As filed with the Securities and Exchange Commission on
October 31, 1997
(File No. 2-17613)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 96 [ X ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. [ X ]
IVY FUND
(Exact Name of Registrant as Specified in Charter)
Via Mizner Financial Plaza
700 South Federal Highway - Suite 300
Boca Raton, Florida 33432
(Address of Principal Executive Offices)
Registrant's Telephone Number: (800) 777-6472
C. William Ferris
Mackenzie Investment Management Inc.
Via Mizner Financial Plaza
700 South Federal Highway - Suite 300
Boca Raton, Florida 33432
(Name and Address of Agent for Service)
Copies to:
Joseph R. Fleming, Esq.
Dechert Price & Rhoads
Ten Post Office Square, South - Suite 1230
Boston, MA 02109
[ X ] It is proposed that this Post-Effective Amendment
become effective on January 1, 1998 pursuant to
subparagraph (a) of Rule 485.
THIS POST-EFFECTIVE AMENDMENT NO. 96 IS BEING FILED IN ORDER TO
ADD ADVISOR CLASS SHARES TO IVY ASIA PACIFIC FUND, IVY BOND FUND,
IVY CANADA FUND, IVY CHINA REGION FUND, IVY EMERGING GROWTH FUND,
IVY GLOBAL FUND, IVY GLOBAL NATURAL RESOURCES FUND, IVY GLOBAL
SCIENCE & TECHNOLOGY FUND, IVY GROWTH FUND, IVY GROWTH WITH
INCOME FUND, IVY INTERNATIONAL FUND II, IVY INTERNATIONAL BOND
FUND, IVY INTERNATIONAL SMALL COMPANIES FUND, IVY LATIN AMERICA
STRATEGY FUND, IVY NEW CENTURY FUND AND IVY PAN-EUROPE FUND. THE
PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION THAT ARE
INCLUDED IN THIS POST-EFFECTIVE AMENDMENT NO. 96 ARE TO BE USED
CONCURRENTLY WITH AND SEPARATELY FROM THE CURRENTLY EFFECTIVE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR IVY MONEY
MARKET FUND, WHICH ARE NOT INCLUDED IN, BUT ARE INCORPORATED BY
REFERENCE TO, THIS FILING.
IVY FUND
CROSS REFERENCE SHEET
Post-Effective Amendment No. 96 contains the Prospectus and
Statement of Additional Information to be used with Ivy Asia
Pacific Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Global
Fund, Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International
Small Companies Fund, Ivy Latin America Strategy Fund, Ivy New
Century Fund and Ivy Pan-Europe Fund, twelve of the eighteen
series of Ivy Fund (the "Registrant"). The other series of the
Registrant are described in separate prospectuses and statements
of additional information, all of which are included herein,
except for the prospectus and statement of additional information
for Ivy Money Market Fund, which are incorporated by reference.
Items Required by Form N-1A
PART A:
1 COVER PAGE: Cover Page
2 SYNOPSIS: Expense Information
3 CONDENSED FINANCIAL INFORMATION: The Fund's Financial
Highlights
4 GENERAL DESCRIPTION OF REGISTRANT: Investment Objectives
and Policies; Risk Factors and Investment Techniques
5 MANAGEMENT OF THE FUND: Organization and Management of the
Fund; Investment Manager; Transfer Agent; Fund
Administration and Accounting
6 CAPITAL STOCK AND OTHER SECURITIES: Performance Data;
Dividends and Taxes; Choosing a Distribution Option;
Shareholder Inquiries; Signature Guarantees; Consolidated
Account Statements
7 PURCHASE OF SECURITIES BEING OFFERED: How to Buy Shares;
How Your Purchase Price is Determined; How Each Fund Values
its Shares; Automatic Investment Method; Retirement Plans
8 REDEMPTION OR REPURCHASE: How to Redeem Shares; Minimum
Account Balance Requirements; Tax Identification Number;
Certificates; Exchange Privilege; Systematic Withdrawal Plan
9 PENDING LEGAL PROCEEDINGS: Not Applicable
PART B:
10 COVER PAGE: Cover Page
11 TABLE OF CONTENTS: Table of Contents
12 GENERAL INFORMATION AND HISTORY: Investment Objectives and
Policies
13 INVESTMENT OBJECTIVES AND POLICIES: Investment Objectives
and Policies; Investment Restrictions; Additional
Restrictions
14 MANAGEMENT OF THE FUND: Trustees and Officers; Investment
Advisory and Other Services
15 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES:
Trustees and Officers; Capitalization and Voting Rights
16 INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisory
and Other Services
17 BROKERAGE ALLOCATION AND OTHER PRACTICES: Brokerage
Allocation; Portfolio Turnover
18 CAPITAL STOCK AND OTHER SECURITIES: Capitalization and
Voting Rights
19 PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING
OFFERED: Net Asset Value; Redemptions
20 TAX STATUS: Taxation
21 UNDERWRITERS: Investment Advisory and Other Services
22 CALCULATION OF PERFORMANCE DATA: Performance Information
23 FINANCIAL STATEMENTS: Financial Statements
IVY FUND
CROSS REFERENCE SHEET
Post-Effective Amendment No. 96 contains the Prospectus and
Statement of Additional Information to be used with Ivy Bond
Fund, Ivy Emerging Growth Fund, Ivy Growth Fund and Ivy Growth
With Income Fund four of the eighteen series of Ivy Fund (the
"Registrant"). The other series of the Registrant are described
in separate prospectuses and statements of additional
information, all of which are included herein, except for the
prospectus and statement of additional information for Ivy Money
Market Fund, which are incorporated by reference.
Items Required by Form N-1A
PART A:
1 COVER PAGE: Cover Page
2 SYNOPSIS: Expense Information
3 CONDENSED FINANCIAL INFORMATION: The Fund's Financial
Highlights
4 GENERAL DESCRIPTION OF REGISTRANT: Investment Objectives
and Policies; Risk Factors and Investment Techniques
5 MANAGEMENT OF THE FUND: Organization and Management of the
Fund; Investment Manager; Transfer Agent; Fund
Administration and Accounting
6 CAPITAL STOCK AND OTHER SECURITIES: Performance Data;
Dividends and Taxes; Choosing a Distribution Option;
Shareholder Inquiries; Signature Guarantees; Consolidated
Account Statements
7 PURCHASE OF SECURITIES BEING OFFERED: How to Buy Shares;
How Your Purchase Price is Determined; How Each Fund Values
its Shares; Automatic Investment Method; Retirement Plans
8 REDEMPTION OR REPURCHASE: How to Redeem Shares; Minimum
Account Balance Requirements; Tax Identification Number;
Certificates; Exchange Privilege; Systematic Withdrawal Plan
9 PENDING LEGAL PROCEEDINGS: Not Applicable
PART B:
10 COVER PAGE: Cover Page
11 TABLE OF CONTENTS: Table of Contents
12 GENERAL INFORMATION AND HISTORY: Investment Objectives and
Policies
13 INVESTMENT OBJECTIVES AND POLICIES: Investment Objectives
and Policies; Investment Restrictions; Additional
Restrictions
14 MANAGEMENT OF THE FUND: Trustees and Officers; Investment
Advisory and Other Services
15 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES:
Trustees and Officers; Capitalization and Voting Rights
16 INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisory
and Other Services
17 BROKERAGE ALLOCATION AND OTHER PRACTICES: Brokerage
Allocation; Portfolio Turnover
18 CAPITAL STOCK AND OTHER SECURITIES: Capitalization and
Voting Rights
19 PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING
OFFERED: Net Asset Value; Redemptions
20 TAX STATUS: Taxation
21 UNDERWRITERS: Investment Advisory and Other Services
22 CALCULATION OF PERFORMANCE DATA: Performance Information
23 FINANCIAL STATEMENTS: Financial Statements
IVY FUND
CROSS REFERENCE SHEET
Post-Effective Amendment No. 96 contains the Prospectus and
Statement of Additional Information to be used with Ivy
International Bond Fund, one of the eighteen series of Ivy Fund
(the "Registrant"). The other series of the Registrant are
described in separate prospectuses and statements of additional
information, all of which are included herein, except for the
prospectus and statement of additional information for Ivy Money
Market Fund, which are incorporated by reference.
Items Required by Form N-1A
PART A:
1 COVER PAGE: Cover Page
2 SYNOPSIS: Expense Information
3 CONDENSED FINANCIAL INFORMATION: The Fund's Financial
Highlights
4 GENERAL DESCRIPTION OF REGISTRANT: Investment Objectives
and Policies; Risk Factors and Investment Techniques
5 MANAGEMENT OF THE FUND: Organization and Management of the
Fund; Investment Manager; Transfer Agent; Fund
Administration and Accounting
6 CAPITAL STOCK AND OTHER SECURITIES: Performance Data;
Dividends and Taxes; Choosing a Distribution Option;
Shareholder Inquiries; Signature Guarantees; Consolidated
Account Statements
7 PURCHASE OF SECURITIES BEING OFFERED: How to Buy Shares;
How Your Purchase Price is Determined; How Each Fund Values
its Shares; Automatic Investment Method; Retirement Plans
8 REDEMPTION OR REPURCHASE: How to Redeem Shares; Minimum
Account Balance Requirements; Tax Identification Number;
Certificates; Exchange Privilege; Systematic Withdrawal Plan
9 PENDING LEGAL PROCEEDINGS: Not Applicable
PART B:
10 COVER PAGE: Cover Page
11 TABLE OF CONTENTS: Table of Contents
12 GENERAL INFORMATION AND HISTORY: Investment Objectives and
Policies
13 INVESTMENT OBJECTIVES AND POLICIES: Investment Objectives
and Policies; Investment Restrictions; Additional
Restrictions
14 MANAGEMENT OF THE FUND: Trustees and Officers; Investment
Advisory and Other Services
15 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES:
Trustees and Officers; Capitalization and Voting Rights
16 INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisory
and Other Services
17 BROKERAGE ALLOCATION AND OTHER PRACTICES: Brokerage
Allocation; Portfolio Turnover
18 CAPITAL STOCK AND OTHER SECURITIES: Capitalization and
Voting Rights
19 PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING
OFFERED: Net Asset Value; Redemptions
20 TAX STATUS: Taxation
21 UNDERWRITERS: Investment Advisory and Other Services
22 CALCULATION OF PERFORMANCE DATA: Performance Information
23 FINANCIAL STATEMENTS: Financial Statements
PROSPECTUS January 1, 1998
IVY FUND
U.S. EQUITY AND FIXED INCOME FUNDS -- ADVISOR CLASS SHARES
Ivy Fund (the "Trust") is a registered investment company
currently consisting of eighteen separate portfolios. The Advisor
Class shares of four 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 Advisor Class shares.
The four Funds are:
Ivy Bond Fund
Ivy Emerging Growth Fund
Ivy Growth Fund
Ivy Growth with Income Fund
Advisor Class shares are offered at net asset value without
the imposition of a front-end or contingent deferred sales charge
or Rule 12b-1 fees, and are available for purchase only by
certain investors. The Funds' Class A, Class B and Class C shares
(and the Class I shares of Ivy Bond Fund) are described in a
separate prospectus dated April 30, 1997.
This Prospectus sets forth concisely the information about
the Funds' Advisor Class shares that a prospective investor
should know before investing. Please read it carefully and retain
it for future reference. Additional information about the Advisor
Class shares is contained in the Statement of Additional
Information for the Funds' Advisor Class shares dated January 1,
1998 (the "SAI"), which has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference into
this Prospectus. The SAI, and the prospectus for the Funds' other
classes of shares, are available upon request and without charge
at the Distributor's address and telephone number printed below.
The SEC maintains a web site (http://www.sec.gov) that contains
the SAI and other material incorporated by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC
OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC 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
The Funds' Financial Highlights
Investment Objectives and Policies
Risk Factors and Investment Techniques
Organization and Management of the Funds
Investment Manager
Fund Administration and Accounting
Transfer Agent
Dividends and Taxes
Performance Data
How to Buy Shares
How Your Purchase Price is Determined
How Each Fund Values Its Shares
How to Redeem Shares
Minimum Account Balance Requirements
Signature Guarantees
Choosing a Distribution Option
Tax Identification Number
Certificates
Exchange Privilege
Systematic Withdrawal Plan
Automatic Investment Method
Consolidated Account Statements
Retirement Plans
Shareholder Inquiries
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Ft. Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
EXPENSE INFORMATION
The expenses and costs associated with investing in the
Advisor Class shares of each Fund are reflected in the following
tables.
SHAREHOLDER TRANSACTION EXPENSES
MAXIMUM SALES MAXIMUM CONTINGENT
LOAD IMPOSED DEFERRED SALES
ON PURCHASES CHARGE (AS A % OF
(AS A % OF ORIGINAL PURCHASE
OFFERING PRICE) PRICE)
All Funds None None
None of the Funds charges a redemption fee, an exchange fee,
or a sales load on reinvested dividends.
ANNUAL FUND OPERATING EXPENSES(1)
(as a percentage of average net assets)
12B-1 TOTAL FUND
SERVICE/ OTHER OPERATING
MANAGEMENT DISTRIBUTION EXPENSES EXPENSES
FEES(2) FEES (2) (2)
IVY BOND FUND 0.75% None 0.56% 1.31%
IVY EMERGING 0.85% None 0.66% 1.51%
GROWTH FUND
IVY GROWTH FUND 0.85% None 0.55% 1.40%
IVY GROWTH WITH 0.75% None 0.76% 1.51%
INCOME FUND
(1) The inception date for each Fund's Advisor Class shares is
January 1, 1998. Accordingly, the expense ratios shown are
estimates based on amounts incurred by each Fund's Class A
during the fiscal year ended December 31, 1996.
(2) After expense reimbursements; Ivy Management, Inc. ("IMI")
currently limits Total Fund Operating Expenses (excluding
Rule 12b-1 fees and certain other items, and net of any
credits for fees paid indirectly) for all Funds to an annual
rate of 1.95% of each Fund's average net assets. Total Fund
Operating Expenses in the above table include fees paid
indirectly. Without expense reimbursements Management Fees
would have been 1.00%.
EXAMPLES
The following tables list the expenses an investor would pay
on a $1,000 investment in a Fund's Advisor Class shares, 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 3 5 10
YEAR YEARS YEARS YEARS
IVY BOND FUND $13 $42 $72 $158
IVY EMERGING GROWTH FUND $15 $48 $82 $180
IVY GROWTH FUND $14 $44 $77 $168
IVY GROWTH WITH INCOME FUND $15 $48 $82 $180
The purpose of the foregoing tables is to assist you in
understanding the various costs and expenses that an investor in
a Fund's Advisor Class shares 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," "Investment Manager"
and "Fund Administration and Accounting," and the following
section of the SAI: "Investment Advisory and Other Services."
THE FUNDS' FINANCIAL HIGHLIGHTS
The inception date for the Funds' Advisor Class shares is
January 1, 1998. Accordingly, no financial information for these
shares is presented below. The accounting firm of Coopers &
Lybrand L.L.P. will be responsible for auditing financial
information relating to the Funds' Advisor Class shares.
Financial highlights for the Funds' Class A, Class B and Class C
shares (and Class I shares, in the case of Ivy Bond Fund) are
contained in a separate Prospectus dated April 30, 1997. The
Funds' Annual Reports are incorporated by reference into the SAI,
and are available upon request from the Funds' transfer agent
(1-800-777-6472).
