Formerly
President,
18 Bonnybrook Road Hy-Sil
Manufacturing
Waban, MA 02168
Company, a
division of
Age: 71 Van
Leer, U.S.A.,
Inc.
(gift
packaging
materials
and
metalized
film
products);
Formerly
Director, Waters
Manufacturing Co.
(manufacturer of
electronic
parts);
Director,
Panorama
Television
Network.
J. Brendan Swan Trustee
President,
Airspray
4701 North Federal Hwy.
International,
Inc.;
Suite 465 Joint
Managing
Director,
Pompano Beach, FL 33064
Airspray
International
Age: 65 B.V.
(an
environmentally
sensitive
packaging
company);
Director, The
Mackenzie Funds
Inc. (1992-
1995);
Trustee of
Mackenzie
Series
Trust
(1992-
present).
Keith J. Carlson Vice Senior
Vice
President
700 South Federal Hwy. President and
Director of
Mackenzie
Suite 300
Investment
Management,
Boca Raton, FL 33432 Inc.
(1994-present);
Age: 39 Senior
Vice
President,
Secretary and
Treasurer of
Mackenzie
Investment
Management Inc.
(1985-
1994);
Senior
Vice
President and
Director of
Ivy
Management,
Inc. (1994-
present); Senior
Vice
President,
Treasurer and
Director of Ivy
Management,
Inc.
(1992-1994);
Vice
President of The
Mackenzie
Funds
Inc.
(1987-1995);
President and
Director of
Mackenzie Ivy
Investor
Services Corp.
(1993-1996);
Vice
President of
Mackenzie
Series
Trust
(1994-
present);
Treasurer of
Mackenzie Series
Trust
(1985-1994);
President and
Director of
Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present);
Executive
Vice
President
and Director
of
Mackenzie Ivy
Funds
Distribution,
Inc. (1993-
1994).
C. William Ferris Secretary/ Senior
Vice
President,
700 South Federal Hwy. Treasurer
Secretary/Treasurer
Suite 300 and
Director of
Boca Raton, FL 33432
Mackenzie
Investment
Age: 51
Management Inc.
(1994-
present); Senior
Vice
President,
Finance and
Administration/Compliance
Officer
of
Mackenzie
Investment
Management Inc.
(1989-1994);
Senior Vice
President,
Secretary/
Treasurer and
Clerk of Ivy
Management, Inc.
(1994-
present); Senior
Vice
President,
Finance and
Administration/Compliance
Officer
of Ivy
Management,
Inc.
(1992-1994);
Senior
Vice
President,
Secretary/
Treasurer and
Clerk of Ivy
Management, Inc.
(1989-
1994);
Senior
Vice
President,
Secretary/
Treasurer of
Mackenzie Ivy
Funds
Distribution, Inc.
(1994-present);
Secretary/
Treasurer and
Director of
Mackenzie Ivy
Funds
Distribution,
Inc. (1993-
1994);
Secretary/Treasurer
and
Director of
Mackenzie
Ivy
Investor
Services Corp.
(1993-1996);
President and
Director of
Mackenzie Ivy
Investor Services
Corp.
(1996-present);
Secretary/
Treasurer of The
Mackenzie
Funds
Inc.
(1993-1995);
Secretary/Treasurer of
Mackenzie Series
Trust
(1994-present).
As of March 23, 1996, none the Officers
and
Trustees of the
Trust as a group owned none of the
outstanding Class A,
Class B
or Class I shares of the Fund.
PERSONAL INVESTMENTS BY EMPLOYEES OF THE
ADVISER
Employees of IMI are permitted to make
personal
securities
transactions, subject to requirements and
restrictions
set forth
in IMI's Code of Ethics. The Code of Ethics
contains
provisions
and requirements designed to identify and
address
certain
conflicts of interest between personal
investment
activities and
the interests of investment advisory clients
such as
the Fund.
Among other things, the Code of Ethics, which
generally
complies
with standards recommended by the Investment
Company
Institute's
Advisory Group on Personal Investing,
prohibits certain
types of
transactions absent prior approval, imposes
time
periods during
which personal transactions may not be made
in certain
securities, and requires the submission of
duplicate
broker
confirmations and monthly reporting of
securities
transactions.
Additional restrictions apply to portfolio
managers,
traders,
research analysts and others involved in the
investment
advisory
process. Exceptions to these and other
provisions of
the Code of
Ethics may be granted in particular
circumstances after
review by
appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31,
1995)
TOTAL
PENSION OR
COMPENSA-
RETIREMENT
TION FROM
BENEFITS
ESTIMATED
TRUST AND
AGGREGATE ACCRUED AS
ANNUAL
FUND COM-
COMPENSA- PART OF
BENEFITS
PLEX PAID
NAME, TION FUND UPON
TO
POSITION FROM TRUST EXPENSES
RETIREMENT
TRUSTEES
John S. 7,112 N/A N/A
8,000
Anderegg, Jr.
(Trustee)
Paul H. 7,112 N/A N/A
8,000
Broyhill
(Trustee)
Stanley -0- N/A N/A
8,000
Channick[*]
(Trustee)
Frank W. 7,112 N/A N/A
8,000
DeFriece, Jr.
(Trustee)
Roy J. -0- N/A N/A
8,000
Glauber[*]
(Trustee)
Michael G. -0- N/A N/A
-0-
Landry
(Trustee and
President)
Michael R. -0- N/A N/A
-0-
Peers
(Trustee and
Chairman of
the Board)
Joseph G. 7,112 N/A N/A
8,000
Rosenthal
(Trustee)
Richard N. 8,000 N/A N/A
8,000
Silverman
(Trustee)
J. Brendan 7,112 N/A N/A
8,000
Swan
(Trustee)
Keith J. -0- N/A N/A
-0-
Carlson
(Vice President)
C. William -0- N/A N/A
-0-
Ferris
(Secretary/Treasurer)
[*] Appointed as a Trustee of the Trust at a
meeting
of the
Board of Trustees held on February 10,
1996.
As of February 26, 1996, the Officers
and Trustees
of the
Trust as a group owned beneficially or of
record none
of the
outstanding Class A, Class B, Class C or
Class I shares
of any of
the Funds.
INVESTMENT ADVISORY AND OTHER
SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY
SERVICES
Ivy Management, Inc. ("IMI") currently
provides
business
management and investment advisory services
to the Fund
pursuant
to a Business Management and Investment
Advisory
Agreement (the
"Agreement"). The Agreement was initially
approved on
September
29, 1994 by the Trust's Board of Trustees
including a
majority of
the Trustees who neither are "interested
persons" (as
defined in
the 1940 Act) of the Trust nor have a direct
or
indirect
financial interest in the operation of the
distribution
plan (see
"Distribution Services") or in any related
agreement
(the
"Independent Trustees"). The Agreement was
approved by
the sole
shareholder of the Fund on December 31, 1994.
Until
December 31,
1994 Mackenzie Investment Management Inc.
("MIMI")
served as
investment adviser to the Fund, which until
December
31, 1994 was
a series of The Mackenzie Funds Inc. (the
"Company").
IMI is a
wholly owned subsidiary of MIMI. MIMI is a
subsidiary
of MFC,
150 Bloor Street West, Toronto, Ontario,
Canada, a
public
corporation organized under the laws of
Ontario whose
shares are
listed for trading on The Toronto Stock
Exchange. MFC
is
registered in Ontario as a mutual fund dealer
and
advises Ivy
Canada Fund. On December 31, 1994, the Fund
was
reorganized as a
series of the Trust. In connection with that
reorganization, IMI
succeeded to MIMI as investment adviser to
the Fund.
IMI also
currently acts as manager and investment
adviser to the
following
investment companies registered under the
1940 Act:
Ivy Emerging
Growth Fund, Ivy Growth Fund, Ivy Growth with
Income
Fund, Ivy
International Fund, Ivy Money Market Fund,
Ivy China
Region Fund,
Ivy Latin America Strategy Fund, Ivy New
Century Fund,
Ivy
International Bond Fund, Ivy Global Fund, Ivy
Canada
Fund and Ivy
Bond Fund.
The Fund pays IMI a monthly fee for
providing
business
management and investment advisory services
at the
annual rate of
0.60% of the Fund's average daily net assets.
During
the fiscal
years ended June 30, 1993 and June 30, 1994
and during
the six-
month period ended December 31, 1994, MIMI,
as the
investment
adviser to the Fund when it was a series of
the
Company, received
fees of $191,454, $171,829 and $32,313,
respectively,
from the
Fund. During the fiscal year ended December
31, 1995,
IMI, as
investment adviser to the Fund, received fees
of
$42,049 from the
Fund.
Under the Agreement, the Trust pays the
following
expenses:
(1) the fees and expenses of the Trust's
Independent
Trustees;
(2) the salaries and expenses of any of the
Trust's
officers or
employees who are not affiliated with IMI;
(3) interest
expenses;
(4) taxes and governmental fees, including
any original
issue
taxes or transfer taxes applicable to the
sale or
delivery of
shares or certificates therefor; (5)
brokerage
commissions and
other expenses incurred in acquiring or
disposing of
portfolio
securities; (6) the expenses of registering
and
qualifying shares
for sale with the SEC and with various state
securities
commissions; (7) accounting and legal costs;
(8)
insurance
premiums; (9) fees and expenses of the
Trust's
Custodian and
Transfer Agent and any related services; (10)
expenses
of
obtaining quotations of portfolio securities
and of
pricing
shares; (11) expenses of maintaining the
Trust's legal
existence
and of shareholders' meetings; (12) expenses
of
preparation and
distribution to existing shareholders of
periodic
reports, proxy
materials and prospectuses; and (13) fees and
expenses
of
membership in industry organizations.
The Agreement obligates IMI to make
investments
for the
accounts of the Fund in accordance with its
best
judgement and
within the investment objectives and
restrictions set
forth in
the Fund's prospectus, the 1940 Act and the
provisions
of the
Code relating to regulated investment
companies,
subject to
policy decisions adopted by the Trust's Board
of
Trustees. IMI
also determines the securities to be
purchased or sold
by the
Fund and places orders with brokers or
dealers who deal
in such
securities.
Under the Agreement, IMI also provides
certain
business
management services. IMI is obligated to (1)
coordinate with the
Fund's Custodian and Transfer Agent and
monitor the
services they
provide to the Fund; (2) coordinate with and
monitor
any other
third parties furnishing services to the
Fund; (3)
provide the
Fund with necessary office space, telephones
and other
communications facilities as are adequate for
the
Fund's needs;
(4) provide the services of individuals
competent to
perform
administrative and clerical functions which
are not
performed by
employees or other agents engaged by the Fund
or by IMI
acting in
some other capacity pursuant to a separate
agreement or
arrangements with the Fund; (5) maintain or
supervise
the
maintenance by third parties of such books
and records
of the
Trust as may be required by applicable
Federal or state
law; (6)
authorize and permit IMI's directors,
officers and
employees who
may be elected or appointed as directors or
officers of
the Trust
to serve in such capacities; and (7) take
such other
action with
respect to the Trust, after approval by the
Trust, as
may be
required by applicable law, including without
limitation the
rules and regulations of the SEC and of state
securities
commissions and other regulatory agencies.
The Agreement provides that if the
Fund's total
expenses in
any fiscal year (other than interest, taxes,
distribution
expenses, brokerage commissions and other
portfolio
transaction
expenses, other expenditures which are
capitalized in
accordance
with generally accepted accounting principles
and any
extraor-
dinary expenses including, without
limitation,
litigation and
indemnification expenses) exceed the
permissible limits
appli-
cable to the Fund in any state in which its
shares are
then
qualified for sale, IMI will bear the excess
expenses.
At the
present time, the most restrictive state
expense
limitation
provision limits the Fund's annual expenses
to 2.5% of
the first
$30 million of its average daily net assets,
2.0% of
the next $70
million and 1.5% of its average daily net
assets over
$100
million. In addition, IMI may voluntarily
reimburse
the Fund's
expenses. MIMI's voluntary expense
reimbursements for
the Fund
for the fiscal year ended June 30, 1994 and
for the six
months
ended December 31, 1994 were $171,733 and
$76,575,
respectively.
IMI's voluntary expense reimbursements for
the Fund for
the
fiscal year ended December 31, 1995 were
$163,233.
On December 31, 1994, the Trustees of
the Trust,
including a
majority of the Independent Trustees, last
voted to
approve the
Agreement for the Fund. The Agreement will
continue in
effect
with respect to the Fund from year to year
only so long
as the
continuance is specifically approved at least
annually
(i) by the
vote of a majority of the Independent
Trustees and (ii)
either
(a) by the vote of a majority of the
outstanding voting
securities (as defined in the 1940 Act) of
the Fund or
(b) by the
vote of a majority of the entire Board of
Trustees. If
the
question of continuance of the Agreement (or
adoption
of any new
agreement) is presented to shareholders,
continuance
(or
adoption) shall be effected only if approved
by the
affirmative
vote of a majority of the outstanding voting
securities
(as
defined in the 1940 Act) of the Fund. See
"Capitalization and
Voting Rights."
The Agreement may be terminated with
respect to
the Fund at
any time, without payment of any penalty, by
the vote
of a
majority of the Board of Trustees, or by a
vote of a
majority of
the outstanding voting securities of the
Fund, on 60
days'
written notice to IMI or by IMI on 60 days'
written
notice to the
Trust. The Agreement shall terminate
automatically in
the event
of its assignment.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI,
serves as
the
exclusive distributor of the Fund's shares
pursuant to
a
Distribution Agreement, which was last
approved by the
Board of
Trustees on August 25, 1995, with the Trust.
IMDI is
not
obligated to sell any specific amount of
shares.
IMDI distributes shares of the Fund
through
broker-dealers
who are members of the National Association
of
Securities
Dealers, Inc. and who have executed dealer
agreements
with IMDI.
IMDI distributes shares of the Fund on a
continuous
basis, but
reserves the right to suspend or discontinue
distribution on such
basis. IMDI is not obligated to sell any
specific
amount of Fund
shares. Pursuant to the Distribution
Agreement, the
Fund bears,
among other expenses, the expenses of
registering and
qualifying
its shares for sale under federal and state
securities
laws and
preparing and distributing to existing
shareholders
periodic
reports, proxy materials and prospectuses.
IMDI may, from time to time, in certain
circumstances, re-
allow to individual selling dealers all or a
portion of
the sales
charge with respect to Class A shares which
it normally
retains.
For example, additional re-allowance may be
made when
the selling
dealer commits to substantial marketing
support such as
internal
wholesaling through dedicated personnel,
internal
communications
and mass mailings. IMDI may, from time to
time, pay a
fee out of
its own resources to individual selling
dealers for
sales of
Class I shares.
During the fiscal year ended June 30,
1993 and the
three
months ended September 30, 1993, MIMI, which
at that
time was the
Fund's distributor, received from sales of
Class A
shares
[FN][Shares of the Fund outstanding as of
June 27,
1993, were
redesignated Class A shares of the Fund.] of
the Fund
$50,027 and
$3,139, respectively, in sales commissions,
of which
$15,582 and
$930, respectively, was retained after
dealers'
re-allowances.
For the nine months ended June 30, 1994, for
the
six-month period
ended December 31, 1994, and for the fiscal
year ended
December
31, 1995, IMDI received from sales of Class A
Shares[FN][Shares
of the Fund outstanding as of June 27, 1993,
were
redesignated
Class A shares of the Fund.] of the Fund
$7,330, $3,398
and
$2,777, respectively, in sales commissions,
of which
$1,381, $892
and $505, respectively, was retained after
dealer
re-allowances.
During the fiscal year ended December 31,
1995, IMDI
received no
CDSCs paid upon certain redemptions of Class
B shares
of the
Fund.
RULE 18F-3 PLAN. On February 23, 1995,
the SEC
adopted Rule
18f-3 under the 1940 Act, which permits a
registered
open-end
investment company whose shares are
registered on Form
N-1A to
issue multiple classes of shares in
accordance with a
written
plan approved by the investment company's
board of
directors/trustees and filed with the SEC.
At a
meeting held on
December 1-2, 1995, the Board of Trustees of
the Trust
adopted a
multi-class plan (the "Rule 18f-3 plan") on
behalf of
the Fund.
The key features of the Rule 18f-3 plan are
as follows:
(i)
shares of each class of the Fund represent an
equal pro
rata
interest in the Fund and generally have
identical
voting,
dividend, liquidation, and other rights,
preferences,
powers,
restrictions, limitations, qualifications,
terms and
conditions,
except that each class bears certain
class-specific
expenses and
has separate voting rights on certain matters
that
relate solely
to that class or in which the interests of
shareholders
of one
class differ from the interests of
shareholders of
another class;
(ii) subject to certain limitations described
in the
Prospectus,
shares of a particular class of the Fund may
be
exchanged for
shares of the same class of another Ivy or
Mackenzie
fund; and
(iii) the Fund's Class B shares will convert
automatically into
Class A shares of the Fund after a period of
eight
years, based
on the relative net asset value of such
shares at the
time of
conversion.
RULE 12B-1 DISTRIBUTION PLANS. The Fund
has
adopted
pursuant to Rule 12b-1 under the 1940 Act
separate
distribution
plans pertaining to its Class A and Class B
shares (the
"Class A
Plan" and the "Class B Plan;" collectively,
the
"Plans"). The
Trustees of the Trust believe that the Plans
will
benefit the
Funds and its shareholders and that the Plans
should
result in
greater sales and/or fewer redemptions of
Trust shares
although
it is impossible to know for certain the
level of sales
and
redemptions of Trust shares in the absence of
a Plan or
under an
alternative distribution arrangement.
Under the Fund's Class A Plan and Class
B Plan,
the Fund
pays IMDI a service fee, accrued daily and
paid
monthly, at the
annual rate of up to 0.25% of the average
daily net
assets
attributable to its Class A shares or Class B
shares,
as the case
may be. The services for which service fees
may be
paid include,
among other services, advising clients or
customers
regarding the
purchase, sale or retention of shares of the
Fund,
answering
routine inquiries concerning the Fund and
assisting
shareholders
in changing options or enrolling in specific
plans.
Pursuant to
the Fund's Plans, service fee payments made
out of or
charged
against the assets attributable to the Fund's
Class A
shares or
Class B shares must be in reimbursement for
services
rendered for
or on behalf of that class of the Fund. The
expenses
not
reimbursed in any one month may be reimbursed
in a
subsequent
month. The Class A Plan does not provide for
the
payment of
interest or carrying charges as distribution
expenses.
IMDI may make payments for distribution
assistance
and for
administrative and accounting services from
resources
that may
include the management fees paid to IMI by
the Fund.
IMDI also
may make payments (such as the service fee
payments
described
above) to unaffiliated broker-dealers for
services
rendered in
the distribution of the Fund's Class A
shares. To
qualify for
such payments, shares may be subject to a
minimum
holding period.
However, no such payments will be made to any
dealer or
broker if
at the end of each year the amount of shares
held does
not exceed
a minimum amount. The minimum holding period
and
minimum level
of holdings will be determined from time to
time by
IMDI.
Under the Fund's Class B Plan, the Fund
pays IMDI
a
distribution fee, accrued daily and paid
quarterly, at
the annual
rate of 0.50% of the average daily net assets
attributable to its
Class B shares in addition to the 0.25%
service fee.
IMDI may
re-allow all or a portion of the service and
distribution fees to
dealers as IMDI may determine from time to
time. The
distribution fee compensates IMDI for
expenses incurred
in
connection with activities primarily intended
to result
in the
sale of Class B shares of the Fund, including
the
printing of
prospectuses for persons other than
shareholders and
the
preparation, printing and distribution of
sales
literature and
advertising materials. Pursuant to the Class
B Plan,
IMDI may
include interest, carrying or other finance
charges in
its
calculation of Class B distribution expenses,
if not
prohibited
from doing so pursuant to an order of or a
regulation
adopted by
the SEC. The SEC order permitting the
imposition of a
contingent
deferred sales charge on Class B shares does
not
currently permit
IMDI to recover such charges.