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 Board of Trustees of
the Trust ("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, including zero-coupon bonds, 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, 1996, 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 Moody's or
S&P, whichever rating is higher): 3.7% in securities rated
Aaa/AAA; 0% in securities rated Aa/AA; 1.9% in securities rated
A/A; 60.4% in securities rated Baa/BBB; 14.2% in securities rated
Ba/BB; 16.3% in securities rated B/B; 0.7% in securities rated
Caa/CCC; 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 total assets in
dividend-paying common and preferred stocks (including adjustable
rate preferred stocks and securities convertible into common
stocks), municipal bonds, zero coupon bonds, and securities sold
on a "when-issued" or firm commitment basis. As a temporary
measure for extraordinary or emergency purposes, the Fund 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"), Global Depository Receipts ("GDRs"), American
Depository Shares ("ADSs") and Global Depository Shares ("GDSs"),
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
cycles 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 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, 1996, 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 will not exceed 15% of its total assets.
RISK FACTORS AND INVESTMENT TECHNIQUES
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 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. As interest
rates decline, the value of debt securities generally increases.
Conversely, rising interest rates tend to cause the value of debt
securities to decrease. Bonds with longer maturities generally
are more volatile than bonds with shorter maturities. The market
value of debt securities also varies according to the relative
financial condition of the issuer. In general, lower-quality
bonds offer higher yields due to the increased risk that the
issuer will be unable to meet its obligations on interest or
principal payments at the time called for by the debt instrument.
U.S. GOVERNMENT SECURITIES: U.S. Government securities are
obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. Such securities include: (1)
direct obligations of the U.S. Treasury (such as Treasury bills,
notes, and bonds) and (2) Federal agency obligations guaranteed
as to principal and interest by the U.S. Treasury (such as GNMA
certificates, which are mortgage-backed securities). When such
securities are held to maturity, the payment of principal and
interest is unconditionally guaranteed by the U.S. Government,
and thus they are of the highest possible credit quality. U.S.
Government securities that are not held to maturity are subject
to variations in market value caused by fluctuations in interest
rates.
Mortgage-backed securities are securities representing part
ownership of a pool of mortgage loans. Although the mortgage
loans in the pool will have maturities of up to 30 years, the
actual average life of the loans typically will be substantially
less because the mortgages will be subject to principal
amortization and may be prepaid prior to maturity. In periods of
falling interest rates, the rate of prepayment tends to increase,
thereby shortening the actual average life of the security.
Conversely, rising interest rates tend to decrease the rate of
prepayment, thereby lengthening the security's actual average
life (and increasing the security's price volatility.) Since it
is not possible to predict accurately the average life of a
particular pool, and because prepayments are reinvested at
current rates, the market value of mortgage-backed securities may
decline during periods of declining interest rates.
INVESTMENT-GRADE DEBT SECURITIES: Bonds rated Aaa by
Moody's and AAA by S&P are judged to be of the best quality
(i.e., capacity to pay interest and repay principal is extremely
strong). Bonds rated Aa/AA are considered to be of high quality
(i.e., capacity to pay interest and repay 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 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 (in particular, Appendix A, which
contains a more complete description of the ratings assigned by
Moody's and S&P).
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.
FOREIGN SECURITIES: The foreign securities in which the
Funds invest may include non-U.S. dollar-denominated securities,
Eurodollar securities, sponsored or unsponsored ADRs, GDRs, ADSs
and GDSs, 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 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, 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. 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,
difficulties in enforcing foreign judgments, political or social
instability, or other developments that could adversely affect
the Funds' foreign investments.
The risks of investing in foreign securities (described
above) 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.
In addition, many emerging markets have experienced and continue
to experience especially high rates of inflation. In certain
countries, inflation has at times accelerated rapidly to
hyperinflationary levels, creating a negative interest rate
environment and sharply eroding the value of outstanding
financial assets in those countries.
In recent years, many emerging market countries 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).
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.
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 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 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 of the option the right,
in return for a premium, 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: A real estate investment
trust ("REIT") is a corporation, trust or association that
invests in real estate mortgages or equities for the benefit of
its investors. 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 obtaining
direct ownership of the underlying collateral, and might incur a
loss if the value of the security should decline.
RESTRICTED AND ILLIQUID SECURITIES: An "illiquid security"
is an asset that may not be sold or disposed of in the ordinary
course of business within seven days at approximately the value
at which a Fund has valued the security on its books. A
"restricted security" is a security that cannot be offered to the
public for sale without first being registered under the
Securities Act of 1933, as amended, and is considered to be
illiquid until such filing takes place. 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. Securities whose proceeds are subject to limitations on
repatriation of principal or profits for more than seven days,
and those for which market quotations are not readily available,
are considered illiquid for purposes of the percentage
limitations that apply to each Fund's investment in illiquid
securities.
SMALL COMPANIES: Investing in smaller company stocks
involves certain special considerations and risks that are not
usually associated with investing in larger, more established
companies. For example, the securities of small or new companies
may be subject to more abrupt or erratic market movements because
they tend to be thinly traded and are subject to a greater degree
to changes in the issuer's earnings and prospects. Small
companies also tend to have limited product lines, markets or
financial resources. Transaction costs associated with trading in
smaller company stocks may be higher than those of larger
companies.
"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 18 separate portfolios. Each Fund has
four classes of shares, designated as Class A, Class B, Class C
and an Advisor Class (only the latter of which is offered by this
Prospectus). Ivy Bond Fund has a fifth 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 the Advisor
Class and Class I of Ivy Bond Fund, has a different Rule 12b-1
distribution plan and bears different distribution fees. Class I
shares are subject to lower administrative service and transfer
agency fees than the Funds' Class A, Class B, Class C and Advisor
Class shares. Each class of shares also has its own sales charge
and expense structure that may affect its performance relative to
a Fund's other classes of 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.
As of October 31, 1997, IMI and MIMI had approximately $_____
billion and $____ 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 average net assets. Ivy Bond
Fund pays a fee that is equal, on an annual basis, to 0.75% of
the first $100 million in average net assets, reduced to 0.50% of
average net assets in excess of $100 million. For the year ended
December 31, 1996, Ivy Bond Fund paid IMI an effective investment
management fee of 0.75% of the Fund's average net assets. Ivy
Emerging Growth Fund and Ivy Growth Fund each pay a fee that is
equal, on an annual basis, to 0.85% of its average net assets.
Ivy Growth with Income Fund pays a fee that is equal, on an
annual basis, to 0.75% 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) directly. The fees payable
to IMI are subject to any reimbursement or fee waiver to which
IMI may agree.
PORTFOLIO MANAGEMENT: The following individuals have
responsibilities for management of the Funds:
- - James W. Broadfoot, is President and Chief Investment
Officer of IMI, has been a portfolio manager for Ivy
Emerging Growth Fund since the Fund's inception in 1993, Ivy
Growth Fund since 1994 and Ivy Growth with Income Fund since
1997. 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.
- - Frank DuMond is a portfolio manager for Ivy Growth Fund and
Ivy Growth with Income Fund. Mr. DuMond has served as
portfolio manager since 1997, and prior to that served as a
research analyst from 1994 through 1996. Mr. DuMond joined
the organization in 1994 and has 4 years of professional
investment experience. He holds a Bachelor of Science degree
from the Massachusetts Institute of Technology.
- - Leslie A. Ferris, a Senior Vice President of IMI, has been a
portfolio manager for Ivy Bond Fund since 1993. Ms. Ferris
joined the organization in 1988 and has 15 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 9 years of professional
investment experience. She has been a portfolio manager for
Ivy Growth Fund since 1993. 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 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
Advisor Class shares are subject to a fee, accrued daily and paid
monthly, at an annual rate of .10%
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).
DIVIDENDS AND TAXES
Distributions you receive from a Fund are reinvested in
additional Advisor Class shares unless you elect to receive them
in cash.
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, that a
Fund designates as capital gains dividends 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.
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 may be eligible for reduced tax
rates, 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 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
Advisor Class shares are offered through this Prospectus
only to the following investors:
(i) trustees or other fiduciaries purchasing shares for
employee benefit plans that are sponsored by organizations
that have at least 1,000 employees; and
(ii) any account with assets of at least $10,000 if (a) a
financial planner, trust company, bank trust department or
registered investment adviser has investment discretion,
and where the investor pays such person as compensation
for its advice and other services an annual fee of at
least .50% on the assets in the account, or (b) such
account is established under a "wrap fee" program and the
account holder pays the sponsor of the program an annual
fee of at least .50% on the assets in the account; and
(iii) officers and Trustees of the Trust (and their relatives);
and
(iv) officers, directors, employees, retired employees, legal
counsel and accountants of IMI, MIMI, and MFC (and their
relatives); and
(v) 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).
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 any purchase order.
MINIMUM INVESTMENT POLICIES: The minimum initial investment
in Advisor Class shares is $10,000. The minimum additional
investment is $250. Initial or additional amounts for retirement
accounts may be less (see "Retirement Plans").
BUYING ADDITIONAL SHARES: You may add to your account at
any time through any of the following options:
BY MAIL: Complete the investment slip attached to your
statement, or write instructions including the account
registration, fund number, and account number of the shares you
wish to purchase. Send your check (payable to the Fund in which
you are investing) and investment slip or written instructions to
one of the addresses above.
THROUGH YOUR BROKER: Deliver to your registered
representative or selling broker the investment slip attached to
your statement (or written instructions) along with your payment.
BY WIRE: Purchases may also be made by wiring money from
your bank account to your Ivy account. Your bank may charge a fee
for wiring funds. Before wiring any funds, please call IMSC at 1-
800-777-6472. Wiring instructions are as follows:
First Union National Bank of Florida
Jacksonville, FL
ABA#063000021
Account #2090002063833
For further credit to:
Your Ivy Account Registration
Your Fund Number and Account Number
BY AUTOMATIC INVESTMENT METHOD: Complete Sections 6A and 7B
on the Account Application (See "Automatic Investment Method" on
page ___ for more information).
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Advisor Class shares of a Fund is
the net asset value ("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 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 Trustees have 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.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS: IMDI may, at
its own expense, pay concessions 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.
An investor may be charged a transaction fee for Advisor
Class shares purchased or redeemed through a broker or agent
other than IMDI.
HOW TO REDEEM SHARES
You may redeem your Advisor Class shares through your
registered securities representative, by mail or by telephone.
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.
When shares are redeemed, a Fund generally sends payment to
you 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
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
___ 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 has been less than $10,000 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 Advisor
Class shares of a Fund unless you specify one of the other
options.
INVESTMENT IN ANOTHER IVY FUND - Both dividends and capital
gains are automatically invested at NAV in the Advisor Class
shares of another Ivy Fund.
DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED - Dividends will
be paid in cash. Capital gains will be reinvested at NAV in
additional Advisor Class shares of a Fund or the Advisor Class
shares of another Ivy Fund.
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
Advisor Class shareholders may exchange their outstanding
Advisor Class shares for Advisor Class shares of another Ivy fund
(other than Ivy International Fund) on the basis of the relative
NAV per Advisor Class share. Exchanges into an Ivy fund in which
shares are not already held are subject to certain minimum
investment restrictions. See "Exchange of Shares" in the SAI or
contact IMSC at 1-800-777-6472 for further details. The Funds
reserve the right to reject any exchange order.
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. 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
fund into which the exchange is made. It is the policy of the
Funds to discourage the use of the exchange privilege for the
purpose of timing short-term market fluctuations. To protect the
interests of other shareholders of a Fund, a Fund may cancel the
exchange privileges of any persons that, in the opinion of the
Fund, are using market timing strategies or are making more than
five exchanges per owner or controlling person per calendar year.
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.
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 continually maintain an account balance of at
least $10,000. 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. Shares must be uncertificated (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 $250 while the
plan is in effect. Redemptions are taxable events.
Amounts paid to you through the Systematic Withdrawal Plan
are derived from the redemption of shares in your account.
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 $250 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 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 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
- - SIMPLE Plans (Individual Retirement Account and 401(k))
Minimum initial and subsequent investments for retirement plans
are $25.
Investors Bank & Trust, which serves as custodian or trustee
under the retirement plan prototypes available from 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 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.
ACCOUNT APPLICATION
IVY BOND FUND
IVY EMERGING GROWTH FUND
IVY GROWTH FUND
IVY GROWTH WITH INCOME FUND
USE THIS APPLICATION FOR ADVISOR CLASS SHARES
Please mail applications and checks to: Ivy Mackenzie Services
Corp., P.O. Box 3022, Boca Raton, FL 33431-0922.
(This application should not be used for retirement accounts for
which Ivy is custodian.)
Account Number:
(Fund Use Only)
Dealer #:
Branch #:
Rep. I.D. #:
Acct. Type: 101/
Soc Cd:
Div Cd: 1/2
CG Cd: 1/2
Exc Cd: 0/1
Red Cd: 0/X
1 REGISTRATION
/ / Individual
/ / Joint Tenant
/ / Estate
/ / UGMA/UTMA
/ / Corporation
/ / Partnership
/ / Sole Proprietor
/ / Trust
/ / Other
Date of Trust
Owner, Custodian or Trustee
Co-owner or Minor
Minor's State of Residence
Street
City
State
Zip Code
Phone Number -- Day
Phone Number -- Evening
2 TAX ID
Citizenship: / / U.S. / / Other ________________
Social Security Number
Tax Identification Number
Under penalties of perjury, I certify by signing in Section
8 below that: (1) the number shown in this section is my
correct taxpayer identification number (TIN), and (2) I am
not subject to backup withholding because: (a) I have not
been notified by the Internal Revenue Service (IRS) that I
am subject to backup withholding as a result of a failure to
report all interest or dividends, or (b) the IRS has
notified me that I am no longer subject to backup
withholding. (Cross out item (2) if you have been notified
by the IRS that you are currently subject to backup
withholding because of underreporting interest or dividends
on your tax return.) Please see the "Tax Identification
Number" section of the Prospectus for additional information
on completing this section.
3 DEALER INFORMATION
The undersigned ("Dealer") agrees to all applicable
provisions in this Application, guarantees the signature and
legal capacity of the Shareholder, and agrees to notify IMSC
of any purchases made under a Letter of Intent or Rights of
Accumulation.
Dealer Name
Branch Office Address
City
State
Zip Code
Representative's Name and Number
Representative's Phone Number
Authorized Signature of Dealer
4 INVESTMENTS
A. Enclosed is my check ($10,000 minimum per Fund) made
payable to the appropriate Fund(s)*. Please invest as
follows:
$_______________ Ivy Bond Fund
$_______________ Ivy Emerging Growth Fund
$_______________ Ivy Growth Fund
$_______________ Ivy Growth with Income Fund
* If investing in more than one Fund, make your
check payable to "Ivy Funds".
B. FOR DEALER USE ONLY
Confirmed trade orders: [Confirm Number, Number of
Shares, Trade Date]
5 DISTRIBUTION OPTIONS
I would like to reinvest dividends and capital gains into
additional shares in this account at net asset value unless
a different option is checked below.
A. / / Reinvest all dividends and capital gains into
additional shares of a different Ivy fund.
Fund Name
Account Number
B. / / Pay all dividends in cash and reinvest capital
gains into additional shares in this Fund or a
different Ivy fund.
Fund Name
Account Number
C. / / Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN C OR D
ABOVE, BE:
/ / Sent to the address listed in the registration.
/ / Sent to the special payee listed in Section
7A / / (By Mail)
7B / / (By E.F.T.)
6 OPTIONAL SPECIAL FEATURES
A. / / Automatic Investment Method (AIM)
- I wish to invest _________________
/ / once per month
/ / twice
/ / 3 times
/ / 4 times
- My bank account will be debited on the _________ day of
the month
Please invest $________________ each period starting in the
month of __________________ in the Advisor Class 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 Advisor Class
account in __________________[Fund Name].