Among other things, each Plan provides
that (1)
IMDI will
submit to the Board of Trustees of the Trust
at least
quarterly,
and the Trustees will review, reports
regarding all
amounts
expended under the Plan and the purposes for
which such
expenditures were made; (2) the Plan will
continue in
effect only
so long as such continuance is approved at
least
annually, and
any material amendment thereto is approved,
by the
votes of a
majority of the Trust's Board of Trustees,
including
the
Independent Trustees, cast in person at a
meeting
called for that
purpose; (3) payments by the Fund under the
Plan shall
not be
materially increased without the affirmative
vote of
the holders
of a majority of the outstanding shares of
the relevant
class;
and (4) while the Plan is in effect, the
selection and
nomination
of Trustees who are not "interested persons"
(as
defined in the
1940 Act) of the Trust shall be committed to
the
discretion of
the Trustees who are not "interested persons"
of the
Trust.
IMDI may make payments for distribution
assistance
and for
administrative and accounting services from
its own
resources,
which may include the management fees paid by
the Fund.
IMDI
also may make payments (such as the service
fee
payments
described above) to unaffiliated
broker-dealers for
services
rendered in the distribution of the Fund's
shares. To
qualify
for such payments, shares may be subject to a
minimum
holding
period. However, no such payments will be
made to any
dealer or
broker, if the amount of shares held does not
exceed a
minimum
amount. The minimum holding period and
minimum level
of holdings
will be determined from time to time by IMDI.
Each Plan may be amended at any time
with respect
to the
Class of shares of the Fund to which the Plan
relates
by vote of
the Trustees, including a majority of the
Independent
Trustees,
cast in person at a meeting called for the
purpose of
considering
such amendment. Each Plan may be terminated
with
respect to the
Class of shares of the Fund to which the Plan
relates
at any
time, without payment of any penalty, by vote
of a
majority of
the Independent Trustees, or by vote of a
majority of
the
outstanding voting securities of that Class.
If the Distribution Agreement or the
Distribution
Plans are
terminated (or not renewed) with respect to
one or more
funds (or
Class of shares thereof) of the Trust, they
may
continue in
effect with respect to any fund (or Class of
shares
thereof) as
to which they have not been terminated (or
have been
renewed).
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class A
shares of the
Fund: advertising, $2,417; printing and
mailing of
prospectuses
to persons other than current shareholders,
$13,127;
compensation
to dealers, $11,854; compensation to sales
personnel,$30,072;
seminars and meetings, $2,963; travel and
entertainment, $8,054;
general and administrative, $14,142;
telephone, $1,040;
and
occupancy and equipment rental, $2,547.
During the fiscal year ended December
31, 1995,
IMDI
expended the following amounts in marketing
Class B
shares of the
Fund: advertising, $14; printing and mailing
of
prospectuses to
persons other than current shareholders, $75;
compensation to
dealers, $68; compensation to sales
personnel,$172;
seminars and
meetings, $17; travel and entertainment, $46;
general
and
administrative, $81; telephone, $6; and
occupancy and
equipment
rental, $15.
CUSTODIAN
Brown Brothers Harriman & Co., a private
bank and
member of
the principal securities exchanges, located
at 40 Water
Street,
Boston, Massachusetts 02109, (the
"Custodian") has
been retained
to act as the Trust's Custodian for assets of
the Fund
held in
the United States. Its primary
responsibility is to
maintain
custody of the cash and securities in the
Fund's
portfolio.
Rules adopted under the 1940 Act permit the
Trust to
maintain its
foreign securities and cash in the custody of
certain
eligible
foreign banks and securities depositories.
Pursuant to
those
rules, Brown Brothers Harriman & Co. has
entered into
subcustodial agreements for the holding of
the Fund's
foreign
securities. As partial payment for its
services, the
Custodian
may receive a portion of the Trust's
brokerage
business, subject
to its ability to provide best price and
execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services
Agreement,
effective
November 1, 1994, MIMI provides certain
accounting and
pricing
services for the Fund. As compensation for
those
services, the
Fund pays MIMI a monthly fee plus
out-of-pocket
expenses as
incurred. The monthly fee is based upon the
net assets
of the
Fund at the preceding month end at the
following rates:
$1,000
when net assets are $20 million and under;
$1,500 when
net assets
are over $20 million to $75 million; $4,000
when net
assets are
over $75 million to $100 million; and $6,000
when net
assets are
over $100 million. For the two months ended
December
31, 1994
and for the fiscal year ended December 31,
1995, the
Fund paid
MIMI $2,130 and $22,290, respectively. Prior
to
November 1,
1994, the Fund utilized an unrelated entity
for Fund
accounting
and pricing services.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Ivy Mackenzie Services Corp. ("IMSC," or
the
"Transfer
Agent") acts as the Trust's transfer agent
and dividend
paying
agent pursuant to a Transfer Agency and
Shareholder
Services
Agreement. For transfer agency and
shareholder
services, the
Fund pays IMSC an annual fee of $20.75 per
open account
of Class
A and Class B shares, and $10.25 per open
account of
Class I
shares, payable in equal monthly
installments. In
addition, the
Fund pays IMSC a fee of $4.36 for each
account that is
closed,
and reimburses IMSC monthly for out-of-pocket
expenses.
Such
fees and expenses for the fiscal year ended
December
31, 1995 for
the Fund totalled $13,645. Certain
broker-dealers that
maintain
shareholder accounts with the Fund through an
omnibus
account
provide transfer agent and other
shareholder-related
services
that would otherwise be provided by IMSC if
the
individual
accounts that comprise the omnibus account
were opened
by their
beneficial owners directly. IMSC pays such
broker-dealers a per
account fee for each open account within the
omnibus
account, or
a fixed rate (e.g., .10%) fee, based on the
average
daily net
asset value of the omnibus account (or a
combination
thereof).
ADMINISTRATOR
MIMI provides various administrative
services to
the Trust
pursuant to an Administrative Services
Agreement. Such
fees for
the fiscal year ended December 31, 1995 for
the Fund
totalled
$7,008.
Outside of providing administrative
services to
the Trust ,
as described above, MIMI may also act on
behalf of IMDI
in paying
commissions to broker-dealers with respect to
sales of
Class B
shares of the Fund.
AUDITORS
Coopers & Lybrand L.L.P., independent
certified
public
accountants, 200 East Las Olas Boulevard,
Suite 1700,
Ft.
Lauderdale, Florida 33301, has been selected
as
auditors for the
Trust. The audit services performed by
Coopers &
Lybrand L.L.P.
include audits of the annual financial
statements of
each of the
funds of the Trust. Other services provided
principally relate
to filings with the SEC and the preparation
and/or
review of the
Trust's tax returns.
CAPITALIZATION AND VOTING
RIGHTS
The Fund results from a reorganization
of
Mackenzie Short-
Term U.S. Government Securities Fund, which
reorganization was
approved by shareholders on December 30,
1994. The
capitalization of the Trust consists of an
unlimited
number of
shares of beneficial interest (no par value
per share).
When
issued, shares of each class of the Fund are
fully
paid, non-
assessable, redeemable and fully
transferable. No
class of
shares of the Fund has preemptive rights or
subscription rights.
The Amended and Restated Declaration of
Trust
permits the
Trustees to create separate series or
portfolios and to
divide
any series or portfolio into one or more
classes. The
Trustees
have authorized thirteen series, each of
which
represents a
separate investment portfolio. The Trustees
have
further
authorized the issuance of Classes A, B and C
shares
for the Ivy
Bond Fund, Ivy Canada Fund, Ivy China Region
Fund, Ivy
Emerging
Growth Fund, Ivy Global Fund, Ivy Growth
Fund, Ivy
Growth with
Income Fund, Ivy International Fund, Ivy
International
Bond Fund
and Ivy Latin America Strategy Fund and Ivy
New Century
Fund, as
well as Classes A, B and I for the Fund,
Class I for
Ivy
International Fund and Ivy Bond Fund, and
Class D
shares for Ivy
Growth with Income Fund [FN][The Class D
shares of Ivy
Growth
with Income Fund were initially issued as
"Ivy Growth
with Income
Fund -- Class C" to shareholders of Mackenzie
Growth &
Income
Fund, a former series of the Company, in
connection
with the
reorganization between that fund and Ivy
Growth with
Income Fund,
and are not offered for sale to the public.
On
February 29,
1996, the Trustees of the Trust resolved by
written
consent to
establish a new class of shares designated as
"Class C"
for all
Ivy Fund portfolios (other than the Fund),
and to
redesignate the
shares of beneficial interest of "Ivy Growth
with
Income Fund--
Class C" as shares of beneficial interest of
"Ivy
Growth with
Income Fund--Class D," which establishment
and
redesignation,
respectively, are to become effective on
April 30,
1996. The
voting, dividend, liquidation and other
rights,
preferences,
powers, restrictions, limitations,
qualifications,
terms and
conditions of the Class D shares of Ivy
Growth with
Income Fund,
as set forth in Ivy Fund's Declaration of
Trust, as
amended from
time to time, will not be changed by this
redesignation.].
Shareholders have the right to vote for
the
election of
Trustees of the Trust and on any and all
matters on
which they
may be entitled to vote by law or by the
provisions of
the
Trust's By-Laws. The Trust is not required
to hold a
regular
annual meeting of shareholders, and it does
not intend
to do so.
Shares of each class of the Fund entitle
their holders
to one
vote per share (with proportionate voting for
fractional shares).
On matters affecting the Fund, the
shareholders of the
Fund are
entitled to vote. All classes of shares of
the Fund
will vote
together, except with respect to the
distribution plan
applicable
to the Fund's Class A and Class B shares or
when a
class vote is
required by the 1940 Act. On matters
relating to all
funds of
the Trust, but affecting the funds
differently,
separate votes by
the shareholders of each fund are required.
Approval
of an
investment advisory agreement and a change in
fundamental
policies would be regarded as matters
requiring
separate voting
by the shareholders of each fund of the
Trust. If the
Trustees
determine that a matter does not affect the
interests
of the
Fund, then the shareholders of the Fund will
not be
entitled to
vote on that matter. Matters that affect the
Trust in
general,
such as ratification of the selection of
independent
public
accountants, will be voted upon collectively
by the
shareholders
of all funds of the Trust.
As used in this SAI and the Fund's
Prospectus, the
phrase
"majority vote of the outstanding shares" of
the Fund
means the
vote of the lesser of: (1) 67% of the shares
of the
Fund (or of
the Trust) present at a meeting if the
holders of more
than 50%
of the outstanding shares are present in
person or by
proxy; or
(2) more than 50% of the outstanding shares
of the Fund
(or of
the Trust). With respect to the submission
to
shareholder vote
of a matter requiring separate voting by the
Fund, the
matter
shall have been effectively acted upon with
respect to
the Fund
if a majority of the outstanding voting
securities of
the Fund
votes for the approval of the matter,
notwithstanding
that:
(1) the matter has not been approved by a
majority of
the
outstanding voting securities of any other
fund of the
Trust; or
(2) the matter has not been approved by a
majority of
the
outstanding voting securities of the Trust.
Under Massachusetts law, the Trust's
shareholders
could,
under certain circumstances, be held
personally liable
for the
obligations of the Trust. However, the
Amended and
Restated
Declaration of Trust disclaims liability of
the
shareholders,
Trustees or officers of the Trust for acts or
obligations of the
Trust, which are binding only on the assets
and
property of the
Trust, and requires that notice of the
disclaimer be
given in
each contract or obligation entered into or
executed by
the Trust
or its Trustees. The Amended and Restated
Declaration
of Trust
provides for indemnification out of fund
property for
all loss
and expense of any shareholder of a Fund held
personally liable
for the obligations of that Fund. The risk
of a
shareholder of
the Trust incurring financial loss on account
of
shareholder
liability is limited to circumstances in
which the
Trust itself
would be unable to meet its obligations and,
thus,
should be
considered remote. No series of the Trust is
liable
for the
obligations of any other series of the Trust.
The Trust's shares do not have
cumulative voting
rights and
accordingly the holders of more than 50% of
the
outstanding
shares could elect the entire Board of
Trustees, in
which case
the holders of the remaining shares would not
be able
to elect
any Trustees.
To the knowledge of the Trust, as of
March 29,
1996, no
shareholder owned beneficially or of record
5% or more
of the
Fund's outstanding shares, except that of the
outstanding Class A
shares of the Fund, Prestige Bank FSB, 710
Old Clairton
Road,
Pittsburgh, PA 15236, owned of record
130,887.563
shares
(21.24%), and First National Bank of
Assumption, 141 N.
Chestnut
Street, Assumption, IL 62510, owned of record
60,273.000 shares
(9.78%), and except that of the outstanding
Class B
shares of the
Fund, Marjorie Fraser, 184 Euclid Avenue,
Hamburg, NY
14075,
owned of record 2,572.280 shares (43.23%),
First Trust
Corp
(custodian) FBO Fredric Fetkowitz, PO Box
173301,
Denver, CO
80217-3301, owned of record 1,005.070 shares
(16.89%),
Carole
Jane Champagne, 236 Davis Avenue, Greenwich,
CT 06830,
owned of
record 597.769 shares (10.04%), First Trust
Corp
(custodian) FBO
Marilyn H. Roeters, PO Box 173301, Denver, CO
80217-3301, owned
of record 568.059 shares (9.54%), First Trust
Corp
(custodian)
FBO Linda L. Stempel, PO Box 173301, Denver,
CO
80217-3301, owned
of record 448.112 shares (7.53%), and Lucile
M.
Rohrbaugh, 1517
Willeys Lake Road, Ferndale, WA 98248, owned
of record
338.961
shares (5.69%).
NET ASSET VALUE
The share price, or value, for the
separate
Classes of
shares of the Fund is called the net asset
value per
share. The
net asset value per share of the Fund is
computed by
dividing the
value of the assets of the Fund, less its
liabilities,
by the
number of shares of the Fund outstanding.
For the
purposes of
determining the aggregate net assets of the
Fund, cash
and
receivables will be valued at their
realizable amounts.
A
security listed or traded on a recognized
stock
exchange or
NASDAQ is valued at its last sale price on
the
principal exchange
on which the security is traded. The value
of a
foreign security
is determined in its national currency as of
the normal
close of
trading on the foreign exchange on which it
is traded
or as of
the close of regular trading on the Exchange,
if that
is earlier,
and that value is then converted into its
U.S. dollar
equivalent
at the foreign exchange rate in effect at
noon, Eastern
time, on
the day the value of the foreign security is
determined. If no
sale is reported at that time, the average
between the
current
bid and asked price is used. All other
securities for
which OTC
market quotations are readily available are
valued at
the average
between the current bid and asked price.
Interest will
be
recorded as accrued. Securities and other
assets for
which
market prices are not readily available are
valued at
fair value
as determined by IMI and approved in good
faith by the
Board of
Trustees. Money market instruments of the
Fund are
valued at
amortized cost, which approximates money
market value.
The Fund's liabilities are allocated
between its
Classes.
The total of such liabilities allocated to a
Class plus
that
Class's distribution fee and any other
expenses
specially
allocated to that Class are then deducted
from the
Class's
proportionate interest in the Fund's assets,
and the
resulting
amount for each Class is divided by the
number of
shares of that
Class outstanding to produce the net asset
value per
share.
Portfolio securities are valued and net
asset
value per
share is determined as of the close of
regular trading
on the
Exchange, (normally 4:00 p.m., eastern time),
every
Monday
through Friday (exclusive of national
business
holidays). The
Trust's offices will be closed, and net asset
value
will not be
calculated, on the following national
business
holidays: New
Year's Day, President's Day, Good Friday,
Memorial Day,
Independence Day, Labor Day, Thanksgiving Day
and
Christmas Day.
On those days when either or both of the
Fund's
Custodian or the
New York Stock Exchange close early as a
result of such
day being
a partial holiday or otherwise, the right is
reserved
to advance
the time on that day by which purchase and
redemption
requests
must be received.
When the Fund writes an option, an
amount equal to
the
premium received by the Fund is included in
the Fund's
Statement
of Assets and Liabilities as an asset and as
an
equivalent
liability. The amount of the liability will
be
subsequently
marked-to-market daily to reflect the current
market
value of the
option written. The current market value of
a written
option is
the last sale on the principal exchange on
which such
option is
traded or, in the absence of a sale, the last
offering
price.
The premium paid by the Fund for the
purchase of a
call or a
put option will be deducted form its assets
and an
equal amount
will be included in the asset section of the
Fund's
Statement of
Assets and Liabilities as an investment and
subsequently adjusted
to the current market value of the option.
For
example, if the
current market value of the option exceeds
the premium
paid, the
excess would be unrealized appreciation and,
conversely, if the
premium exceeds the current market value,
such excess
would be
unrealized depreciation. The current market
value of a
purchased
option will be the last sale price on the
principal
exchange on
which the option is traded or, in the absence
of a
sale, the last
bid price. If the Fund exercises a call
option which
it has
purchased, the cost of the security which the
Fund
purchased upon
exercise will be increased by the premium
originally
paid.
The valuations of below investment-grade
debt
securities may
be supplied by a pricing agent; if valuations
are not
available
through a pricing agent, such valuations may
be
supplied through
a broker or otherwise as determined in good
faith by
the Board of
Trustees.
The sale of shares of the Fund will be
suspended
during any
period when the determination of its net
asset value is
suspended
pursuant to rules or orders of the SEC and
may be
suspended by
the Board of Trustees whenever in its
judgment it is in
the best
interest of the Fund to do so.
PORTFOLIO TURNOVER
The Fund purchases securities that are
believed by
IMI to
have above average potential for capital
appreciation.
Common
stocks are disposed of in situations where it
is
believed that
potential for such appreciation has lessened
or that
other common
stocks have a greater potential. Therefore,
the Fund
may
purchase and sell securities without regard
to the
length of time
the security is to be, or has been, held.
The annual
Portfolio
turnover rates for the Fund are provided in
the Fund's
Prospectus
under "Financial Highlights."
The Fund's Portfolio turnover rate is
calculated
by dividing
the lesser of purchases or sales of portfolio
securities for the
fiscal year by the monthly average of the
value of the
portfolio
securities owned by the Fund during the
fiscal year.
For
purposes of determining such portfolio
turnover, all
securities
whose maturities at the time of acquisition
were one
year or less
are excluded.
The Fund's Portfolio turnover rate for
the fiscal
year ended
December 31, 1995, for the six-month period
ended
December 31,
1994 and for the fiscal year ended June 30,
1994 was
54%, 143%,
and 37%, respectively. A Portfolio turnover
rate that
exceeds
100% involves correspondingly higher
brokerage
commissions and
other transaction costs, which will be borne
directly
by the
Fund. In addition, short-term gains realized
from
portfolio
transactions are taxable to shareholders as
ordinary
income.
Fluctuations in the Fund's portfolio turnover
rate are
due to the
Fund's responding to changes in economic and
market
developments.
REDEMPTIONS
Shares of the Fund are redeemed at their
net asset
value
next determined after a proper redemption
request has
been
received by IMSC, less any applicable
contingent
deferred sales
charge.
Unless a shareholder requests that the
proceeds of
any
redemption be wired to his or her bank
account, payment
for
shares tendered for redemption is made by
check within
seven days
after tender in proper form, except that the
Trust
reserves the
right to suspend the right of redemption or
to postpone
the date
of payment upon redemption beyond seven days,
(i) for
any period
during which the New York Stock Exchange is
closed
(other than
customary weekend and holiday closings) or
during which
trading
on the Exchange is restricted, (ii) for any
period
during which
an emergency exists as determined by the SEC
as a
result of which
disposal of securities owned by the Fund is
not
reasonably
practicable or it is not reasonably
practicable for the
Fund to
fairly determine the value of its net assets,
or (iii)
for such
other periods as the SEC may by order permit
for the
protection
of shareholders of the Fund.
Under unusual circumstances, when the
Board of
Trustees
deems it in the best interest of the Fund's
shareholders, the
Fund may make payment for shares repurchased
or
redeemed in whole
or in part in securities of the Fund taken at
current
values. If
any such redemption in kind is to be made,
the Fund
intends to
make an election pursuant to Rule 18f-1 under
the 1940
Act. This
will require the Fund to redeem with cash at
a
shareholder's
election in any case where the redemption
involves less
than
$250,000 (or 1% of the Fund's net asset value
at the
beginning of
each 90-day period during which such
redemptions are in
effect,
if that amount is less than $250,000).