/ / Monthly / / Quarterly / /Semiannually / / Annually
/ / Once / / Twice / / 3 times / / 4 times per month
I request the distribution be:
/ / Sent to the address listed in the registration.
/ / Sent to the special payee listed in Section 7.
/ / Invested into additional shares of the same class of a
different Ivy fund.
Fund Name
Account Number
Amount $__________________(Minimum $50) starting on or about
the
- _______ day of the month
- _______ day of the month
- _______ day of the month*
NOTE: Account minimum: $5,000 in shares at current offering
price
C. Electronic Funds Transfer for Redemption Proceeds**
I authorize the Agent to honor telephone instructions
for the redemption of Fund shares up to $50,000.
Proceeds may be wire transferred to the bank account
designated ($1,000 minimum). (Complete Section 7B)
D. Telephone Exchanges** / / Yes / / No
I authorize exchanges by telephone among the Ivy funds
upon instructions from any person as more fully
described in the Prospectus. To change this option once
established, written instructions must be received from
the shareholder of record or the current registered
representative.
If neither box is checked, the telephone exchange
privilege will be provided automatically.
E. Telephonic Redemptions** / / Yes / / No
The Fund or its agents are authorized to honor
telephone instructions from any person as more fully
described in the Prospectus for the redemption of Fund
shares. The amount of the redemption shall not exceed
$50,000 and the proceeds are to be payable to the
shareholder of record and mailed to the address of
record. To change this option once established, written
instructions must be received from the shareholder of
record or the current registered representative.
If neither box is checked, the telephone redemption
privilege will be provided automatically.
* There must be a period of at least seven calendar days
between each investment/withdrawal period.
** This option may not be used if shares are issued in
certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS
Please send all disbursements to this special payee:
Name of Bank or Individual
Account Number (If Applicable)
Street
City/State/Zip
B. FED WIRE / E.F.T. INFORMATION
Financial Institution
ABA #
Account #
Street
City/State/Zip
(Please attach a voided check)
8 SIGNATURES
Investors should be aware that the failure to check the "No"
under Section 6D or 6E above means that the Telephone
Exchange/Redemption Privileges will be provided. The Funds
employ reasonable procedures that require personal
identification prior to acting on exchange/redemption
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such procedures,
a Fund may be liable for any losses due to unauthorized or
fraudulent telephone instructions. Please see "Exchange
Privilege" and "How to Redeem Shares" in the Prospectus for
more information on these privileges.
I certify to my legal capacity to purchase or redeem shares
of the Fund for my own account or for the account of the
organization named in Section 1. I have received a current
Prospectus and understand its terms are incorporated in this
application by reference. I am certifying my taxpayer
information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT
TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
______________________________ ________________________
Signature of Owner, Custodian, Date
Trustee or Corporate Officer
______________________________ ________________________
Signature of Joint Owner, Date
Co-Trustee or Corporate Officer
(Remember to sign Section 8)
PROSPECTUS
January 1, 1998
IVY FUND
INTERNATIONAL EQUITY FUNDS -- ADVISOR CLASS SHARES
Ivy Fund (the "Trust") is a registered investment company
currently consisting of eighteen separate portfolios. The Advisor
Class shares of eleven 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 Advisor Class shares.
The eleven Funds are:
Ivy Asia Pacific Fund
Ivy Canada Fund
Ivy China Region Fund
Ivy Global Fund
Ivy Global Natural Resources Fund
Ivy Global Science & Technology Fund
Ivy International Fund II
Ivy International Small Companies Fund
Ivy Latin America Strategy Fund
Ivy New Century Fund
Ivy Pan-Europe Fund
Advisor Class shares are offered at net asset value
without
the imposition of a front-end or contingent deferred sales charge
or Rule 12b-1 fees, and are available for purchase only by
certain investors. The Funds' Class A, Class B and Class C shares
(and the Class I shares of Ivy Global Science & Technology Fund,
Ivy International Fund II and Ivy Small Companies Fund) are
described in a separate prospectus dated October 31, 1997.
This Prospectus sets forth concisely the information about
the Funds' Advisor Class shares that a prospective investor
should know before investing. Please read it carefully and retain
it for future reference. Additional information about the Advisor
Class shares is contained in the Statement of Additional
Information for the Funds' Advisor Class shares dated January 1,
1998 (the "SAI"), which has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference into
this Prospectus. The SAI, and the prospectus for the Funds' other
classes of shares, are available upon request and without charge
at the Distributor's address and telephone number printed below.
The SEC maintains a web site (http://www.sec.gov) that contains
the SAI and other material incorporated by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC 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
The Funds' Financial Highlights
Investment Objectives and Policies
Risk Factors and Investment Techniques
Organization and Management of the Funds
Investment Manager
Fund Administration and Accounting
Transfer Agent
Dividends and Taxes
Performance Data
How to Buy Shares
How Your Purchase Price is Determined
How Each Fund Values Its Shares
How to Redeem Shares
Minimum Account Balance Requirements
Signature Guarantees
Choosing a Distribution Option
Tax Identification Number
Certificates
Exchange Privilege
Systematic Withdrawal Plan
Automatic Investment Method
Consolidated Account Statements
Retirement Plans
Shareholder Inquiries
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Ft. Lauderdale, FL
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
[IVY MACKENZIE LOGO]
EXPENSE INFORMATION
The expenses and costs associated with investing in the
Advisor Class shares of each Fund are reflected in the following
tables.
SHAREHOLDER TRANSACTION EXPENSES
MAXIMUM SALES
MAXIMUM CONTIN-
LOAD IMPOSED
GENT DEFERRED
ON PURCHASES
SALES CHARGE
(AS A % OF
(AS A % OF
OFFERING
ORIGINAL
PRICE)
PURCHASE PRICE)
All Funds None
None
None of the Funds charges a redemption fee, an exchange
fee,
or a sales load on reinvested dividends.
ANNUAL FUND OPERATING EXPENSES(1)
(as a percentage of average net
assets)
12B-1
TOTAL FUND
SERVICE/
OTHER OPERATING
MANAGEMENT DISTRIBUTION
EXPENSES EXPENSES
FEES(2) FEES
(2) (2)
Ivy Asia Pacific 1.00% None
0.95% 1.95%
Fund(3)
Ivy Canada Fund 0.85% None
1.54% 2.39%
Ivy China Region Fund 0.72% None
1.23% 1.95%
Ivy Global Fund 1.00% None
0.93% 1.93%
Ivy Global Natural 1.00% None
0.95% 1.95%
Resources Fund(3)
Ivy Global Science & 0.29% None
1.65% 1.94%
Technology Fund(5)
Ivy International 1.00% None
0.50% 1.50%
Fund II(4)
Ivy International 1.00% None
0.95% 1.95%
Small Companies Fund(3)
Ivy Pan-Europe Fund(4) 1.00% None
0.95% 1.95%
12B-1
SERVICE/
OTHER
MANAGEMENT DISTRIBUTION
EXPENSES
FEES(2) FEES
(2)
Ivy Latin America 0.00% None
2.30%
Strategy Fund
Ivy New Century 0.38% None
1.82%
Fund
OTHER
TOTAL FUND
EXPENSES
OPERATING
GROSS FUND (AFTER
EXPENSES
OPERATING CUSTODY
(AFTER CUSTODY
EXPENSES(2) CREDITS)(2)
CREDITS)(2)
Ivy Latin America 2.30% 1.94%
1.94%
Strategy Fund
Ivy New Century 2.20% 1.57%
1.95%
Fund
(1) The inception date for each Fund's Advisor Class shares is
January 1, 1998. Accordingly, the expense ratios shown
are
estimates based on amounts incurred by each Fund's Class A
shares during the fiscal year ended December 31, 1996.
(2) After expense reimbursements; Ivy Management, Inc. ("IMI")
currently limits Total Fund Operating Expenses (excluding
Rule 12b-1 fees and certain other items, and net of any
credits for fees paid indirectly) for all Funds except Ivy
Canada Fund to an annual rate of 1.95% (1.50%, in the case
of Ivy International Fund II) of each Fund's average net
assets. Total Fund Operating Expenses in the above table
include fees paid indirectly. Without expense
reimbursements Management Fees would have been 1.00% and
Total Fund Operating Expenses (excluding Rule 12b-1 fees
and
certain other items, and net of any credits for fees paid
indirectly) would have increased 0.28% for Ivy China
Region
Fund; 0.71% for Ivy Global Science & Technology Fund;
2.34%
for Ivy Latin America Strategy Fund, and 0.37% for Ivy New
Century Fund.
(3) These funds commenced operation on January 1, 1997.
Expense
information is based on estimated amounts for the current
fiscal year.
(4) These funds commenced operations on May 13, 1997. Expense
information is based on estimated amounts for the current
fiscal year.
(5) Expense information is based on annualized amounts from
July
22, 1996 (commencement of operations) to December 31,
1996.
EXAMPLES
The following tables list the expenses an investor would
pay
on a $1,000 investment in a Fund's Advisor Class shares, 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 3
5 10
YEAR YEARS
YEARS YEARS
Ivy Asia Pacific Fund $20 $61
Ivy Canada Fund $24 $75
$128 $273
Ivy China Region Fund $20 $61
$105 $227
Ivy Global Fund $20 $61
$104 $225
Ivy Global Natural Resources Fund $20 $61
Ivy Global Science & Technology
Fund $20 $61
$105 $226
Ivy International Fund II $15 $47
Ivy International Small Companies
Fund $20 $61
Ivy Latin America Strategy Fund $23 $72
$123 $264
Ivy New Century Fund $22 $69
$118 $253
Ivy Pan-Europe Fund $20 $61
The purpose of the foregoing tables is to assist you in
understanding the various costs and expenses that an investor in
a Fund's Advisor Class shares 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," "Investment Manager"
and "Fund Administration and Accounting," and the following
section of the SAI: "Investment Advisory and Other Services."
THE FUNDS' FINANCIAL HIGHLIGHTS
The inception date for the Funds' Advisor Class shares is
January 1, 1998. Accordingly, no financial information for these
shares is presented below. The accounting firm of Coopers &
Lybrand L.L.P. will be responsible for auditing financial
information relating to the Funds' Advisor Class shares.
Financial highlights for the Funds' Class A, Class B and Class C
shares (and the Class I shares of Ivy Global Science & Technology
Fund, Ivy International Fund II and Ivy International Small
Companies Fund) are contained in a separate Prospectus dated
October 31, 1997. The Funds' Annual Reports are incorporated by
reference into the SAI, and are available upon request from the
Funds' transfer agent (1-800-777-6472).
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 Board of Trustees of
the Trust ("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 ASIA PACIFIC FUND: The Fund's principal investment
objective is long-term growth. Consideration of current income is
secondary to this principal objective. Under normal circumstances
the Fund invests at least 65% of its total assets in securities
issued in Asia-Pacific countries, which for purposes of this
Prospectus are defined to include China, Hong Kong, India,
Indonesia, Malaysia, Pakistan, the Philippines, Singapore, Sri
Lanka, South Korea, Taiwan, Thailand and Vietnam. Securities of
Asia-Pacific issuers include: (a) securities of companies
organized under the laws of an Asia-Pacific country or for which
the principal securities trading market is in the Asia-Pacific
region; (b) securities that are issued or guaranteed by the
government of an Asia-Pacific 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 the Asia-
Pacific region; and (d) any of the preceding types of securities
in the form of depository shares.
The Fund may participate in markets throughout the Asia-
Pacific region, and it is expected that the Fund will be invested
at all times in at least three Asia-Pacific countries. The Fund
does not expect to concentrate its investments in any particular
industry. See Appendix B to the SAI for further information about
the economic characteristics of certain Asia-Pacific countries.
The Fund may invest up to 35% of its assets in investment-
grade debt securities of government or corporate issuers in
emerging market countries, investment-grade equity and debt
securities of issuers in developed countries (including the
United States), warrants, and 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 up to
5% of its net assets in zero coupon bonds, and in debt securities
rated Ba or below by Moody's Investor Services, Inc. ("Moody's")
or BB or below by Standard and Poor's Corporation ("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 engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total assets in
other investment companies that invest in securities issued in
Asia-Pacific countries, and (ii) up to 15% of its net assets in
restricted and other illiquid securities.
The Fund may purchase put and call options on securities
and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in stock index and
foreign currency futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 15% of its
total assets.
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 or AAA or AA by
S&P, or if unrated, judged to be of comparable quality by
Mackenzie Financial Corporation ("MFC"), the Fund's Advisor),
(iii) foreign securities (including sponsored or unsponsored
American Depository Receipts ("ADRs"), Global Depository Receipts
("GDRs"), American Depository Shares ("ADSs") and Global
Depository Shares ("GDSs")), (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 foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total assets in
other investment companies and (ii) up to 15% of its net assets
in restricted and other illiquid securities.
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), (ii) 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 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. See Appendix B to the SAI for further
information about the economic characteristics of certain China
Region countries.
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, 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, 1996, the Fund had 0.90% of
its total assets invested in low-rated debt securities.
The Fund may invest in sponsored or unsponsored ADRs,
GDRs,
ADSs and GDSs, warrants, purchase securities on a "when-issued"
or firm commitment basis, engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total assets in
other investment companies, and (ii) up to 15% of its net assets
in restricted and other illiquid securities.
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 equivalent exposure 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 will invest at least 65% of its total assets in the common
stock of companies throughout the world, with at least three
different countries (one of which may be the United States)
represented in the Fund's overall portfolio holdings. Although
the Fund generally invests in common stock, it may also invest in
preferred stocks, sponsored or unsponsored ADRs, GDRs, ADSs and
GDSs, and investment-grade debt securities (i.e., those rated Baa
or higher by Moody's or BBB or higher by S&P, or if unrated, 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, 1996, the Fund had 0.94% of
its total assets invested in low-rated debt securities.
The Fund may invest in equity real estate investment
trusts,
warrants, purchase securities on a "when-issued" or firm
commitment basis, engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total assets in
other investment companies and (ii) up to 15% of its net assets
in restricted and other illiquid securities.
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 Moody's or AAA or AA by
S&P). The Fund may also enter into repurchase agreements, and,
for temporary or emergency purposes, may borrow up to 10% of the
value of its total assets from banks.
The Fund may purchase put and call options on stock
indices,
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 equivalent exposure
in such contracts does not exceed 20% of its total assets.
IVY GLOBAL NATURAL RESOURCES FUND: The Fund's investment
objective is long-term growth. Any income realized will be
incidental. Under normal conditions, the Fund invests at least
65% of its total assets in the equity securities of companies
throughout the world that own, explore or develop natural
resources and other basic commodities, or supply goods and
services to such companies. Under this investment policy, at
least three different countries (one of which may be the United
States) will be represented in the Fund's overall portfolio
holdings. "Natural resources" generally include precious metals
(such as gold, silver and platinum), ferrous and nonferrous
metals (such as iron, aluminum and copper), strategic metals
(such as uranium and titanium), coal, oil, natural gases, timber,
undeveloped real property and agricultural commodities. Although
the Fund generally invests in common stock, it may also invest in
preferred stock, securities convertible into common stock and
sponsored or unsponsored ADRs, GDRs, ADSs and GDSs. The Fund may
also invest directly in precious metals and other physical
commodities.
IMI believes that certain political and economic changes
in
the global environment in recent years have had and will continue
to have a profound effect on global supply and demand of natural
resources, and that rising demand from developing markets and new
sources of supply should create attractive investment
opportunities. In selecting the Fund's investments, IMI will seek
to identify securities of companies that, in IMI's opinion,
appear to be undervalued relative to the value of the companies'
natural resource holdings.