Should payment
be made in
securities, the redeeming shareholder may
incur
brokerage costs
in converting such securities to cash.
Subject to state law restrictions, the
Trust may
redeem
those accounts of shareholders who have
maintained an
investment,
including sales charges paid, of less than
$1,000 in
the Fund for
a period of more than 12 months. All
accounts below
the
applicable minimum will be redeemed
simultaneously when
IMI deems
it advisable. The $1,000 balance will be
determined by
actual
dollar amounts invested by the shareholder,
unaffected
by market
fluctuations. The Trust will notify any such
shareholder by
certified mail of its intention to redeem
such account,
and the
shareholder shall have 60 days from the date
of such
letter to
invest such additional sums as shall raise
the value of
such
account above that minimum. Should the
shareholder
fail to
forward such sum within 60 days of the date
of the
Trust's letter
of notification, the Trust will redeem the
shares held
in such
account and transmit the proceeds to the
shareholder.
Such
redemptions will be taxable events. However,
those
shareholders
who are investing pursuant to the Automatic
Investment
Method
will not be redeemed automatically unless
they have
ceased making
payments pursuant to the plan for a period of
at least
six
consecutive months, and these shareholders
will be
given six-
months' notice by the Trust before such
redemption.
Shareholders
in a qualified retirement, pension or profit
sharing
plan who
wish to avoid tax consequences must
"rollover" any sum
so
redeemed into another qualified plan within
60 days.
The Board
of Trustees may increase or decrease the
minimum
shareholder
account balance which may be subject to
redemption from
time to
time.
If a shareholder has given authorization
for
telephonic
redemption privilege, shares can be redeemed
and
proceeds sent by
federal wire to a single previously
designated bank
account.
Delivery of the proceeds of a wire redemption
request
of $250,000
or more may be delayed by the Fund for up to
seven days
if deemed
appropriate under then-current market
conditions. The
Trust
reserves the right to change this minimum or
to
terminate the
telephonic redemption privilege without prior
notice.
The Trust
cannot be responsible for the efficiency of
the federal
wire
system of the shareholder's dealer of record
or bank.
The
shareholder is responsible for any charges by
the
shareholder's
bank.
The Fund employs reasonable procedures
that
require personal
identification prior to acting on redemption
or
exchange
instructions communicated by telephone to
confirm that
such
instructions are genuine. In the absence of
such
procedures, the
Fund may be liable for any losses due to
unauthorized
or
fraudulent telephone instructions.
TAXATION
The following is a general discussion of
certain
tax rules
thought to be applicable with respect to the
Fund. It
is merely
a summary and is not an exhaustive discussion
of all
possible
situations or of all potentially applicable
taxes.
Accordingly,
shareholders and prospective shareholders
should
consult a
competent tax advisor about the tax
consequences to
them of
investing in the Fund.
The Fund intends to be taxed as a
regulated
investment
company under Subchapter M of the Code.
Accordingly,
the Fund
must, among other things, (a) derive in each
taxable
year at
least 90% of its gross income from dividends,
interest,
payments
with respect to certain securities loans, and
gains
from the sale
or other disposition of stock, securities or
foreign
currencies,
or other income derived with respect to its
business of
investing
in such stock, securities or currencies; (b)
derive in
each
taxable year less than 30% of its gross
income from the
sale or
other disposition of certain assets held less
than
three months,
namely: (i) stock or securities; (ii)
options,
futures, or
forward contracts (other than those on
foreign
currencies); or
(iii) foreign currencies (or options,
futures, or
forward con-
tracts on foreign currencies) that are not
directly
related to
the Fund's principal business of investing in
stock or
securities
(or options and futures with respect to stock
or
securities) (the
"30% Limitation"); and (c) diversify its
holdings so
that, at the
end of each fiscal quarter, (i) at least 50%
of the
market value
of the Fund's assets is represented by cash,
U.S.
Government
securities, the securities of other regulated
investment
companies and other securities, with such
other
securities
limited, in respect of any one issuer, to an
amount not
greater
than 5% of the value of the Fund's total
assets and 10%
of the
outstanding voting securities of such issuer,
and (ii)
not more
than 25% of the value of its total assets is
invested
in the
securities of any one issuer (other than U.S.
Government
securities and the securities of other
regulated
investment
companies).
As a regulated investment company, the
Fund
generally will
not be subject to U.S. Federal income tax on
its income
and gains
that it distributes to shareholders, if at
least 90% of
its
investment company taxable income (which
includes,
among other
items, dividends, interest and the excess of
any
short-term
capital gains over long-term capital losses)
for the
taxable year
is distributed. The Fund intends to
distribute all
such income.
Amounts not distributed on a timely
basis in
accordance with
a calendar year distribution requirement are
subject to
a
nondeductible 4% excise tax at the Fund
level. To
avoid the tax,
the Fund must distribute during each calendar
year (1)
at least
98% of its ordinary income (not taking into
account any
capital
gains or losses) for the calendar year, (2)
at least
98% of its
capital gains in excess of its capital losses
(adjusted
for
certain ordinary losses) for a one-year
period
generally ending
on October 31 of the calendar year, and (3)
all
ordinary income
and capital gains for previous years that
were not
distributed
during such years. To avoid application of
the excise
tax, the
Fund intends to make distributions in
accordance with
the
calendar year distribution requirements. A
distribution will be
treated as paid on December 31 of the current
calendar
year if it
is declared by the Fund in October, November
or
December of the
year with a record date in such a month and
paid by the
Fund
during January of the following year. Such
distributions will be
taxable to shareholders in the calendar year
the
distributions
are declared, rather than the calendar year
in which
the
distributions are received.
DISTRIBUTIONS
Distributions of investment company
taxable income
are
taxable to a U.S. shareholder as ordinary
income,
whether paid in
cash or shares. If the Fund receives
dividends from
U.S.
corporations, a portion of the dividends paid
by the
Fund to a
corporate shareholder may qualify for the
dividends-received
deduction. Distributions of net capital
gains (the
excess of net
long-term capital gains over net short-term
capital
losses), if
any, designated by the Fund as capital gain
dividends,
are
taxable as long-term capital gains, whether
paid in
cash or in
shares, regardless of how long the
shareholder has held
the
Fund's shares and are not eligible for the
dividends-received
deduction. Shareholders receiving
distributions in the
form of
newly issued shares will have a cost basis in
each
share received
equal to the net asset value of a share of
the Fund on
the
distribution date. A distribution of an
amount in
excess of the
Fund's current and accumulated earnings and
profits
will be
treated by a shareholder as a return of
capital which
is applied
against and reduces the shareholder's basis
in his or
her shares.
To the extent that the amount of any such
distribution
exceeds
the shareholder's basis in his or her shares,
the
excess will be
treated by the shareholder as gain from a
sale or
exchange of the
shares. Shareholders will be notified
annually as to
the U.S.
federal tax status of distributions and
shareholders
receiving
distributions in the form of newly issued
shares will
receive a
report as to the net asset value of the
shares
received.
If the net asset value of shares is
reduced below
a
shareholder's cost as a result of a
distribution by the
Fund,
such distribution generally will be taxable
even though
it
represents a return of invested capital.
Investors
should be
careful to consider the tax implications of
buying
shares just
prior to a distribution. The price of shares
purchased
at this
time may reflect the amount of the
forthcoming
distribution.
Those purchasing just prior to a distribution
will
receive a
distribution which generally will be taxable
to them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of
his or her
shares, a
shareholder will realize a taxable gain or
loss
depending upon
his or her basis in the shares. Such gain or
loss will
be
treated as capital gain or loss if the shares
are
capital assets
in the shareholder's hands and generally will
be
long-term or
short-term, depending upon the shareholder's
holding
period for
the shares. Any loss realized on a
redemption, sale or
exchange
will be disallowed to the extent the shares
disposed of
are
replaced (including through reinvestment of
dividends)
within a
period of 61 days beginning 30 days before
and ending
30 days
after the shares are disposed of. In such a
case, the
basis of
the shares acquired will be adjusted to
reflect the
disallowed
loss. Any loss realized by a shareholder on
the sale
of Fund
shares held by the shareholder for six-months
or less
will be
treated for tax purposes as a long-term
capital loss to
the
extent of any distributions of capital gain
dividends
received or
treated as having been received by the
shareholder with
respect
to such shares.
In some cases, shareholders will not be
permitted
to take
all or a portion of their sales loads into
account for
purposes
of determining the amount of gain or loss
realized on
the
disposition of their shares. This
prohibition
generally applies
where (1) the shareholder incurs a sales load
in
acquiring the
shares of the Fund, (2) the shares are
disposed of
before the
91st day after the date on which they were
acquired,
and (3) the
shareholder subsequently acquires shares in
the same
Fund or
another regulated investment company and the
otherwise
applicable
sales charge is reduced under a "reinvestment
right"
received
upon the initial purchase of regulated
investment
company shares.
The term "reinvestment right" means any right
to
acquire shares
of one or more regulated investment companies
without
the payment
of a sales load or with the payment of a
reduced sales
charge.
Sales charges affected by this rule are
treated as if
they were
incurred with respect to the shares acquired
under the
reinvestment right. This provision may be
applied to
successive
acquisitions of fund shares.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a
fixed maturity
date of
more than one year from the date of issuance)
that may
be
acquired by the Fund may be treated as debt
securities
that are
issued originally at a discount. Generally,
the amount
of the
original issue discount ("OID") is treated as
interest
income and
is included in income over the term of the
debt
security, even
though payment of that amount is not received
until a
later time,
usually when the debt security matures. In
addition,
if the Fund
invests in certain high yield OID obligations
issued by
corporations, a portion of the OID accruing
on such
obligations
may be eligible for the deduction for
dividends
received by
corporations. In such event, dividends of
investment
company
taxable income received from the Fund by its
corporate
shareholders, to the extent attributable to
such
portion of
accrued OID, may be eligible for this
deduction for
dividends
received by corporate shareholders if so
designated by
the Fund
in a written notice to shareholders.
Some of the debt securities (with a
fixed maturity
date of
more than one year from the date of issuance)
that may
be
acquired by the Fund in the secondary market
may be
treated as
having market discount. Generally, gain
recognized on
the
disposition of, and any partial payment of
principal
on, a debt
security having market discount is treated as
ordinary
income to
the extent the gain, or principal payment,
does not
exceed the
"accrued market discount" on such debt
security. In
addition,
the deduction of any interest expenses
attributable to
debt
securities having market discount may be
deferred.
Market
discount generally accrues in equal daily
installments.
The Fund
may make one or more of the elections
applicable to
debt
securities having market discount, which
could affect
the
character and timing of recognition of
income.
Some debt securities (with a fixed
maturity date
of one year
or less from the date of issuance) that may
be acquired
by the
Fund may be treated as having acquisition
discount, or
OID in the
case of certain types of debt securities.
Generally,
the Fund
will be required to include the acquisition
discount,
or OID, in
income over the term of the debt security,
even though
payment of
that amount is not received until a later
time, usually
when the
debt security matures. The Fund may make one
or more
of the
elections applicable to debt securities
having
acquisition
discount, or OID, which could affect the
character and
timing of
recognition of income.
The Fund generally will be required to
distribute
dividends
to shareholders representing discount on debt
securities that is
currently includible in income, even though
cash
representing
such income may not have been received by the
Fund.
Cash to pay
such dividends may be obtained from sales
proceeds of
securities
held by the Fund.
OPTIONS AND HEDGING TRANSACTIONS
The taxation of equity options and OTC
options on
debt
securities is governed by Code section 1234.
Pursuant
to Code
section 1234, the premium received by the
Fund for
selling a put
or call option is not included in income at
the time of
receipt.
If the option expires, the premium is
short-term
capital gain to
the Fund. If the Fund enters into a closing
transaction, the
difference between the amount paid to close
out its
position and
the premium received is short-term capital
gain or
loss. If a
call option written by the Fund is exercised,
thereby
requiring
the Fund to sell the underlying security, the
premium
will
increase the amount realized upon the sale of
such
security and
any resulting gain or loss will be a capital
gain or
loss, and
will be long-term or short-term depending
upon the
holding period
of the security. With respect to a put or
call option
that is
purchased by the Fund, if the option is sold,
any
resulting gain
or loss will be a capital gain or loss, and
will be
long-term or
short-term, depending upon the holding period
of the
option. If
the option expires, the resulting loss is a
capital
loss and is
long-term or short-term, depending upon the
holding
period of the
option. If the option is exercised, the cost
of the
option, in
the case of a call option, is added to the
basis of the
purchased
security and, in the case of a put option,
reduces the
amount
realized on the underlying security in
determining gain
or loss.
Certain options, futures contracts and
forward
contracts in
which the Fund may invest are "section 1256
contracts."
Gains or
losses on section 1256 contracts generally
are
considered 60%
long-term and 40% short-term capital gains or
losses;
however,
foreign currency gains or losses (as
discussed below)
arising
from certain section 1256 contracts may be
treated as
ordinary
income or loss. Also, section 1256 contracts
held by
the Fund at
the end of each taxable year (and, generally,
for
purposes of the
4% excise tax, on October 31 of each year)
are
"marked-to-market"
(that is, treated as sold at fair market
value),
resulting in
unrealized gains or losses being treated as
though they
were
realized.
Generally, the hedging transactions
undertaken by
the Fund
may result in "straddles" for U.S. federal
income tax
purposes.
The straddle rules may affect the character
of gains
(or losses)
realized by the Fund. In addition, losses
realized by
the Fund
on positions that are part of a straddle may
be
deferred under
the straddle rules, rather than being taken
into
account in
calculating the taxable income for the
taxable year in
which the
losses are realized. Because only a few
regulations
implementing
the straddle rules have been promulgated, the
tax
consequences to
the Fund of engaging in hedging transactions
are not
entirely
clear. Hedging transactions may increase the
amount of
short-
term capital gain realized by the Fund which
is taxed
as ordinary
income when distributed to shareholders.
The Fund may make one or more of the
elections
available
under the Code which are applicable to
straddles. If
the Fund
makes any of the elections, the amount,
character and
timing of
the recognition of gains or losses from the
affected
straddle
positions will be determined under rules that
vary
according to
the election(s) made. The rules applicable
under
certain of the
elections may operate to accelerate the
recognition of
gains or
losses from the affected straddle positions.
Because the straddle rules may affect
the
character of gains
or losses, defer losses and/or accelerate the
recognition of
gains or losses from the affected straddle
positions,
the amount
which may be distributed to shareholders, and
which
will be taxed
to them as ordinary income or long-term
capital gain,
may be
increased or decreased as compared to a fund
that did
not engage
in such hedging transactions.
The 30% Limitation and the
diversification
requirements
applicable to the Fund's assets may limit the
extent to
which the
Fund will be able to engage in transactions
in options,
futures
contracts and forward contracts.
CURRENCY FLUCTUATIONS - "SECTION 988" GAINS
OR LOSSES
Under the Code, gains or losses
attributable to
fluctuations
in exchange rates which occur between the
time the Fund
accrues
receivables or liabilities denominated in a
foreign
currency and
the time the Fund actually collects such
receivables,
or pays
such liabilities, generally are treated as
ordinary
income or
ordinary loss. Similarly, on disposition of
debt
securities
denominated in a foreign currency and on
disposition of
certain
futures contracts, forward contracts and
options, gains
or losses
attributable to fluctuations in the value of
foreign
currency
between the date of acquisition of the
security or
contract and
the date of disposition also are treated as
ordinary
gain or
loss. These gains or losses, referred to
under the
Code as
"section 988" gains or losses, may increase
or decrease
the
amount of the Fund's investment company
taxable income
to be
distributed to its shareholders as ordinary
income.
FOREIGN WITHHOLDING TAXES
Income received by the Fund from sources
within
foreign
countries may be subject to withholding and
other taxes
imposed
by such countries.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT
COMPANIES
If the Fund invests in stock of certain
foreign
investment
companies either directly or through ADRs,
the Fund may
be
subject to U.S. federal income taxation on a
portion of
any
"excess distribution" with respect to, or
gain from the
disposition of, such stock. The tax would be
determined by
allocating such distribution or gain ratably
to each
day of the
Fund's holding period for the stock. The
distribution
or gain so
allocated to any taxable year of the Fund,
other than
the taxable
year of the excess distribution or
disposition, would
be taxed to
the Fund at the highest ordinary income rate
in effect
for such
year, and the tax would be further increased
by an
interest
charge to reflect the value of the tax
deferral deemed
to have
resulted from the ownership of the foreign
company's
stock. Any
amount of distribution or gain allocated to
the taxable
year of
the distribution or disposition would be
included in
the Fund's
investment company taxable income and,
accordingly,
would not be
taxable to the Fund to the extent distributed
by the
Fund as a
dividend to its shareholders.
The Fund may be able to make an
election, in lieu
of being
taxable in the manner described above, to
include
annually in
income its pro rata share of the ordinary
earnings and
net
capital gain of the foreign investment
company,
regardless of
whether it actually received any
distributions from the
foreign
company. These amounts would be included in
the Fund's
investment company taxable income and net
capital gain
which, to
the extent distributed by the Fund as
ordinary or
capital gain
dividends, as the case may be, would not be
taxable to
the Fund.
In order to make this election, the Fund
would be
required to
obtain certain annual information from the
foreign
investment
companies in which it invests, which in many
cases may
be
difficult to obtain. Alternatively, the Fund
may be
eligible for
another election that would involve marking
to market
its PFIC
stock at the end of each taxable year, with
any
resulting mark to
market gain being reported as ordinary
income. No mark
to market
losses would be recognized. The effect of
this
election would be
to treat excess distributions and gain on
dispositions
as
ordinary income which is not subject to a
fund-level
tax when
distributed to shareholders as a dividend.
BACKUP WITHHOLDING
The Fund will be required to report to
the
Internal Revenue
Service ("IRS") all distributions as well as
gross
proceeds from
the redemption of the Fund's shares, except
in the case
of
certain exempt shareholders. All such
distributions
and proceeds
will be subject to withholding of Federal
income tax at
a rate of
31% ("backup withholding") in the case of
non-exempt
shareholders
if (1) the shareholder fails to furnish the
Fund with
and to
certify the shareholder's correct taxpayer
identification number
or social security number, (2) the IRS
notifies the
shareholder
or the Fund that the shareholder has failed
to report
properly
certain interest and dividend income to the
IRS and to
respond to
notices to that effect, or (3) when required
to do so,
the
shareholder fails to certify that he or she
is not
subject to
backup withholding. If the withholding
provisions are
applicable, any such distributions or
proceeds, whether
reinvested in additional shares or taken in
cash, will
be reduced
by the amounts required to be withheld.
Distributions may also be subject to
additional
state, local
and foreign taxes depending on each
shareholder's
particular
situation. In many states, Fund
distributions which
are derived
from interest on certain U.S. government
obligations
are exempt
from taxation. Non-U.S. shareholders may be
subject to
U.S. tax
rules that differ significantly from those
summarized
above.
This discussion does not purport to deal with
all of
the tax
consequences applicable to the Fund or
shareholders.
Shareholders are advised to consult their own
tax
advisers with
respect to the particular tax consequences to
them of
an
investment in the Fund.
PERFORMANCE INFORMATION
Comparisons of the Fund's performance
may be made
with
respect to various unmanaged indices
(including the
Toronto Stock
Exchange 300, S&P 100, S&P 500, Dow Jones
Industrial
Average and
Major Market Index) which assume reinvestment
of
dividends, but
do not reflect deductions for administrative
and
management
costs. The Fund also may be compared to
Lipper's
Analytical
Reports, reports produced by a widely used
independent
research
firm that ranks mutual funds by overall
performance,
investment
objectives and assets, or to Wiesenberger
Reports.
Lipper
Analytical Services does not include sales
charges in
computing
performance. Performance information for the
Fund may
be
compared, in advertisements, sales literature
and
reports to
shareholders, to the Consumer Price Index
(measure for
inflation)
to assess the real rate of return from an
investment in
the Fund,
other groups of mutual funds tracked by
Lipper
Analytical
Services, or tracked by other services,
companies,
publications
or persons who rank mutual funds on overall
performance
or other
criteria. Further information on comparisons
is
contained in the
Prospectus for the Fund. Performance
rankings will be
based on
historical information and are not intended
to indicate
future
performance.