For temporary defensive purposes, the Fund may invest
without limit in 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 one-third of the value of its total assets from
banks, but may not purchase securities at any time during which
the value of the Fund's outstanding loans exceeds 10% of the
value of the Fund's total assets. The Fund may engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest (i) up to 10% of its
total assets in other investment companies and (ii) up to 15% of
its net assets in restricted and other illiquid securities.
For hedging purposes only, the Fund may engage in
transactions in (and options on) foreign currency futures
contracts, provided that the Fund's equivalent exposure in such
contracts does not exceed 15% of its total assets.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND: The Fund's
principal
investment objective is long-term capital growth. Any income
realized will be incidental. Under normal conditions, the Fund
will invest at least 65% of its total assets in the common stock
of companies that are expected to benefit from the development,
advancement and use of science and technology. Under this
investment policy, at least three different countries (one of
which may be the United States) will be represented in the Fund's
overall portfolio holdings. Industries likely to be represented
in the Fund's portfolio include computers and peripheral
products, software, electronic components and systems,
telecommunications, media and information services,
pharmaceuticals, hospital supply and medical devices,
biotechnology, environmental services, chemicals and synthetic
materials, and defense and aerospace. The Fund may also invest in
companies that are expected to benefit indirectly from the
commercialization of technological and scientific advances. In
recent years, rapid advances in these industries have stimulated
unprecedented growth. While this is no guarantee of future
performance, IMI believes that these industries offer substantial
opportunities for long-term capital appreciation.
Although the Fund generally invests in common stock, it
may
also invest in preferred stock, securities convertible into
common stock, sponsored or unsponsored ADRs, GDRs, ADSs and GDSs
and investment-grade debt securities (i.e., those rated Baa or
higher by Moody's or BBB or higher by S&P, or if unrated, are
considered by IMI to be of comparable quality), including
corporate bonds, notes, debentures, convertible bonds and zero-
coupon bonds. The Fund may also invest up to 5% of its net assets
in debt securities that are rated Ba or below by Moody's or BB or
below by S&P, or if unrated, are considered by IMI to be of
comparable quality (commonly referred to as "high yield" or
"junk" bonds). The Fund will not invest in debt securities rated
less than C by either Moody's or S&P. (A description of the
ratings assigned by Moody's and S&P is contained in Appendix A to
the SAI).
The Fund may invest in warrants, purchase securities on a
"when-issued" or firm commitment basis, engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest (i) up to 10% of its
total assets in other investment companies and (ii) up to 15% of
its net assets in restricted and other illiquid securities.
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 Moody's or AAA or AA by
S&P). The Fund may also enter into repurchase agreements, and,
for temporary or emergency purposes, may borrow up to 10% of the
value of its total assets from banks.
The Fund may purchase put and call options on stock
indices
and on individual securities, provided the premium paid for such
options does not exceed 10% of the value of the Fund's net
assets. The Fund may also sell covered put options with respect
to up to 50% of the value of its net assets, and may sell covered
call options so long as not more than 20% of the Fund's net
assets is subject to being purchased upon the exercise of the
calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency
futures contracts, provided that the Fund's equivalent exposure
in such contracts does not exceed 20% of the value of its total
assets.
IVY INTERNATIONAL FUND II: 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. Under this
investment policy, at least three different countries (other than
the United States) will be represented in the Fund's overall
portfolio holdings. For temporary defensive purposes, the Fund
may also invest in equity securities principally traded in U.S.
markets. IMI, the Fund's investment manager, 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. IMI 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 warrants, 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, considered by IMI to be
of comparable quality), preferred stocks, sponsored or
unsponsored ADRs, GDRs, ADSs and GDSs, 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 also purchase securities on a
"when-issued" or firm commitment basis, and may engage in
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest (i) up to 10% of its
total assets in other investment companies and (ii) up to 15% of
its net assets in restricted and other illiquid securities.
The Fund may purchase put and call options on securities
and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
IVY INTERNATIONAL SMALL COMPANIES FUND: The Fund's
principal
investment objective is long-term growth primarily through
investment in foreign equity securities. Consideration of current
income is secondary to this principal objective. Under normal
circumstances the Fund invests at least 65% of its total assets
in common and preferred stocks (and securities convertible into
common stocks) of foreign issuers having total market
capitalization of less than $1 billion. Under this investment
policy, at least three different countries (other than the United
States) will be represented in the Fund's overall portfolio
holdings. For temporary defensive purposes, the Fund may also
invest in equity securities principally traded in the United
States. The Fund will invest its assets in a variety of economic
sectors, industry segments and individual securities in order to
reduce the effects of price volatility in any area and to enable
shareholders to participate in markets that do not necessarily
move in concert with the U.S. market. The factors that IMI
considers in determining the appropriate distribution of
investments among various countries and regions include prospects
for relative economic growth, expected levels of inflation,
government policies influencing business conditions and the
outlook for currency relationships.
In selecting the Fund's investments, IMI will seek to
identify securities that are attractively priced relative to
their intrinsic value. The intrinsic value of a particular
security is analyzed by reference to characteristics such as
relative price/earnings ratio, dividend yield and other relevant
factors (such as applicable financial, tax, social and political
conditions).
When economic or market conditions warrant, the Fund may
invest without limit in U.S. Government securities, investment-
grade debt securities, zero coupon bonds, 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. The
Fund may also invest up to 5% 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).
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 engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total assets in
other investment companies and (ii) up to 15% of its net assets
in restricted and other illiquid securities.
The Fund may purchase put and call options on securities
and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in stock index and
foreign currency futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 15% of its
total assets.
IVY LATIN AMERICA STRATEGY FUND: The Fund's principal
investment objective is 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 ADRs, GDRs, ADSs and GDSs, 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, 1996, the Fund had none of its assets invested in
low-rated 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 total
assets).
The Fund may invest in warrants, purchase securities on a
"when-issued" or firm commitment basis, engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest (i) up to 10% of its
total assets in other investment companies, and (ii) up to 15% of
its net assets in restricted and other illiquid securities. The
Fund 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
equivalent exposure 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 sponsored or unsponsored ADRs,
GDRs, ADSs and GDSs 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 total 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 yield" or "junk" bonds).
As of December 31, 1996, the Fund had 0.27% of its total assets
invested 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
total assets. The Fund may engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total assets in
other investment companies, and (ii) up to 15% of its net assets
in restricted and other illiquid securities.
The Fund may purchase put and call options on securities
and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and 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
equivalent exposure in such contracts does not exceed 15% of its
total assets.
IVY PAN-EUROPE FUND: The Fund's principal investment
objective is long-term capital growth. Consideration of current
income is secondary to this principal objective. The Fund seeks
to achieve its investment objective by investing primarily in the
equity securities of companies domiciled or otherwise doing
business (as described below) in European countries. Under normal
circumstances, the Fund will invest at least 65% of its total
assets in the equity securities of "European companies," which
include any issuer (a) that is organized under the laws of a
European country; (b) that derives 50% or more of its total
revenues from goods produced or sold, investments made or
services performed in Europe; or (c) for which the principal
trading market is in Europe. The Fund may also invest up to 35%
of its total assets in the equity securities of issuers domiciled
outside of Europe. The equity securities in which the Fund may
invest include common stock, preferred stock and common stock
equivalents such as warrants and convertible debt securities. The
Fund may also invest in sponsored or unsponsored ADRs, European
Depository Receipts ("EDRs"), GDRs, ADSs, European Depository
Shares ("EDSs") and GDSs. The Fund does not expect to concentrate
its investments in any particular industry.
The Fund may invest up to 35% of its net assets in debt
securities, but will not invest more than 20% of its net assets
in debt securities rated Ba or below by Moody's or BB or below by
S&P (commonly referred to as "high yield" or "junk" bonds), or if
unrated, are considered by IMI to be of comparable quality. The
Fund may also purchase securities on a "when-issued" or firm
commitment basis, engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
In addition, the Fund may invest up to 5% of its net assets in
zero coupon bonds.
For temporary defensive purposes or when IMI believes that
circumstances warrant, the Fund may invest without limit in U.S.
Government securities, investment-grade debt securities (i.e.,
those rated Baa or higher by Moody's or BBB or higher by S&P, or
if unrated, are considered by IMI to be of comparable quality),
warrants, and cash or cash equivalents such as domestic or
foreign bank obligations (including certificates of deposit, time
deposits and bankers' acceptances), short-term notes, repurchase
agreements, and domestic or foreign commercial paper (which, if
issued by a corporation, must be rated Prime-1 by Moody's or A-1
by S&P, or if unrated has been issued by a company that at the
time of investment has an outstanding debt issue rated Aaa or Aa
by Moody's or AAA or AA by S&P).
For temporary or emergency purposes, the Fund may borrow
up
to one-third of the value of its total assets from banks, but may
not purchase securities at any time during which the value of the
Fund's outstanding loans exceeds 10% of the value of the Fund's
total assets. The Fund may also invest (i) up to 10% of its total
assets in other investment companies, and (ii) up to 15% of its
net assets in restricted and other illiquid securities.
The Fund may purchase put and call options on securities
and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
RISK FACTORS AND INVESTMENT TECHNIQUES
SPECIAL CONSIDERATIONS RELATED TO IVY ASIA PACIFIC FUND:
Certain Asia-Pacific countries in which the Fund may invest are
developing countries, and may be in the initial stages of their
industrialization cycle. The economic structures of developing
countries generally are less diverse and mature than in the
United States, and their political systems may be relatively
unstable. Historically, markets of developing countries have been
more volatile than the markets of developed countries, yet such
markets often have provided higher rates of return to investors.
Investing in securities of issuers in Asia-Pacific
countries
involves certain considerations not typically associated with
investing in securities of United States companies, including (i)
restrictions on foreign investment and on repatriation of capital
invested in Asian countries, (ii) currency fluctuations, (iii)
the cost of converting foreign currency into United States
dollars, (iv) potential price volatility and lesser liquidity of
shares traded on Asia-Pacific country securities markets and (v)
political and economic risks, including the risk of
nationalization or expropriation of assets and the risk of war.
Certain Asia-Pacific countries may be more vulnerable to
the
ebb and flow of international trade and to trade barriers and
other protectionist or retaliatory measures. Investments in
countries such as China that have recently opened their capital
markets and that appear to have relaxed their central planning
requirement, as well as in countries that have privatized some of
their state-owned industries, should be regarded as speculative.
The settlement period of securities transactions in
foreign
markets in general may be longer than in domestic markets, and
such delays may be of particular concern in developing countries.
For example, the possibility of political upheaval and the
dependence on foreign economic assistance may be greater in
developing countries than in developed countries, either one of
which may increase settlement delays.
Securities exchanges, issuers and broker-dealers in some
Asia-Pacific countries are subject to less regulatory scrutiny
than in the United States. In addition, due to the limited size
of the markets for Asia-Pacific securities, the prices for such
securities may be more vulnerable to adverse publicity,
investors' perceptions or traders' positions or strategies, which
could cause a decrease not only in the value but also in the
liquidity of the Fund's investments.
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 has assumed sovereignty
over Hong Kong.
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.
SPECIAL CONSIDERATIONS RELATED TO IVY GLOBAL SCIENCE &
TECHNOLOGY FUND, IVY INTERNATIONAL SMALL COMPANIES FUND AND IVY
NEW CENTURY FUND: In light of 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. In addition, both Ivy Global Science &
Technology Fund and Ivy International Small Companies Fund are
expected to 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.
Because Ivy Global Science & Technology Fund normally
focuses its investments in science and technology-related
industries, the value of the Fund's shares may be more
susceptible to factors affecting those industries and to greater
market fluctuation than a fund whose portfolio holdings are more
diverse. For example, rapid advances in these industries tend to
render existing products obsolete. In addition, many companies in
which the Fund is likely to invest are subject to government
regulations and approval of their products and services, which
may affect their overall profitability and cause their stock
prices to be more volatile. In selecting the Fund's portfolio of
investments, IMI will consider each company's ability to create
new products, secure any necessary regulatory approvals, and
generate sufficient customer demand. A company's failure to
perform well in any one of these areas, however, could cause its
stock to decline sharply.
SPECIAL CONSIDERATIONS RELATED TO IVY GLOBAL NATURAL
RESOURCES FUND: Since the Fund normally invests a substantial
portion of its assets in securities of companies engaged in
natural resources activities, the Fund may be subject to greater
risks and market fluctuations than funds with more diversified
portfolios. The value of the Fund's securities will fluctuate in
response to market conditions generally, and will be particularly
sensitive to the markets for those natural resources in which a
particular issuer is involved. The values of natural resources
may also fluctuate directly with respect to real and perceived
inflationary trends and various political developments. In
addition, many natural resource companies have been subject to
significant costs associated with compliance with environmental
and other safety regulations. In selecting the Fund's portfolio
of investments, IMI will consider each company's ability to
create new products, secure any necessary regulatory approvals,
and generate sufficient customer demand. A company's failure to
perform well in any one of these areas, however, could cause its
stock to decline sharply.
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 because they tend to be traded in lower volume and
because the companies are subject to greater business risk.
The Fund's investments in precious metals (such as gold)
and
other physical commodities are subject to special risk
considerations, including substantial price fluctuations over
short periods of time. On the other hand, investments in precious
metals coins or bullion could help to moderate fluctuations in
the value of the Fund's portfolio, since the prices of precious
metals have at times tended not to fluctuate as widely as shares
of issuers engaged in the mining of precious metals. Because
precious metals and other commodities do not generate investment
income, however, the return on such investments will be derived
solely from the appreciation and depreciation on such
investments. The Fund may also incur storage and other costs
relating to its investments in precious metals and other
commodities, which may, under certain circumstances, exceed
custodial and brokerage costs associated with investments in
other types of securities. When the Fund purchases a precious
metal, IMI currently intends that it will only be in a form that
is readily marketable.
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 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 total assets, more than 5% of its total
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 were 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: A Fund may only borrow for temporary or
emergency purposes, as described above. 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 Moody's or A-1 by S&P, or if not rated, are issued by
companies having an outstanding debt issue currently rated Aaa or
Aa by Moody's or AAA or AA by S&P.
CONVERTIBLE SECURITIES: The convertible securities in
which
the 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 (and increasing the security's price volatility). Since it
is not possible to predict accurately the average life of a
particular pool, and because prepayments are reinvested at
current rates, the market value of mortgage-backed securities may
decline during periods of declining interest rates.
INVESTMENT-GRADE DEBT SECURITIES: Bonds rated Aaa by
Moody's and AAA by S&P are judged to be of the best quality
(i.e., capacity to pay interest and repay principal is extremely
strong). Bonds rated Aa/AA are considered to be of high quality
(i.e., capacity to pay interest and repay 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, GDRs, ADSs
and GDSs, 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 associated
with the Funds' investments, generally.
In many foreign 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. 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,
difficulties in enforcing foreign judgments, political or social
instability, or other developments that could adversely affect
the Funds' foreign investments.
The risks of investing in foreign securities (described
above) 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.
In addition, many emerging markets have experienced and continue
to experience especially high rates of inflation. In certain
countries, inflation has at times accelerated rapidly to
hyperinflationary levels, creating a negative interest rate
environment and sharply eroding the value of outstanding
financial assets in those countries.
In recent years, many emerging market countries 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.
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 foreign currency 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 the right, in return for a premium, 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, in return
for a premium, 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 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.
PRECIOUS METALS AND OTHER PHYSICAL COMMODITIES: Investors
in Ivy Global Natural Resources Fund should be aware that
commodities trading is generally considered a speculative
activity. For example, prices of precious metals are affected by
factors such as cyclical economic conditions, political events
and monetary policies of various countries. Accordingly, markets
for precious metals may at times be volatile and there may be
sharp price fluctuations even during periods when prices overall
are rising. Investments in physical commodities may also present
practical problems of delivery, storage and maintenance, possible
illiquidity, the unavailability of accurate market valuations and
increased expenses.
REAL ESTATE INVESTMENT TRUSTS: A real estate investment
trust ("REIT") is a corporation, trust or association that
invests in real estate mortgages or equities for the benefit of
its investors. 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 obtaining
direct ownership of the underlying collateral, and might incur a
loss if the value of the security should decline.
RESTRICTED AND ILLIQUID SECURITIES: An "illiquid
security"
is an asset that may not be sold or disposed of in the ordinary
course of business within seven days at approximately the value
at which a Fund has valued the security on its books. A
"restricted security" is a security that cannot be offered to the
public for sale without first being registered under the
Securities Act of 1933, as amended, and is considered to be
illiquid until such filing takes place. 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. Securities whose proceeds are subject to limitations on
repatriation of principal or profits for more than seven days,
and those for which market quotations are not readily available,
are considered illiquid for purposes of the percentage
limitations that apply to each Fund's investment in illiquid
securities.
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).
SMALL COMPANIES: Investing in smaller company stocks
involves certain special considerations and risks that are not
usually associated with investing in larger, more established
companies. For example, the securities of smaller companies may
be subject to more abrupt or erratic market movements, because
they tend to be thinly traded and are subject to a greater degree
to changes in the issuer's earnings and prospects. Small
companies also tend to have limited product lines, markets or
financial resources. Transaction costs in smaller company stocks
also may be higher than those of larger companies.
WARRANTS: The holder of a warrant has the right to
purchase
a given number of shares of a particular issuer at a specified
price until expiration of the warrant. Such investments can
provide a greater potential for profit or loss than an equivalent
investment in the underlying security, and are considered
speculative investments. For example, if a warrant were not
exercised by the date of its expiration, a Fund would lose its
entire investment.
"WHEN-ISSUED" SECURITIES AND FIRM COMMITMENTS: Purchasing
securities on a "when-issued" or firm commitment basis involves a
risk of loss if the value of the security to be purchased
declines prior to the settlement date.
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 18 separate
portfolios. Each Fund has four classes of shares, designated as
Class A, Class B, Class C and an Advisor Class (only the latter
of which is offered by this Prospectus). Ivy Global Science &
Technology Fund, Ivy International Fund II and Ivy International
Small Companies Fund each has a fifth 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
the Advisor Class and Class I, has a separate Rule 12b-1
distribution plan and bears different distribution fees. Class I
shares are subject to lower administrative service and transfer
agency fees than the Funds' Class A, Class B, Class C and Advisor
Class shares. Each class of shares also has its own sales charge
and expense structure that may affect its performance relative to
a Fund's other classes of 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
services to the Funds, and investment advisory services to all of
the Funds other than Ivy Canada Fund and Ivy Global Natural
Resources Fund (which are advised by MFC). 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. As of October 31,
1997, IMI and MIMI had approximately $____ billion and $____
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 AND IVY GLOBAL NATURAL RESOURCES FUND:
For
IMI's business management services, each Fund pays IMI a fee,
which is accrued daily and paid monthly, based on the Fund's
average net assets at an annual rate of 0.50%. Each Fund pays MFC
a monthly fee for advisory services, which is accrued daily and
paid monthly, based on the Fund's average net assets at an annual
rate of 0.35% and 0.50% for Ivy Canada Fund and Ivy Global
Natural Resources Fund, respectively.
IVY ASIA PACIFIC FUND, IVY CHINA REGION FUND, IVY GLOBAL
SCIENCE & TECHNOLOGY FUND, IVY INTERNATIONAL FUND II, IVY
INTERNATIONAL SMALL COMPANIES FUND, IVY LATIN AMERICA STRATEGY
FUND, IVY NEW CENTURY FUND AND IVY PAN-EUROPE 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
the Fund's average net assets at an annual rate of 1.00%.
IMI voluntarily limits the total operating expenses for
each
Fund (excluding Rule 12b-1 fees, interest, taxes, brokerage
commissions, litigation, indemnification, and extraordinary
expenses) to an annual rate of 1.95% (1.50%, in the case of Ivy
International Fund II) of the Funds' average net assets, which
may lower each Fund's expenses and increase its total return.
This voluntary expense limitation may be terminated or revised at
any time, at which point the affected Fund's expenses may
increase and its total return may be reduced.
IVY GLOBAL FUND: For IMI's business management and
investment advisory services, the Fund pays IMI a fee, which is
accrued daily and paid monthly, based on the Fund's average net
assets at an annual rate of 1.00% of the first $500 million in
net assets and 0.75% on net assets over $500 million. For the
fiscal year ended December 31, 1996, the effective management fee
paid to IMI was 1.00% of the Fund's average net assets.
Currently, IMI voluntarily limits the Fund's total
operating
expenses (excluding Rule 12b-1 fees, interest, taxes, brokerage
commissions, litigation, indemnification, and extraordinary
expenses) to an annual rate of 1.95% of the Fund's average net
assets, which may lower the Fund's expenses and increase its
total return. This voluntary expense limitation may be terminated
or revised 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. The investment management 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 Funds.
PORTFOLIO MANAGEMENT: The following individuals have
responsibilities for management of the Funds:
- - James W. Broadfoot, is President and Chief Investment
Officer of IMI and Vice President of the Trust, is the
portfolio manager for Ivy Global Science & Technology
Fund.
Prior to joining the organization in 1990, Mr. Broadfoot
was
a principal in an investment counsel firm specializing in
emerging growth companies. Mr. Broadfoot has 24 years of
professional investment experience, and is a Chartered
Financial Analyst. He has an MBA from The Wharton School
of
the University of Pennsylvania.
- - Michael G. Landry is the Chairman and a Director of IMI
and
the President and a Director of MIMI and the Chairman 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 Templeton
International. 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
Ivy Global Fund and is a member of the Ivy international
portfolio management team.
- - Frederick Sturm, a Senior Vice President of MFC, is the
portfolio manager of Ivy Canada Fund and Ivy Global
Natural
Resources Fund. Mr. Sturm joined MFC in 1983 and has 11
years of professional investment experience. In that time,
Mr. Sturm has established a performance record 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.
- - Barbara Trebbi is a Senior Vice President of IMI,
portfolio
manager of Ivy International Fund II, and Ivy
International
Small Companies Fund. She is Managing Director of
International Equities and a member of the Ivy
international
portfolio management team. Ms. Trebbi joined the
organization in 1988 and has 9 years of professional
experience. She is a Charter Financial Analyst and holds
a
graduate diploma from the London School of Economics.
- - The Ivy international portfolio management team manages
Ivy
Asia Pacific Fund, Ivy China Region Fund, Ivy Latin
America
Strategy Fund, and Ivy Pan-Europe Fund. The Ivy
international portfolio management team consists of
Barbara
Trebbi, Michael Landry and the Ivy international research
team headed by Eric Michelis. Mr. Michelis has a graduate
degree in Economics and Finance from Institut Des Etudes
Politiques de Paris and a graduate degree from Ecole
Francaise D'Electronique Et D'Inforatique. Other team
members include Oleg Makhorine, located in Prague, who is
a
graduate of the Economics University in Prague; Justin Lu,
who is a graduate of Shanghai International University;
Moira McLachlan, who earned her degree in international
business from the University of South Carolina; and
Jonathan
Tang, located in Shanghai, who is a graduate of Shanghai
International University.
IMI'S INVESTMENT PROCESS: Each of IMI's international
equity portfolio managers is supported by a team of research
analysts, who are responsible for providing objective information
on regional and country-specific economic and political
developments and monitoring individual companies. Members of the
research analyst team that supports IMI's international equity
portfolio managers are located in the U.S. at IMI's south Florida
office, as well as in Asia and Europe. IMI's analysts use a
variety of research sources, such as brokerage reports, economic
and financial news services, equity databases and company
reports. Established relationships with more than thirty research
firms provide IMI's analysts and portfolio managers access to
information on the various factors that may influence a
particular investment decision. These firms range from large
investment banks with global coverage to local research houses.
In many cases, IMI's investment professionals also conduct
primary research by meeting with company management, touring
facilities, and speaking with local research analysts, economists
and strategists. Such primary research is considered particularly
important in emerging market countries.
Research efforts by IMI focus on determining opportunities
that fall within the IMI's long-term, value-oriented approach to
investing. The investment decision making process starts with a
"top-down" view of a particular country and the long-term outlook
for given industries within that country. Company selection
generally is based on a "bottom-up" analysis of certain value
measures (e.g., earnings, cash flow and growth potential) that
are monitored in a proprietary database in which risk-adjusted
company valuations across countries and industries are compared.
Ultimate investment decisions take into account the fund's
investment objective, diversification requirements and risk
tolerance level. While current earnings are considered important,
investment decisions most often are based on earnings estimates
over a five-year period. Stock selection typically is
concentrated in the cheapest 20% of the universe and sell
recommendations normally are generated when valuations reach the
top 20% of the universe.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative services for the
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
Advisor Class shares are subject to a fee, accrued daily and paid
monthly, at an annual rate of .10%
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).
DIVIDENDS AND TAXES
DIVIDENDS: Distributions you receive from a Fund are
reinvested in additional Advisor Class shares unless you elect to
receive them in cash. Dividends ordinarily will vary from one
class to another.
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.
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, that a
Fund designates as capital gain dividends 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.
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 may be eligible for reduced
Federal tax rates, 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 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
Advisor Class shares are offered through this Prospectus
only to the following investors:
(i) trustees or other fiduciaries purchasing
shares for employee benefit plans that are
sponsored by organizations that have at
least 1,000 employees; and
(ii) any account with assets of at least
$10,000 if (a) a financial planner, trust
company, bank trust department or
registered investment adviser has
investment discretion, and where the
investor pays such person as compensation
for its advice and other services an
annual fee of at least .50% on the assets
in the account, or (b) such account is
established under a "wrap fee" program and
the account holder pays the sponsor of the
program an annual fee of at least .50% on
the assets in the account; and
(iii) officers and Trustees of the Trust (and their
relatives); and
(iv) officers, directors, employees, retired
employees,
legal counsel and accountants of IMI, MIMI, and
MFC
(and their relatives); and
(v) 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).
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 any purchase order.
MINIMUM INVESTMENT POLICIES: The minimum initial
investment
in Advisor Class shares is $10,000. The minimum additional
investment is $250. Initial or additional amounts for retirement
accounts may be less (see "Retirement Plans").
BUYING ADDITIONAL SHARES: You may add to your account at
any time through any of the following options:
BY MAIL: Complete the investment slip attached to your
statement, or write instructions including the account
registration, Fund number and account number of the shares you
wish to purchase. Send your check (payable to the Fund in which
you are investing), along with your investment slip or written
instructions, to one of the addresses above.
THROUGH YOUR BROKER: Deliver to your registered
representative or selling broker the investment slip attached to
your statement (or written instructions) along with your payment.
BY WIRE: Purchases may also be made by wiring money from
your bank account to your Ivy account. Your bank may charge a fee
for wiring funds. Before wiring any funds, please call IMSC at 1-
800-777-6472. Wiring instructions are as follows:
First Union National Bank of Florida
Jacksonville, FL
ABA#063000021
Account #2090002063833
For further Credit to:
Your Ivy Account Registration
Your Fund Number and Account Number
BY AUTOMATIC INVESTMENT METHOD: Complete Sections 6A and
7B
on the Account Application (see "Automatic Investment Method" on
page ___ for more information).
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Advisor Class shares of a Fund is
the net asset value ("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 Trustees have 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.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS: IMDI may, at
its own expense, pay concessions 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.
An investor may be charged a transaction fee for Advisor
Class shares purchased or redeemed through a broker or agent
other than IMDI.
HOW TO REDEEM SHARES
You may redeem your Advisor Class shares through your
registered securities representative, by mail or by telephone.
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.
When shares are redeemed, a Fund generally sends payment
to
you 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
determined at the close of regular trading (4:00 p.m. Eastern
time) on the day that a redemption request is received in good
order by IMSC.
BY MAIL: Requests for redemption in writing are
considered
to be in "proper or good order" if they contain the following:
- Any outstanding certificate(s) for shares being
redeemed.
- A letter of instruction, including the account
registration, fund number, the account number and the
dollar amount or number of shares to be redeemed.
- Signatures of all registered owners whose names appear
on
the account.
- Any required signature guarantees.
- Other supporting legal documentation, if required (in
the
case of estates, trusts, guardianships, corporations,
unincorporated associations, retirement plan trustees
or
others acting in representative capacities).
The dollar amount or number of shares indicated for
redemption must not exceed the available shares or NAV of your
account at the next-determined prices. If your request exceeds
these limits, then the trade will be rejected in its entirety.
Mail your request to IMSC at one of the addresses on page
___ of this Prospectus.
BY TELEPHONE: Individual and joint accounts may redeem up
to $50,000 per day over the telephone by contacting IMSC at 1-
800-777-6472. In times of unusual economic or market changes, the
telephone redemption privilege may be difficult to implement. If
you are unable to execute your transaction by telephone, you may
want to consider placing the order in writing and sending it by
mail or overnight courier.
Checks will be made payable to the current account
registration and sent to the address of record. If there has been
a change of address in the last 30 days, please use the
instructions for redemption requests by mail described above. A
signature guarantee would be required.
Requests for telephone redemptions will be accepted from
the
registered owner of the account, the designated registered
representative or the registered representative's assistant.
Shares held in certificate form cannot be redeemed by
telephone.
If Section 6E of the Account Application is not completed,
telephone redemption privileges will be provided automatically.
Although telephone redemptions may be a convenient feature, you
should realize that you may be giving up a measure of security
that you may otherwise have if you terminated the privilege and
redeemed your shares in writing. If you do not wish to make
telephone redemptions or let your registered representative do so
on your behalf, you must notify IMSC in writing.
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 has been less than $10,000 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 Advisor
Class shares of a Fund unless you specify one of the other
options.
INVESTMENT IN ANOTHER IVY FUND - Both dividends and
capital
gains are automatically invested at NAV in the Advisor Class
shares of another Ivy Fund.
DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED - Dividends
will
be paid in cash. Capital gains will be reinvested at NAV in
additional Advisor Class shares of a Fund or the Advisor Class
shares of another Ivy Fund.
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
new account application to claim this exemption. If the
registration is for an UGMA/UTMA account, please provide the
social security number of the minor. Non-U.S. investors who do
not have a TIN must provide, with their Account Application, a
completed IRS Form W-8.
CERTIFICATES
In order to facilitate transfers, exchanges and
redemptions,
most shareholders elect not to receive certificates. Should you
wish to have a certificate issued, please contact IMSC at 1-800-
777-6472 and request that one be sent to you. (Retirement plan
accounts are not eligible for this service.) Please note that if
you were to lose your certificate, you would incur an expense to
replace it.
Certificates requested by telephone for shares valued up
to
$50,000 will be issued to the current registration and mailed to
the address of record. Should you wish to have your certificates
mailed to a different address, or registered differently from the
current registration, contact IMSC at 1-800-777-6472.
EXCHANGE PRIVILEGE
Advisor Class shareholders may exchange their outstanding
Advisor Class shares for Advisor Class shares of another Ivy fund
(other than Ivy International Fund) on the basis of the relative
NAV per Advisor Class share. Exchanges into an Ivy fund in which
shares are not already held are subject to certain minimum
investment restrictions. See "Exchange of Shares" in the SAI or
contact IMSC at 1-800-777-6472 for further details. The Funds
reserve the right to reject any exchange order.