In addition, the Trust may, from time to
time,
include the
yield and the average annual total return of
shares of
the Fund
in advertisements, promotional literature or
reports to
shareholders or prospective investors.
YIELD. Quotations of yield for a
specific class
of shares
of the Fund will be based on all investment
income
attributable
to that class earned during a particular
30-day (or one
month)
period (including dividends and interest),
less
expenses
attributable to that class accrued during the
period
("net
investment income"), and will be computed by
dividing
the net
investment income per share of that class
earned during
the
period by the maximum offering price per
share (in the
case of
Class A and Class B shares) or the net asset
value per
share (in
the case of Class I shares) on the last day
of the
period,
according to the following formula:
YIELD = 2[({(a-b)/cd} +
1){superscript
6}-1]
Where: a = dividends and
interest earned
during the
period attributable
to a
specific class
of shares,
b = expenses accrued for
the
period
attributable to that
class
(net of
reimbursements),
c = the average daily
number of
shares of
that class
outstanding during
the period
that were entitled
to receive
dividends,
and
d = the maximum offering
price per
share (in
the case of Class A
shares) or
the net
asset value per
share (in the
case of
Class I shares) on
the last
day of the
period.
The yield for Class A [FN][Shares of the
Fund
outstanding as
of June 27, 1993, have been designated as
"Class A"
shares of the
Fund.] and Class B shares of the Fund for the
30-day
period ended
December 30, 1995 was 5.41% and 5.15%. There
were no
Class I
shares outstanding as of such date.
From commencement until September 20,
1994, this
Fund
(formerly Mackenzie Adjustable U.S.
Government
Securities Trust)
had an investment objective of seeking a high
level of
current
income, consistent with lower volatility of
principal.
The
Fund's performance for periods prior to
September 20,
1994 should
not be considered representative of the
Fund's
performance under
its current investment objective.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS.
Quotations of
standardized average annual total return
("Standardized
Return")
for a specific class of shares of the Fund
will be
expressed in
terms of the average annual compounded rate
of return
that would
cause a hypothetical investment in that class
of the
Fund made on
the first day of a designated period to equal
the
ending
redeemable value ("ERV") of such hypothetical
investment on the
last day of the designated period, according
to the
following
formula:
P(1 + T){superscript n} = ERV
Where: P = a hypothetical initial
payment of
$1,000 to
purchase shares of a
specific class
T = the average annual total
return of
shares of
that class
n = the number of years
ERV = the ending redeemable
value of a
hypothetical
$1,000 payment made at
the
beginning of the
period.
For purposes of the above computation
for the
Fund, it is
assumed that all dividends and capital gains
distributions made
by the Fund are reinvested at net asset value
in
additional
shares of the same class during the
designated period.
In
calculating the ending redeemable value for
Class A
shares, the
maximum 3.00% sales charge is deducted from
the initial
$1,000
payment and, for Class B shares, the
applicable
contingent
deferred sales charge imposed upon redemption
of Class
B shares
held for the period is deducted.
Standardized Return
quotations
for the Fund do not take into account any
required
payments for
federal or state income taxes. Standardized
Return
quotations
are determined to the nearest 1/100 of 1%.
In determining the average annual total
return for
a
specific class of shares of the Fund,
recurring fees,
if any,
that are charged to all shareholder accounts
are taken
into
consideration. For any account fees that
vary with the
size of
the account of the Fund, the account fee used
for
purposes of the
above computation is assumed to be the fee
that would
be charged
to the mean account size of the Fund.
The Fund may, from time to time, include
in
advertisements,
promotional literature or reports to
shareholders or
prospective
investors total return data that are not
calculated
according to
the formula set forth above
("Non-Standardized
Return"). Initial
sales charges are not taken into account in
calculating
Non-
Standardized Return; a sales charge, if
deducted, would
reduce
the return.
The following table summarizes the
calculation of
Standardized and Non-Standardized Return for
the Class
A, Class B
and Class I shares of the Fund for the
periods
indicated. Shares
of the Fund outstanding as of June 27, 1993
have been
redesignated as "Class A" shares of the Fund.
STANDARDIZED RETURN[*]
CLASS A[1] CLASS B[2]
CLASS I[6]
One year ended
December 31,
1995: 5.30% 3.60%
N/A
Inception[#] to
December 31,
1995:[5] 4.01% 3.60%
1.84
NON-STANDARDIZED RETURN[**]
CLASS A[3] CLASS B[4]
CLASS I[6]
One year ended
December 31,
1995: 8.56% 8.71%
N/A
Inception[#] to
December 31,
1995:[5] 4.68% 8.71%
1.84
_________________________
[*] The Standardized Return figures for
Class A shares
reflect
the deduction of the maximum initial
sales charge
of 3.00%.
The Standardized Return figures for
Class B shares
reflect
the deduction of the applicable CDSC
imposed on a
redemption
of Class B shares held for the period.
[**] The Non-Standardized Return figures do
not reflect
the
deduction of any initial sales charge or
CDSC.
[#] The inception date for the Fund (and the
Class A
shares of
the Fund) was April 18, 1991; the
inception date
for the
Class I shares of the Fund was June 28,
1993; and
the
inception date for Class B shares of the
Fund is
January 1,
1995. From commencement until September
20, 1994,
the Fund
(formerly Mackenzie Adjustable U.S.
Government
Securities
Trust) had an investment objective of
seeking a
high level
of current income, consistent with lower
volatility of
principal. Until December 31, 1994,
Mackenzie
Investment
Management Inc. served as investment
adviser to
the Fund,
which until that date was a series of
The
Mackenzie Funds
Inc.
[1] The Standardized Return figures for
Class A shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class A shares
for the one
year
ended December 31, 1995, and the period
from
inception
through December 31, 1995 would have
been 2.82%
and 2.97%,
respectively.
[2] The Standardized Return figures for
Class B shares
reflect
expense reimbursement. Without expense
reimbursement, the
Standardized Return for Class B shares
for the one
year
ended December 31, 1995, and for the
period from
inception
through December 31, 1995 would have
been 2.29%
and 2.29%,
respectively.
[3] The Non-Standardized Return figures for
Class A
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class A
shares for the one year ended December
31, 1995
and the
period from inception through December
31, 1995
would have
been 6.01% and 3.63%, respectively.
[4] The Non-Standardized Return figures for
Class B
shares
reflect expense reimbursement. Without
expense
reimbursement, the Non-Standardized
Return for
Class B
shares for the one year ended December
31, 1995,
and for the
period from inception through December
31, 1995
would have
been 7.34% and 7.34%, respectively.
[5] The total return for a period less than
a full
year is
calculated on an aggregate basis and is
not
annualized.
[6] Class I shares are not subject to an
initial sales
charge or
a CDSC, therefore the Non-Standardized
and
Standardized
Return figures are identical. The
Standardized
and Non-
standardized Return figures for Class I
each
reflect expense
reimbursement. Without expense
reimbursement,
each such
figure for the period since inception
would have
been .55%.
There were no Class I shares of the Fund
outstanding for the
time periods indicated.
CUMULATIVE TOTAL RETURN. Cumulative
total return
is the
cumulative rate of return on a hypothetical
initial
investment of
$1,000 in a specific Class of shares of the
Fund for a
specified
period. Cumulative total return quotations
reflect
changes in
the price of the Fund's shares and assume
that all
dividends and
capital gains distributions during the period
were
reinvested in
Fund shares. Cumulative total return is
calculated by
computing
the cumulative rates of return of a
hypothetical
investment in a
specific Class of shares of the Fund over the
periods
indicated,
according to the following formula
(cumulative total
return is
then expressed as a percentage):
C = (ERV/P)-1
Where: C = cumulative total return
P = a hypothetical initial
investment
of $1,000
to purchase shares of a
specific
Class
ERV = ending redeemable value:
ERV is
the value,
at the end of the
applicable
period, of a
hypothetical $1,000
investment made
at the
beginning of the
applicable period.
The following table summarizes the
calculation of
the
Cumulative Total Return for the Class A,
Class B and
Class I
shares of the Fund for the periods indicated,
assuming
the
maximum 3.00% sales charge HAS been assessed.
CUMULATIVE TOTAL RETURN FOR PERIOD ENDED
DECEMBER
31, 1995
SINCE
ONE YEAR
INCEPTION[#]
Class A 5.30% 20.55%
Class B 5.53% 5.53%
Class I[*] N/A 4.83
The following table summarizes the
calculation of
Cumulative
Total Return for the Class A, Class B and
Class I
shares of the
Fund for the periods indicated, assuming the
maximum
3.00% sales
charge HAS NOT been assessed.
CUMULATIVE TOTAL RETURN FOR PERIOD ENDED
DECEMBER
31, 1995
SINCE
ONE YEAR
INCEPTION[#]
Class A 8.56% 24.28%
Class B 8.53% 8.53%
Class I[*] N/A 4.83
____________
[#] The inception date for the Fund (and the
Class A
shares of
the Fund) was April 18, 1991; the
inception date
for the
Class I shares of the Fund was June 28,
1993; and
the
inception date for Class B shares of the
Fund is
January 1,
1995. From commencement until September
20, 1994,
the Fund
(formerly Mackenzie Adjustable U.S.
Government
Securities
Trust) had an investment objective of
seeking a
high level
of current income, consistent with lower
volatility of
principal. Until December 31, 1994,
Mackenzie
Investment
Management Inc. served as investment
adviser to
the Fund,
which until that date was a series of
The
Mackenzie Funds
Inc.
[*] Class I shares are not subject to a
sales charge,
therefore
the cumulative total return figures with
and
without
assessment of a maximum sales charge are
identical. There
were no Class I shares of the Fund
outstanding
during the
time periods indicated.
OTHER QUOTATIONS, COMPARISONS AND
GENERAL
INFORMATION. The
foregoing computation methods are prescribed
for
advertising and
other communications subject to SEC Rule 482.
Communications not
subject to this rule may contain a number of
different
measures
of performance, computation methods and
assumptions,
including
but not limited to: historical total
returns; results
of actual
or hypothetical investments; changes in
dividends,
distributions
or share values; or any graphic illustration
of such
data. These
data may cover any period of the Trust's
existence and
may or may
not include the impact of sales charges,
taxes or other
factors.