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. 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
fund into which the exchange is made. It is the policy of the
Funds to discourage the use of the exchange privilege for the
purpose of timing short-term market fluctuations. To protect the
interests of other shareholders of a Fund, a Fund may cancel the
exchange privileges of any persons that, in the opinion of the
Fund, are using market timing strategies or are making more than
five exchanges per owner or controlling person per calendar year.
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.
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 continually maintain an account balance of at
least $10,000. 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. Shares must be uncertificated (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 $250 while the
plan is in effect. Redemptions are taxable events.
Amounts paid to you through the Systematic Withdrawal Plan
are derived from the redemption of shares in your account.
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 Fund account. The minimum investment
under this plan is $250 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 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 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
- SIMPLE Plans (Individual Retirement Account and 401(k))
Minimum initial and subsequent investments for retirement
plans are $25.
Investors Bank & Trust, which serves as custodian or
trustee
under the retirement plan prototypes available from 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 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.
ACCOUNT APPLICATION
IVY ASIA PACIFIC FUND
IVY CANADA FUND
IVY CHINA REGION FUND
IVY GLOBAL FUND
IVY GLOBAL NATURAL RESOURCES FUND
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
IVY INTERNATIONAL FUND II
IVY INTERNATIONAL SMALL COMPANIES FUND
IVY LATIN AMERICA STRATEGY FUND
IVY NEW CENTURY FUND
IVY PAN-EUROPE FUND
USE THIS APPLICATION FOR ADVISOR CLASS SHARES
Please mail applications and checks to: Ivy Mackenzie Services
Corp., P.O. Box 3022, Boca Raton, FL 33431-0922.
(This application should not be used for retirement accounts for
which Ivy is custodian.)
Account Number:
(Fund Use Only)
Dealer #:
Branch #:
Rep. I.D. #:
Acct. Type: 101/
Soc Cd:
Div Cd: 1/2
CG Cd: 1/2
Exc Cd: 0/1
Red Cd: 0/X
1 REGISTRATION
/ / Individual
/ / Joint Tenant
/ / Estate
/ / UGMA/UTMA
/ / Corporation
/ / Partnership
/ / Sole Proprietor
/ / Trust
/ / Other
Date of Trust
Owner, Custodian or Trustee
Co-owner or Minor
Minor's State of Residence
Street
City
State
Zip Code
Phone Number -- Day
Phone Number -- Evening
2 TAX ID
Citizenship: / / U.S. / / Other ________________
Social Security Number
Tax Identification Number
Under penalties of perjury, I certify by signing in
Section
8 below that: (1) the number shown in this section is my
correct taxpayer identification number (TIN), and (2) I am
not subject to backup withholding because: (a) I have not
been notified by the Internal Revenue Service (IRS) that I
am subject to backup withholding as a result of a failure
to
report all interest or dividends, or (b) the IRS has
notified me that I am no longer subject to backup
withholding. (Cross out item (2) if you have been notified
by the IRS that you are currently subject to backup
withholding because of underreporting interest or
dividends
on your tax return.) Please see the "Tax Identification
Number" section of the Prospectus for additional
information
on completing this section.
3 DEALER INFORMATION
The undersigned ("Dealer") agrees to all applicable
provisions in this Application, guarantees the signature
and
legal capacity of the Shareholder, and agrees to notify
IMSC
of any purchases made under a Letter of Intent or Rights
of
Accumulation.
Dealer Name
Branch Office Address
City
State
Zip Code
Representative's Name and Number
Representative's Phone Number
Authorized Signature of Dealer
4 INVESTMENTS
A. Enclosed is my check ($10,000 minimum per Fund)
made
payable to the appropriate Fund(s)*. Please invest
as
follows:
$_______________ Ivy Asia Pacific Fund
$_______________ Ivy Canada Fund
$_______________ Ivy China Region Fund
$_______________ Ivy Global Fund
$_______________ Ivy Global Natural Resources Fund
$_______________ Ivy Global Science & Technology
Fund
$_______________ Ivy International Fund II
$_______________ Ivy International Small Companies
Fund
$_______________ Ivy Latin America Strategy Fund
$_______________ Ivy New Century Fund
$_______________ Ivy Pan-Europe Fund
* If investing in more than one Fund, make
your
check payable to "Ivy Funds".
B. FOR DEALER USE ONLY
Confirmed trade orders: [Confirm Number, Number of
Shares, Trade Date]
5 DISTRIBUTION OPTIONS
I would like to reinvest dividends and capital gains into
additional shares in this account at net asset value
unless
a different option is checked below.
A. / / Reinvest all dividends and capital gains
into
additional shares of a different Ivy fund.
Fund Name
Account Number
B. / / Pay all dividends in cash and reinvest
capital
gains into additional shares in this Fund or
a
different Ivy fund.
Fund Name
Account Number
C. / / Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN C OR D
ABOVE, BE:
/ / Sent to the address listed in the registration.
/ / Sent to the special payee listed in Section
7A / / (By Mail)
7B / / (By E.F.T.)
6 OPTIONAL SPECIAL FEATURES
A. / / Automatic Investment Method (AIM)
- I wish to invest _________________
/ / once per month
/ / twice
/ / 3 times
/ / 4 times
- My bank account will be debited on the _________
day of
the month
Please invest $________________ each period starting in
the
month of __________________ in the Advisor Class 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 Advisor
Class
account in __________________[Fund Name].
/ / Monthly / / Quarterly / /Semiannually / / Annually
/ / Once / / Twice / / 3 times / / 4 times per month
I request the distribution be:
/ / Sent to the address listed in the registration.
/ / Sent to the special payee listed in Section 7.
/ / Invested into additional shares of the same class
of a
different Ivy fund.
Fund Name
Account Number
Amount $__________________(Minimum $50) starting on or
about
the
- _______ day of the month
- _______ day of the month
- _______ day of the month*
NOTE: Account minimum: $5,000 in shares at current
offering
price
C. Electronic Funds Transfer for Redemption Proceeds**
I authorize the Agent to honor telephone
instructions
for the redemption of Fund shares up to $50,000.
Proceeds may be wire transferred to the bank
account
designated ($1,000 minimum). (Complete Section 7B)
D. Telephone Exchanges** / / Yes / / No
I authorize exchanges by telephone among the Ivy
funds
upon instructions from any person as more fully
described in the Prospectus. To change this option
once
established, written instructions must be received
from
the shareholder of record or the current registered
representative.
If neither box is checked, the telephone exchange
privilege will be provided automatically.
E. Telephonic Redemptions** / / Yes / / No
The Fund or its agents are authorized to honor
telephone instructions from any person as more
fully
described in the Prospectus for the redemption of
Fund
shares. The amount of the redemption shall not
exceed
$50,000 and the proceeds are to be payable to the
shareholder of record and mailed to the address of
record. To change this option once established,
written
instructions must be received from the shareholder
of
record or the current registered representative.
If neither box is checked, the telephone redemption
privilege will be provided automatically.
* There must be a period of at least seven calendar
days
between each investment/withdrawal period.
** This option may not be used if shares are issued in
certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS
Please send all disbursements to this special
payee:
Name of Bank or Individual
Account Number (If Applicable)
Street
City/State/Zip
B. FED WIRE / E.F.T. INFORMATION
Financial Institution
ABA #
Account #
Street
City/State/Zip
(Please attach a voided check)
8 SIGNATURES
Investors should be aware that the failure to check the
"No"
under Section 6D or 6E above means that the Telephone
Exchange/Redemption Privileges will be provided. The Funds
employ reasonable procedures that require personal
identification prior to acting on exchange/redemption
instructions communicated by telephone to confirm that
such
instructions are genuine. In the absence of such
procedures,
a Fund may be liable for any losses due to unauthorized or
fraudulent telephone instructions. Please see "Exchange
Privilege" and "How to Redeem Shares" in the Prospectus
for
more information on these privileges.
I certify to my legal capacity to purchase or redeem
shares
of the Fund for my own account or for the account of the
organization named in Section 1. I have received a
current
Prospectus and understand its terms are incorporated in
this
application by reference. I am certifying my taxpayer
information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT
TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
______________________________
________________________
Signature of Owner, Custodian, Date
Trustee or Corporate Officer
______________________________
________________________
Signature of Joint Owner, Date
Co-Trustee or Corporate Officer
(Remember to sign Section 8)
PROSPECTUS January 1, 1998
IVY FUND
IVY INTERNATIONAL BOND FUND -- ADVISOR CLASS SHARES
Ivy Fund (the "Trust") is a registered investment company
currently consisting of eighteen separate portfolios. The
Advisor Class of shares of one of these portfolios, Ivy
International Bond Fund (the "Fund"), is described in this
Prospectus.
Advisor Class shares are offered at net asset value without
the imposition of a front-end or contingent deferred sales charge
or Rule 12b-1 fees, and are available for purchase only by
certain investors. The Fund's Class A, Class B and Class C
shares are described in a separate prospectus dated April 30,
1997.
This Prospectus sets forth concisely the information about the
Fund's Advisor Class shares that a prospective investor should
know before investing. Please read it carefully and retain it
for future reference. Additional information about the Fund's
Advisor Class shares is contained in the Statement of Additional
Information for the Advisor Class shares, dated January 1, 1998,
(the "SAI"), which has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated by reference
into this Prospectus. The SAI, and the prospectus for the Funds'
other classes of shares, are available upon request and without
charge at the Distributor's address and telephone number printed
below. The SEC maintains a web site (http://www.sec.gov) that
contains the SAI and other material incorporated by reference
into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
Expense Information
Investment Objectives and Policies
Risk Factors and Investment Techniques
Organization and Management of the Fund
Investment Manager
Fund Administration and Accounting
Transfer Agent
Dividends and Taxes
Performance Data
How to Buy Shares
How Your Purchase Price is Determined
How The Fund Values its Shares
How to Redeem Share
Minimum Account Balance Requirements
Signature Guarantees
Choosing a Distribution Option
Tax Identification Number
Certificates
Exchange Privilege
Systematic Withdrawal Plan
Automatic Investment Method
Consolidated Account Statements
Retirement Plans
Shareholder Inquiries
BOARD OF TRUSTEES
John S. Anderegg, Jr.
Paul H. Broyhill
Keith J. Carlson
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Joseph G. Rosenthal
Richard N. Silverman
J. Brendan Swan
OFFICERS
Michael G. Landry, Chairman
Keith J. Carlson, President
James W. Broadfoot, Vice President
C. William Ferris, Secretary/Treasurer
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Ivy Mackenzie Services Corp.
P.O. Box 3022
Boca Raton, FL
33431-0922
1-800-777-6472
AUDITORS
[_____________________]
INVESTMENT MANAGER
Ivy Management, Inc.
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
1-800-456-5111
EXPENSE INFORMATION
The expenses and costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following
tables.
SHAREHOLDER TRANSACTION EXPENSES
MAXIMUM SALES LOAD MAXIMUM CONTINGENT
IMPOSED ON PURCHASES DEFERRED SALES CHARGE
(AS A PERCENTAGE OF (AS A PERCENTAGE OF
OFFERING PRICE AT TIME ORIGINAL PURCHASE
OF PURCHASE) PRICE)
IVY
INTERNATIONAL
BOND FUND None None
The Fund does not charge a redemption fee, an exchange fee, or a
sales load on reinvested dividends.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
TOTAL FUND
12B-1 SERVICE/ OTHER OPERATING
MANAGEMENT DISTRIBUTION EXPENSES EXPENSES
FEES(1) FEES (1) (1)
IVY
INTERNATIONAL
BOND FUND ____% None _____% _____%
(1) After expense reimbursements. Ivy Management, Inc. ("IMI")
currently limits Total Fund Operating Expenses (excluding
Rule 12b-1 fees and certain other items, and net of any
credits for fees paid indirectly) for the Fund to an annual
rate of 1.95% of the Fund average net assets. Total Fund
Operating Expenses in the above table include fees paid
indirectly. Without expense reimbursements Management Fees
would have been 1.00%.
EXAMPLE
CLASS A SHARES
The following table lists the expenses that an investor would pay
on a $1,000 investment in the Fund's Advisor Class shares,
assuming (1) 5% annual return and (2) unless otherwise noted,
redemption at the end of each time period. These examples further
assume reinvestment of all dividends and distributions, and that
the percentage amounts under "Total Fund Operating Expenses"
remain the same each year. THE EXAMPLES SHOULD NOT BE CONSIDERED
A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY
BE HIGHER OR LOWER THAN THOSE SHOWN.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
IVY INTERNATIONAL
BOND FUND $ $ $ $
The purpose of the foregoing table is to assist an investor
in the Fund's Advisor Class in understanding the various costs
that he or she will bear directly or indirectly. The information
presented in the preceding table does not reflect the charge of
$10 per transaction that would apply if a shareholder elects to
have redemption proceeds wired to his or her bank account. For a
more detailed discussion of the Fund's fees and expenses, see the
following sections of this Prospectus: "Organization and
Management of the Fund," and "Investment Manager" and "Fund
Administration and Accounting" and the following section of the
SAI: [______________________].
THE FUND'S FINANCIAL HIGHLIGHTS
The inception date for the Fund's Advisor Class shares is
January 1, 1998. Accordingly, no financial information for these
shares is presented below. The accounting firm of ______________
will be responsible for auditing financial information relating
to the Fund's Advisor Class shares. Financial highlights for the
Fund's Class A, Class B and Class C shares are contained in a
separate Prospectus dated April 30, 1997. Copies of the Annual
Report for this Fund are incorporated by reference into the SAI,
and are available upon request from the Fund's transfer agent
(1-800-777-6472).
INVESTMENT OBJECTIVES AND POLICIES
The Fund is a non-diversified company which has a principal
investment objective of current income primarily by investing in
high-grade non-U.S. dollar-denominated bonds (international
bonds). Protection, and possible enhancement, of principal value
through active management of currency, bond market and maturity
exposure and through security selection is a secondary objective.
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.
The Fund's investment objectives are fundamental and may not be
changed without the approval of a majority of the Fund's
outstanding voting shares (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Trustees
may make non-material changes in the Fund's objectives without
shareholder approval. Except for the Fund's investment
objectives and those investment restrictions specifically
identified as fundamental, all investment policies and practices
described in this Prospectus and in the SAI are non-fundamental
and may be changed by the Trustees without shareholder approval.
There can be no assurance that the Fund's objectives will be met.
INVESTING IN INTERNATIONAL BOND MARKETS
The U.S. dollar-denominated bond market now represents less than
one half of the world's developed bond markets. As a result,
opportunities for investment in international bond markets have
become more significant. The liquidity of international bond
markets has improved as the number of investors participating in
these markets has increased. Additionally, many international
bond markets have become more attractive for foreign investors
due to the reduction of barriers of entry to foreign investors by
deregulation and by reduction of withholding taxes.
Concurrent with the opening of foreign markets, restrictions on
international capital flows have been reduced or eliminated,
thereby enabling investment funds to seek the highest expected
returns. As a result, the market conditions of one nation
influence the market conditions of other countries through the
flow of international capital. The Fund is a convenient vehicle
for investing in international bond markets, some of which may,
during certain time periods, outperform the U.S. dollar-
denominated bond markets.
History has shown that returns from international bond markets
often differ from those generated by U.S. bond markets. The
variations in returns are, in part, the result of fluctuating
foreign currency exchange rates and changes in foreign interest
rates as compared with U.S. interest rates. Although the Fund is
non-diversified under the 1940 Act, investing in the Fund can
provide an investor's existing portfolio of U.S. dollar-
denominated bonds (U.S. bonds) with international
diversification.
At times, higher investment returns may be provided by
international bonds than from U.S. bonds. For example,
international bonds may provide higher current income and/or
greater capital appreciation than U.S. bonds due to fluctuation
in foreign currencies relative to the U.S. dollar. Of course, at
any time, the opposite may also be true.
Individual and small institutional investors often find it
difficult to participate in international bond markets. This is
due in part to the lack of current information available about
foreign entities as well as difficulties in purchasing and
selling foreign securities, holding foreign securities in
safekeeping, and converting foreign currencies into U.S. dollars.
The Fund is a convenient and relatively low cost way for
individuals and small institutions to invest in these markets.
The Fund can provide its shareholders with potential capital
appreciation and protection, as well as income, as is associated
with a professionally managed portfolio of high-grade
international bonds. IMI has significant experience investing in
international markets as well as in global trading, custody and
currency transactions.
In addition, the Fund offers investors the opportunity to enjoy
the benefits of all of the Ivy Mackenzie Funds. IMI, together
with its affiliate, Mackenzie Investment Management Inc.
("MIMI"), manages a diverse family of funds and provides a wide
range of services to help investors meet their investment needs.
RISK FACTORS AND INVESTMENT TECHNIQUES
The Fund is intended for long-term investors who can accept the
risks associated with investing in international bonds. Total
return from investment in the Fund will consist of income after
expenses, bond price gains (or losses) in the local currency and
currency gains or losses. For federal income tax purposes,
currency gains and losses generally are regarded as ordinary
income and loss and, therefore, may increase or reduce the amount
of the Fund's distributions.
The value of the Fund's portfolio will vary in response to a
number of economic factors, the most important being fluctuations
in foreign currency exchange rates, in market interest rates and
in an issuer's creditworthiness. Since the Fund's investments
are denominated primarily in foreign currencies, changes in
foreign currency values can significantly affect the Fund's share
price. Investors should be aware that exchange rate movements
can be significant and endure for long periods of time. In
addition, because the market value of a debt security generally
varies inversely with changes in prevailing interest rates, the
longer the maturity of a debt security, the more volatile it will
be in terms of changes in value. There also exists the risk that
the issuer of a debt security may not be able to meet its
obligation on interest or principal payments at the time called
for by the security.
IMI attempts to control exchange rate and interest rate risks
through active portfolio management, including such techniques as
management of currency, bond market and maturity exposure and
selection of securities based on available yields and IMI's
foreign interest rate and currency exchange rate projections.
Longer maturity bonds tend to fluctuate more in price than
shorter-term instruments in which the Fund invests--providing
potential for both gain and loss.
Investors should not rely on an investment in the Fund for their
short-term financial needs or use the Fund as a vehicle for
playing short-term swings in the international bond and foreign
exchange markets. The Fund should not be regarded as a total
investment program. Also, investors should be aware that
investing in international bonds may involve a higher degree of
risk than investing in U.S. bonds.
Investing in foreign securities involves special risks and
considerations not typically associated with investing in U.S.
securities. These include differences in accounting, auditing
and financial reporting standards, generally higher commission
rates on foreign portfolio transactions, often less publicly
available information about issuers, the possibility of
expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability
which could affect U.S. investment in foreign countries, and
potential restrictions on the flow of international capital.
Additionally, dividends or interest payable on foreign securities
may be subject to foreign taxes withheld prior to distribution
and other foreign taxes might apply. Transactions in foreign
securities may involve greater time from the trade date until
settlement than is involved for domestic securities transactions
and may involve the risk of possible losses to the Fund due to
subsequent declines in the value of the portfolio securities.
Foreign securities often trade with less frequency and volume
than domestic securities and therefore may exhibit greater price
volatility. Because foreign securities often are purchased with
and pay in currencies of foreign countries, the value of these
assets as measured in U.S. dollars may be affected favorably or
unfavorably by changes in currency rates and exchange control
regulations. The Fund may incur currency exchange costs when it
changes investments from one country to another. Further, the
Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
The Fund seeks to achieve its objective by investing primarily in
a managed portfolio of high grade bonds denominated in foreign
currencies, including European currencies and the European
Currency Unit (ECU). At least 65% of the Fund's total assets
will normally be invested in bonds denominated in foreign
currencies. In selecting bonds for the Fund's portfolio, IMI
will consider various factors, including yields, credit quality
and the fundamental outlook for currency and interest rate trends
in different parts of the world. IMI may also take into account
the ability to hedge currency and local bond price risk.
To be considered a high grade bond in which the Fund primarily
invests, a bond must be rated at least A or better by Standard
and Poor's Corporation ("S&P") or by Moody's Investors Services,
Inc. ("Moody's") or, if the bond is unrated, it must be
considered by IMI to be of comparable quality in local currency
terms.
The Fund may invest less than 35% of its net assets in debt
securities rated Baa or below by Moody's and/or BBB or below by
S&P or, if unrated, considered by IMI to be of comparable
quality. The Fund will not invest in debt securities that, at
the time of investment, are rated less than C by either Moody's
or S&P.
The Fund's investments may include: debt securities issued or
guaranteed by a foreign national government, its agencies,
instrumentalities or political subdivisions; debt securities
issued or guaranteed by supranational organizations (e.g.,
European Investment Bank, Inter-American Development Bank or the
World Bank); corporate debt securities; bank or bank holding
company debt securities; and other debt securities, including
those convertible into common stock. The Fund may also invest in
zero coupon securities which do not provide for the periodic
payment of interest and are sold at significant discount from
face value.
The Fund may also purchase securities which are not publicly
offered and may be subject to regulations applicable to
restricted securities.
The Fund intends to diversify among several countries and market
sectors, and to have represented, in substantial proportions,
business activities in not less than three different countries
other than the United States. Under normal circumstances, the
Fund will invest no more than 35% of the value of its total
assets in U.S. debt securities. The Fund may engage in options,
futures, forward foreign currency contact and other derivatives
transactions, as described below, for hedging purposes or to seek
to enhance potential gain. The Fund may invest without limit in
U.S. debt securities, including short-term money market
securities, for temporary defensive or emergency purposes. It is
not possible to predict the extent to which the Fund might employ
such optional strategies.
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
The Fund may not make loans except through the lending or
purchase of portfolio securities or through repurchase
agreements, and may not borrow money except as a temporary
measure for extraordinary or emergency purposes.
In addition, as a matter of non-fundamental 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. These instruments may be difficult to sell promptly
at an acceptable price, and the sale of certain of these
instruments may be subject to legal restrictions. Difficulty in
selling these instruments may result in a loss or may be costly
to the Fund. A description of these and other policies and
restrictions is contained under "Investment Restrictions" in the
Fund's SAI.
To protect against adverse movements of interest rates and for
purposes of liquidity, the Fund may also purchase short-term
obligations denominated in U.S. and foreign currencies such as,
but not limited to, bank deposits, bankers' acceptances,
certificates of deposit, commercial paper, short-term government,
government agency, supranational agency and corporate
obligations, and repurchase agreements.
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 buying and selling options and futures
contracts, entering into currency exchange contracts, and
purchasing indexed securities.
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, regardless of whether the
intent was to reduce risk or increase return. 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.
The Fund may enter into repurchase agreements with selected banks
and broker/dealers. Under a repurchase agreement, the Fund
acquires securities, subject to the seller's agreement to
repurchase at a specified time and price.
The Fund may purchase securities on a when-issued or forward
delivery basis, for payment and delivery at a later date. The
price and yield generally are fixed on the date of commitment to
purchase. From the time of purchase until settlement, no
interest accrues to the Fund. At the time of settlement, the
market value of the security may differ from the purchase price.
The higher yields and high income sought by the Fund may be
obtainable from high yield, higher risk securities in the lower
rating categories of the established rating services. These
securities are rated Baa or lower by Moody's or BBB or lower by
S&P. The Fund may invest in securities rated as low as C by
Moody's or S&P, which may indicate that the obligations are
speculative to a high degree and often in default. 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. 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. See Appendix A to the SAI for a more
complete description of the ratings assigned by Moody's and S&P
and their respective characteristics.
RISKS
The different types of securities and investment techniques used
by IMI all have attendant risks of varying degrees. The Fund's
investments, and consequently its net asset value, will be
subject to the market fluctuations and risks inherent in all
securities. The following are descriptions of certain risks
related to the investments and techniques that IMI may use from
time to time.
LOW-RATED DEBT SECURITIES. The Fund may invest less than
35% of its net assets in debt securities rated below BBB or Baa,
but no lower than C, by S&P or Moody's. Debt obligations rated
in the lower ratings categories, or which are unrated, involve
greater volatility of price and risk of loss of principal and
income than the price and liquidity of higher rated securities.
In addition, lower ratings reflect a greater possibility of an
adverse change in financial condition affecting the ability of
the issuer to make payments of interest and principal. The
market price and liquidity of lower rated fixed income securities
generally respond to short-term corporate and market developments
to a greater extent than the price and liquidity of higher rated
securities, because these developments are perceived to have a
more direct relationship with the ability of an issuer of lower
rated securities to meet its ongoing debt obligations.
Reduced volume and liquidity in the high yield, high risk
bond market or the reduced availability of market quotations may
make it more difficult to dispose of the bonds and to value
accurately the Fund's assets. The reduced availability of
reliable, objective data may increase the Fund's reliance on
IMI's judgment in valuing high yield, high risk bonds. In
addition, the Fund's investments in high yield, high risk
securities may be susceptible to adverse publicity and investor
perceptions, whether or not justified by fundamental factors.
NON-DIVERSIFIED INVESTMENT COMPANIES. As a "non-
diversified" investment company, the Fund may invest a greater
portion of its assets in the securities of fewer issuers, thereby
exposing the Fund to greater market and credit risk than a more
broadly diversified investment company.
REPURCHASE AGREEMENTS. Repurchase agreements are agreements
under which the Fund buys a money market instrument and obtains a
simultaneous commitment from the seller to repurchase the
instrument at a specified time and agreed-upon yield. The Fund
may enter into repurchase agreements with banks or broker-dealers
deemed to be creditworthy by IMI under guidelines approved by the
Board of Trustees. The Fund could experience a delay in obtaining
direct ownership of the underlying collateral, and might incur a
loss if the value of the security should decline.
ZERO COUPON SECURITIES. Zero coupon securities are subject
to greater market value fluctuations from changing interest rates
than debt obligations of comparable maturities which make current
cash interest payments. If the Fund holds zero coupon securities
in its portfolio, it generally will recognize income currently
for federal income tax purposes in the amount of the unpaid,
accrued interest and generally will be required to distribute
dividends representing such income to shareholders currently,
even though funds representing this income will 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 from loan proceeds.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS: The Fund usually
effects its currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign exchange market.
However, some price spread on currency exchange (e.g., to cover
service charges) is usually incurred when the Fund converts
assets from one currency to another. The Fund may also be
affected unfavorably by fluctuations in the relative rates of
exchange between the currencies of different nations.
FORWARD FOREIGN CURRENCY CONTRACTS: A forward foreign
currency contract involves an obligation to purchase or sell a
specific currency at a future date at a predetermined price.
Although these contracts are intended to minimize the risk of
loss due to a decline in the value of the hedged currencies, they
also tend to limit any potential gain that might result should
the value of the currencies increase. In addition, there may be
an imperfect correlation between the Fund's portfolio holdings of
securities denominated in a particular currency and forward
contracts entered into by the Fund, which may prevent the Fund
from achieving the intended hedge or expose the Fund to the risk
of currency exchange loss.
OPTIONS AND FUTURES TRANSACTIONS: The Fund may use various
techniques to increase or decrease their exposure to changing
security prices, currency exchange rates, commodity prices, or
other factors that affect the value of the Fund's securities.
These techniques may involve derivative transactions such as
purchasing put and call options, selling put and call options,
and engaging in transactions in currency rate futures, stock
index futures and related options.
The Fund may invest in options on stock indices and on
individual securities in accordance with its stated investment
objective and policies (see above). A put option is a short-term
contract that gives the purchaser of the option, in return for a
premium, the right to sell the underlying security or currency to
the seller of the option at a specified price during the term of
the option. A call option is a short-term contract that gives the
purchaser the right to buy the underlying security or currency
from the seller of the option at a specified price during the
term of the option. An option on a stock index gives the
purchaser the right to receive from the seller cash equal to the
difference between the closing price of the index and the
exercise price of the option.
The Fund may also enter into futures transactions in
accordance with its stated investment objective and policies. An
interest rate futures contract is an agreement between two
parties to buy or sell a specified debt security at a set price
on a future date. A stock index futures contract is an agreement
to take or make delivery of an amount of cash based on the
difference between the value of the index at the beginning and at
the end of the contract period.
Investors should be aware that the risks associated with the
use of options and futures are considerable. Options and futures
transactions generally involve a small investment of cash
relative to the magnitude of the risk assumed, and therefore
could result in a significant loss to the Fund if IMI judges
market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's investments. The Fund may also
experience a significant loss if it is unable to close a
particular position due to the lack of a liquid secondary market.
For further information regarding the use of options and futures
transactions and any associated risks, see the SAI.
ORGANIZATION OF THE FUND
The Fund is a separate, non-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 eighteen series of shares. The Trustees of the
Trust also have the authority, without shareholder approval, to
classify and reclassify the shares of the Fund into one or more
classes. The Fund has four classes of shares, designated as
Class A, Class B, Class C and the Advisor Class (only the latter
of which is offered by this Prospectus). Shares of the Fund
entitle their holders to one vote per share (with proportionate
voting for fractional shares). The shares of each class
represent an interest in the same portfolio of Fund investments.
Each class of shares, except for the Advisor Class, has a
different Rule 12b-1 distribution plan and bears different
distribution fees. Each class of shares also has its own sales
charge and expense structure that may affect its performance
relative to the Fund's other classes of 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 to the Fund. Mackenzie Investment
Management Inc. ("MIMI") provides administrative and accounting
services, Ivy Mackenzie Distributors, Inc. ("IMDI") distributes
the Fund's shares, and Ivy Mackenzie Services Corp. ("IMSC")
provides transfer agency and shareholder-related services for the
Fund. IMI, IMDI and IMSC are wholly-owned subsidiaries of MIMI.
As of October 31, 1997, IMI and MIMI had approximately $_____
billion and $_____ million, respectively, in assets under
management. MIMI is a subsidiary of Mackenzie Financial
Corporation ("MFC"), which has been an investment counsel and
mutual fund manager in Toronto, Ontario, Canada for more than 25
years.
INVESTMENT MANAGER. For IMI's business management and
investment advisory services, the Fund pays IMI a fee, which is
accrued daily and paid monthly, based on the Fund's average net
assets at an annual rate of 0.75%. The fees paid by the Fund are
higher than those charged by many funds that invest primarily in
U.S. securities, but not necessarily higher than the fees charged
to funds with investment objectives similar to those of the Fund.
Currently, IMI limits the Fund's total operating expenses
(excluding Rule 12b-1 fees, interest, taxes, brokerage
commissions, litigation, class-specific expenses, indemnification
and extraordinary expenses) to an annual rate of 1.50% of the
Fund's average net assets, which may lower the Fund's expenses
and increase its total return. This voluntary expense limitation
expense limitation may be terminated or revised at any time, at
which point the Fund's expenses may increase and its total return
may be reduced.
IMI pays all expenses that it incurs in rendering management
services to the Fund. The Fund bears its own operational costs.
General expenses of the Trust that are not readily identifiable
as belonging to a particular series of the Trust (or a particular
class thereof) are allocated among and charged to each series
based on its relative net asset size. Expenses that are
attributable to a particular Fund (or class thereof) will be
borne by that Fund (or class) directly. The fees payable to IMI
are subject to any reimbursement or fee waiver to which IMI may
agree.