Performance quotations for the Fund will
vary from
time to
time depending on market conditions, the
composition of
the
Fund's portfolio and operating expenses of
the Fund.
These
factors and possible differences in the
methods used in
calculating performance quotations should be
considered
when
comparing performance information regarding
the Fund
with
information published for other investment
companies
and other
investment vehicles. Performance quotations
should
also be
considered relative to changes in the value
of the
Fund's shares
and the risks associated with the Fund's
investment
objectives
and policies. At any time in the future,
performance
quotations
may be higher or lower than past performance
quotations
and there
can be no assurance that any historical
performance
quotation
will continue in the future.
The Fund may also cite endorsements or
use for
comparison
its performance rankings and listings
reported in such
newspapers
or business or consumer publications as,
among others:
AAII
JOURNAL, BARRON'S, BOSTON BUSINESS JOURNAL,
BOSTON
GLOBE, BOSTON
HERALD, BUSINESS WEEK, CONSUMER'S DIGEST,
CONSUMER
GUIDE
PUBLICATIONS, CHANGING TIMES, FINANCIAL
PLANNING,
FINANCIAL
WORLD, FORBES, FORTUNE, GROWTH FUND GUIDE,
HOUSTON
POST,
INSTITUTIONAL INVESTOR, INTERNATIONAL FUND
MONITOR,
INVESTOR'S
DAILY, LOS ANGELES TIMES, MEDICAL ECONOMICS,
MIAMI
HERALD, MONEY
MUTUAL FUND FORECASTER, MUTUAL FUND LETTER,
MUTUAL FUND
SOURCE
BOOK, MUTUAL FUND VALUES, NATIONAL
UNDERWRITER NELSON'S
DIRECTOR
OF INVESTMENT MANAGERS, NEW YORK TIMES,
NEWSWEEK, NO
LOAD FUND
INVESTOR, NO LOAD FUND* X, OAKLAND TRIBUNE,
PENSION
WORLD,
PENSIONS AND INVESTMENT AGE, PERSONAL
INVESTOR, RUGG
AND STEELE,
TIME, U.S. NEWS AND WORLD REPORT, USA TODAY,
THE WALL
STREET
JOURNAL, AND WASHINGTON POST.
FINANCIAL STATEMENTS
The Portfolio of Investments as of
December 31,
1995, the
Statement of Assets and Liabilities as of
December 31,
1995, the
Statement of Operations for the fiscal year
ended
December 31,
1995, the Statement of Changes in Net Assets
for the
six-month
period ended December 31, 1994 and for the
fiscal years
ended
June 30, 1994 and December 31, 1995,
Financial
Highlights, the
Notes to Financial Statements, and the Report
of
Independent
Accountants are included in the Fund's
December 31,
1995 Annual
Report to Shareholders, which is incorporated
by
reference into
this SAI.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S
CORPORATION
("S&P") AND
MOODY'S INVESTORS SERVICE, INC.
("MOODY'S")
CORPORATE BOND
AND COMMERCIAL PAPER
RATINGS
[From "Moody's Bond Record," November 1994
Issue
(Moody's
Investor Service, New York, 1994), and
"Standard &
Poor's
Municipal Ratings Handbook," October 1994
Issue (McGraw
Hill, New
York, 1994).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa
by Moody's
are judged
by Moody's to be of the best quality,
carrying the
smallest
degree of investment risk. Interest payments
are
protected by a
large or exceptionally stable margin and
principal is
secure.
Bonds rated Aa are judged by Moody's to be of
high
quality by all
standards. Aa bonds are rated lower than Aaa
bonds
because
margins of protection may not be as large as
those of
Aaa bonds,
or fluctuations of protective elements may be
of
greater
amplitude, or there may be other elements
present which
make the
long-term risks appear somewhat larger than
those
applicable to
Aaa securities. Bonds which are rated A by
Moody's
possess many
favorable investment attributes and are
considered as
upper
medium-grade obligations. Factors giving
security to
principal
and interest are considered adequate, but
elements may
be present
which suggest a susceptibility to impairment
sometime
in the
future.
Bonds rated Baa by Moody's are
considered
medium-grade
obligations, I.E., they are neither highly
protected
nor poorly
secured. Interest payments and principal
security
appear
adequate for the present, but certain
protective
elements may be
lacking or may be characteristically
unreliable over
any great
length of time. Such bonds lack outstanding
investment
characteristics and in fact have speculative
characteristics as
well. Bonds which are rated Ba are judged to
have
speculative
elements; their future cannot be considered
well-assured. Often
the protection of interest and principal
payments may
be very
moderate and thereby not well safeguarded
during both
good and
bad times over the future. Uncertainty of
position
characterizes
bonds in this class. Bonds which are rated B
generally
lack
characteristics of the desirable investment.
Assurance
of
interest and principal payments of or
maintenance of
other terms
of the contract over any long period of time
may be
small.
Bonds which are rated Caa are of poor
standing.
Such
issues may be in default or there may be
present
elements of
danger with respect to principal or interest.
Bonds
which are
rated Ca represent obligations which are
speculative in
a high
degree. Such issues are often in default or
have other
marked
shortcomings. Bonds which are rated C are
the lowest
rated class
of bonds and issues so rated can be regarded
as having
extremely
poor prospects of ever attaining any real
investment
standing.
(b) COMMERCIAL PAPER. The Prime rating
is the
highest
commercial paper rating assigned by Moody's.
Among the
factors
considered by Moody's in assigning ratings
are the
following:
(1) evaluation of the management of the
issuer; (2)
economic
evaluation of the issuer's industry or
industries and
an
appraisal of speculative-type risks which may
be
inherent in
certain areas; (3) evaluation of the issuer's
products
in
relation to competition and customer
acceptance; (4)
liquidity;
(5) amount and quality of long-term debt; (6)
trend of
earnings
over a period of ten years; (7) financial
strength of a
parent
company and the relationships which exist
with the
issuer; and
(8) recognition by management of obligations
which may
be present
or may arise as a result of public interest
questions
and
preparations to meet such obligations.
Issuers within
this Prime
category may be given ratings 1, 2 or 3,
depending on
the
relative strengths of these factors. The
designation
of Prime-1
indicates the highest quality repayment
capacity of the
rated
issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate
debt
rating is a
current assessment of the creditworthiness of
an
obligor with
respect to a specific obligation. The
ratings are
based on
current information furnished by the issuer
or obtained
by S&P
from other sources it considers reliable.
The ratings
described
below may be modified by the addition of a
plus or
minus sign to
show relative standing within the major
rating
categories.
Debt rated AAA by S&P is considered by
S&P to be
the highest
grade obligation. Capacity to pay interest
and repay
principal
is extremely strong. Debt rated AA is judged
by S&P to
have a
very strong capacity to pay interest and
repay
principal and
differs from the highest rated issues only in
small
degree. Debt
rated A by S&P has a strong capacity to pay
interest
and repay
principal, although it is somewhat more
susceptible to
the
adverse effects of changes in circumstances
and
economic
conditions than debt in higher rated
categories.
Debt rated BBB by S&P is regarded by S&P
as having
an
adequate capacity to pay interest and repay
principal.
Although
such bonds normally exhibit adequate
protection
parameters,
adverse economic conditions or changing
circumstances
are more
likely to lead to a weakened capacity to pay
interest
and repay
principal than debt in higher rated
categories.
Debt rated BB, B, CCC, CC and C is
regarded as
having
predominately speculative characteristics
with respect
to
capacity to pay interest and repay principal.
BB
indicates the
least degree of speculation and C the
highest. While
such debt
will likely have some quality and protective
characteristics,
these are outweighed by large uncertainties
or
exposures to
adverse conditions. Debt rated BB has less
near-term
vulnerability to default than other
speculative issues.
However,
it faces major ongoing uncertainties or
exposure to
adverse
business, financial or economic conditions
which could
lead to
inadequate capacity to meet timely interest
and
principal
payments. The BB rating category is also
used for debt
subordinated to senior debt that is assigned
an actual
or implied
BBB- rating. Debt rated B has a greater
vulnerability
to default
but currently has the capacity to meet
interest
payments and
principal repayments. Adverse business,
financial, or
economic
conditions will likely impair capacity or
willingness
to pay
interest and repay principal. The B rating
category is
also used
for debt subordinated to senior debt that is
assigned
an actual
or implied BB or BB- rating. Debt rated CCC
has a
currently
identifiable vulnerability to default, and is
dependent
upon
favorable business, financial, and economic
conditions
to meet
timely payment of interest and repayment of
principal.
In the
event of adverse business, financial or
economic
conditions, it
is not likely to have the capacity to pay
interest and
repay
principal. The CCC rating category is also
used for
debt
subordinated to senior debt that is assigned
an actual
or implied
B or B- rating. The rating CC typically is
applied to
debt
subordinated to senior debt which is assigned
an actual
or
implied CCC debt rating. The rating C
typically is
applied to
debt subordinated to senior debt which is
assigned an
actual or
implied CCC- debt rating. The C rating may
be used to
cover a
situation where a bankruptcy petition has
been filed,
but debt
service payments are continued.
(b) COMMERCIAL PAPER. An S&P
commercial paper
rating is a
current assessment of the likelihood of
timely payment
of debt
having an original maturity of no more than
365 days.
Commercial paper rated A by S&P has the
following
characteristics: (i) liquidity ratios are
adequate to
meet cash
requirements; (ii) long-term senior debt
rating should
be A or
better, although in some cases BBB credits
may be
allowed if
other factors outweigh the BBB; (iii) the
issuer should
have
access to at least one additional channel of
borrowing;
(iv)
basic earnings and cash flow should have an
upward
trend with
allowances made for unusual circumstances;
and (v)
typically the
issuer's industry should be well established
and the
issuer
should have a strong position within its
industry and
the
reliability and quality of management should
be
unquestioned.
Issues rated A are further referred to by use
of
numbers 1, 2 and
3 to denote relative strength within this
highest
classification.
For example, the A-1 designation indicates
that the
degree of
safety regarding timely payment of debt is
strong.
Issues rated B are regarded as having
only
speculative
capacity for timely payment. The C rating is
assigned
to short-
term debt obligations with a doubtful
capacity for
payment.
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