ADMINISTRATOR. MIMI provides various administrative services
for the Fund, such as maintaining the registration of Fund shares
under state "Blue Sky" laws, and assisting in with the
preparation of Federal and state income tax returns, financial
statements and periodic reports to shareholders. MIMI also
assists the Trust's legal counsel with the filing of registration
statements, proxies and other required filings under Federal and
state law. Under this arrangement, the average net assets
attributable to the Fund's Advisor Class shares are subject to a
fee at the annual rate of 0.01%.
MIMI also provides certain accounting and pricing services
for the Fund (see "Fund Accounting Services" in the SAI for more
information).
TRANSFER AGENT. IMSC is the transfer and dividend-paying
agent for the Fund and also provides certain shareholder-related
services . In addition, certain broker-dealers that maintain
shareholder accounts with the Fund through an omnibus account
provide transfer agent and other shareholder-related services
that would otherwise be provided by IMSC if the individual
accounts that comprise the omnibus account were opened by their
beneficial owners directly (see "Investment Advisory and Other
Services" in the SAI).
DIVIDENDS AND TAXES
DIVIDENDS: Distributions you receive from the Fund are
reinvested in additional Advisor Class shares unless you elect to
receive them in cash.
The Fund intends to make a distribution for each fiscal year
of any net investment income and net realized short-term capital
gain, as well as any net long-term capital gain, realized during
the year. An additional distribution may be made of net
investment income, net realized short-term capital gains and net
realized long-term capital gains to comply with the calendar year
distribution requirement under the excise tax provisions of
Section 4982 of the Internal Revenue Code of 1986, as amended
(the "Code").
TAXATION. The following discussion is intended for general
information only. You should consult with your 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 as a regulated investment
company under the Code. To qualify, the Fund must meet certain
income, distribution and diversification requirements. In any
year in which the Fund qualifies as a regulated investment
company and timely distributes all of its taxable income, the
Fund generally will not pay any Federal income or excise tax.
Dividends paid out of the Fund's investment company taxable
income (including dividends, interest and net short-term capital
gains) will be taxable to a shareholder as ordinary income. If a
portion of the Fund's income consists of dividends paid by U.S.
corporations, a portion of the dividends paid by the Fund may be
eligible for the corporate dividends-received deduction.
Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any, are
taxable as long-term capital gains, regardless of how long the
shareholder has held the Fund's shares. Dividends are taxable to
shareholders in the same manner whether received in cash or
reinvested in additional Fund shares.
If, for any year, the Fund's total distributions exceed its
earnings and profits, the excess will generally be treated as a
return of capital. The amount treated as a return of capital will
reduce a shareholder's adjusted basis in his/her shares (thereby
increasing potential gain or reducing potential loss on the sale
of shares) and, to the extent that the amount exceeds this basis,
will be treated as a taxable gain.
A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by the Fund in October,
November or December with a record date in such a month and paid
by the Fund during January of the following calendar year. Such
distributions will be taxable to shareholders in the calendar
year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Investments in securities that are issued at a discount will
result each year in income to the Fund 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.
Income and gains received by the Fund from sources within foreign
countries may be subject to foreign withholding and other taxes.
Unless the Fund is eligible 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 the Fund, or upon receipt of a
distribution in complete liquidation of the Fund, generally will
be a capital gain or loss which will be long-term or short-term,
generally depending upon the shareholder's holding period for the
shares.
The Fund may be required to withhold U.S. Federal income tax at
the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct
taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue
Service (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.
Fund distributions may be subject to state, local and foreign
taxes. Distributions of the Fund which are derived from interest
on obligations of the U.S. Government and certain of its
agencies, authorities and instrumentalities may be exempt from
state and local taxes in certain states. Further information
relating to tax consequences is contained in the SAI.
PERFORMANCE DATA
Performance information (e.g., "total return") is computed
separately for each class of Fund shares in accordance with
formulas prescribed by the SEC. Performance information for each
class may be compared in reports and promotional literature to
indices such as the Standard and Poor's 500 Stock Index, Dow
Jones Industrial Average, and Morgan Stanley Capital
International World Index. Advertisements, sales literature and
communications to shareholders may also contain statements of the
Fund's current yield, various expressions of total return and
current distribution rate. Performance figures will vary in part
because of the different expense structures of the Fund's
different classes. ALL PERFORMANCE INFORMATION IS HISTORICAL AND
IS NOT INTENDED TO SUGGEST FUTURE RESULTS.
"Total return" is the change in value of an investment in
the Fund for a specified period, and assumes the reinvestment of
all distributions and imposition of the maximum applicable sales
charge. "Average annual total return" represents the average
annual compound rate of return of an investment in a particular
class of Fund shares assuming the investment is held for one
year, five years and ten years as of the end of the most recent
calendar quarter. Where the Fund provides total return quotations
for other periods, or based on investments at various sales
charge levels or at net asset value, "total return" is based on
the total of all income and capital gains paid to (and reinvested
by) shareholders, plus (or minus) the change in the value of the
original investment expressed as a percentage of the purchase
price.
HOW TO BUY SHARES
Advisor Class shares are offered through this Prospectus
only to the following investors:
(i) trustees or other fiduciaries purchasing shares for
employee benefit plans that are sponsored by organizations
that have at least 1,000 employees; and
(ii) any account with assets of at least $10,000 if (a) a
financial planner, trust company, bank trust department or
registered investment adviser has investment discretion,
and where the investor pays such person as compensation
for its advice and other services an annual fee of at
least .50% on the assets in the account, or (b) such
account is established under a "wrap fee" program and the
account holder pays the sponsor of the program an annual
fee of at least .50% on the assets in the account; and
(iii) officers and Trustees of the Trust (and their relatives);
and
(iv) officers, directors, employees, retired employees, legal
counsel and accountants of IMI, MIMI, and MFC (and their
relatives); and
(v) 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).
OPENING AN ACCOUNT: Complete and sign the Account
Application on the last page of this Prospectus. Make your check
payable to Ivy International Bond 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 any purchase order.
MINIMUM INVESTMENT POLICIES: The minimum initial investment
in Advisor Class shares is $10,000. The minimum additional
investment is $250. Initial or additional amounts for retirement
accounts may be less (see "Retirement Plans").
BUYING ADDITIONAL SHARES: You may add to your account at
any time through any of the following options:
BY MAIL: Complete the investment slip attached to your
statement, or write instructions including the account
registration, Fund number and account number of the shares you
wish to purchase. Send your check (payable to the Fund in which
you are investing), along with your investment slip or written
instructions, to one of the addresses above.
THROUGH YOUR BROKER: Deliver to your registered
representative or selling broker the investment slip attached to
your statement, or written instructions, along with your payment.
BY WIRE: Purchases may also be made by wiring money from
your bank account to your Ivy account. Your bank may charge a fee
for wiring funds. Before wiring any funds, please call IMSC at 1-
800-777-6472. Wiring instructions are as follows:
FIRST UNION NATIONAL BANK OF FLORIDA
JACKSONVILLE, FL
ABA#063000021
ACCOUNT #2090002063833
FOR FURTHER CREDIT TO:
YOUR IVY ACCOUNT REGISTRATION
YOUR FUND NUMBER AND ACCOUNT NUMBER
BY AUTOMATIC INVESTMENT METHOD: Complete Sections 6A and 7B
on the Account Application (see "Automatic Investment Method" on
page _____ for more information).
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Advisor Class shares of the Fund is
the net asset value ("NAV") per share. The purchase price per
share is known as the public offering price.
Share purchases will be made at the next determined price
after your purchase order is received. The price is effective for
orders received by IMSC or by your registered securities dealer
prior to the time of the determination of the NAV. Any orders
received after the time of the determination of the NAV will be
entered at the next calculated price.
Orders placed with a securities dealer before the NAV is
determined that are transmitted through the facilities of the
National Securities Clearing Corporation on the same day are
confirmed at that day's price. Any loss resulting from the
dealer's failure to submit an order by the deadline will be borne
by that dealer.
You will receive an account statement after any purchase,
exchange or full liquidation. Statements related to reinvestment
of dividends, capital gains, automatic investment plans (see the
SAI for further explanation) and/or systematic withdrawal plans
will be sent quarterly.
HOW THE FUND VALUES ITS SHARES
The NAV per share is the value of one share. The NAV is
determined for each Class of shares as of the close of the New
York Stock Exchange on each day the Exchange is open by dividing
the value of the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding, adjusted to
the nearest cent. These procedures are described more completely
in the SAI.
The Trust's Board of Trustees has established procedures to
value the Fund's securities in order to determine the NAV. The
value of a foreign security is determined as of the normal close
of trading on the foreign exchange on which it is traded or as of
the close of regular trading on the New York Stock Exchange, if
that is earlier. If no sale is reported at that time, the average
between the current bid and asked prices is used. All other
securities for which OTC market quotations are readily available
are valued at the average between the current bid and asked
prices. Securities and other assets for which market prices are
not readily available are valued at fair value, as determined by
IMI and approved in good faith by the Board. Money market
instruments of the Fund are valued at amortized cost.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS: IMDI may, at
its own expense, pay concessions to dealers that satisfy certain
criteria established from time to time by IMDI. These conditions
relate to increasing sales of shares of the Fund over specified
periods and to certain other factors. These payments may,
depending on the dealer's satisfaction of the required
conditions, be periodic and may be up to (i) 0.25% of the value
of Fund shares sold by the dealer during a particular period, and
(ii) 0.10% of the value of Fund shares held by the dealer's
customers for more than one year, calculated on an annual basis.
An investor may be charged a transaction fee for Advisor
Class shares purchased or redeemed through a broker or agent
other than IMDI.
HOW TO REDEEM SHARES
You may redeem your Advisor Class shares through your
registered securities representative, by mail or by telephone.
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.
When shares are redeemed, the Fund generally sends payment
to you on the next business day. Under unusual circumstances, the
Fund may suspend redemptions or postpone payment to the extent
permitted by Federal securities laws. The proceeds of the
redemption may be more or less than the purchase price of your
shares, depending upon, among other factors, the market value of
the Fund's securities at the time of the redemption. If the
redemption is for over $50,000, or the proceeds are to be sent to
an address other than the address of record, or an address change
has occurred in the last 30 days, it must be requested in writing
with a signature guarantee. See "Signature Guarantees," below.
If you are not certain of the requirements for a redemption,
please contact IMSC at
1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES DEALER: The Dealer is
responsible for promptly transmitting redemption orders.
Redemptions requested by dealers will be made at the NAV
determined at the close of regular trading (4:00 p.m. Eastern
time) on the day that a redemption request is received in good
order by IMSC.
BY MAIL: Requests for redemption in writing are considered
to be in "proper or good order" if they contain the following:
- Any outstanding certificate(s) for shares being
redeemed.
- A letter of instruction, including the account
registration, fund number, the account number and the
dollar amount or number of shares to be redeemed.
- Signatures of all registered owners whose names appear
on the account.
- Any required signature guarantees.
- Other supporting legal documentation, if required (in
the case of estates, trusts, guardianships,
corporations, unincorporated associations, retirement
plan trustees or others acting in representative
capacities).
The dollar amount or number of shares indicated for
redemption must not exceed the available shares or NAV of your
account at the next-determined prices. If your request exceeds
these limits, then the trade will be rejected in its entirety.
Mail your request to IMSC at one of the addresses on
page ___ of this Prospectus.
BY TELEPHONE: Individual and joint accounts may redeem up
to $50,000 per day over the telephone by contacting IMSC at 1-
800-777-6472. In times of unusual economic or market changes, the
telephone redemption privilege may be difficult to implement. If
you are unable to execute your transaction by telephone, you may
want to consider placing the order in writing and sending it by
mail or overnight courier.
Checks will be made payable to the current account
registration and sent to the address of record. If there has been
a change of address in the last 30 days, please use the
instructions for redemption requests by mail described above. A
signature guarantee would be required.
Requests for telephone redemptions will be accepted from the
registered owner of the account, the designated registered
representative or the registered representative's assistant.
Shares held in certificate form cannot be redeemed by
telephone.
If Section 6E of the Account Application is not completed,
telephone redemption privileges will be provided automatically.
Although telephone redemptions may be a convenient feature, you
should realize that you may be giving up a measure of security
that you may otherwise have if you terminated the privilege and
redeemed your shares in writing. If you do not wish to make
telephone redemptions or let your registered representative do so
on your behalf, you must notify IMSC in writing.
The Fund employs reasonable procedures that require personal
identification prior to acting on redemption instructions
communicated by telephone to confirm that such instructions are
genuine. In the absence of such procedures, the Fund may be
liable for any losses due to unauthorized or fraudulent telephone
instructions.
RECEIVING YOUR PROCEEDS BY FEDERAL FUNDS WIRE: For
shareholders who established this feature at the time they opened
their account, telephone instructions will be accepted for
redemption of amounts up to $50,000 ($1,000 minimum) and proceeds
will be wired on the next business day to a predesignated bank
account.
In order to add this feature to an existing account or to
change existing bank account information, please submit a letter
of instructions including your bank information to IMSC at the
address provided above. The letter must be signed by all
registered owners, and their signatures must be guaranteed.
Your account will be charged a fee of $10 each time
redemption proceeds are wired to your bank. Your bank may also
charge you a fee for receiving a Federal Funds wire.
Neither IMSC nor the Fund can be responsible for the
efficiency of the Federal Funds wire system or the shareholder's
bank.
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small accounts, the Fund
may redeem the accounts of shareholders whose investment has been
less than $10,000 for more than 12 months. The Fund will not
redeem an account unless the shareholder has been given at least
60 days' advance notice of the Fund's intention to do so. No
redemption will be made if a shareholder's account falls below
the minimum due to a reduction in the value of the Fund's
portfolio securities. This provision does not apply to IRAs,
other retirement accounts and UGMA/UTMA accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent fraudulent redemptions,
we require a signature guarantee in order to accommodate the
following requests:
- Redemption requests over $50,000.
- Requests for redemption proceeds to be sent to someone
other than the registered shareholder.
- Requests for redemption proceeds to be sent to an
address other than the address of record.
- Registration transfer requests.
- Requests for redemption proceeds to be wired to your
bank account (if this option was not selected on your
original application, or if you are changing the bank
wire information).
A signature guarantee may be obtained only from an eligible
guarantor institution as defined in Rule 17Ad-15 of the
Securities Exchange Act of 1934, as amended. An eligible
guarantor institution includes banks, brokers, dealers, municipal
securities dealers, government securities dealers, government
securities brokers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. The signature guarantee must not be qualified in
any way. Notarizations from notary publics are not the same as
signature guarantees, and are not accepted.
Circumstances other than those described above may require a
signature guarantee. Please contact IMSC at 1-800-777-6472 for
more information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the distribution option
that best suits your needs:
AUTOMATIC REINVESTMENT OPTION -- Both dividends and capital
gains are automatically reinvested at NAV in additional Advisor
Class shares of the Fund unless you specify one of the other
options.
INVESTMENT IN ANOTHER IVY FUND -- Both dividends and capital
gains are automatically invested at NAV in the Advisor Class
shares of another Ivy fund.
DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED -- Dividends will
be paid in cash. Capital gains will be reinvested at NAV in
additional Advisor Class shares of the Fund or the Advisor Class
shares of another Ivy fund.
DIVIDENDS AND CAPITAL GAINS IN CASH -- Both dividends and
capital gains will be paid in cash.
If you wish to have your cash distributions deposited
directly to your bank account via electronic funds transfer
("EFT"), or if you wish to change your distribution option,
please contact IMSC at 1-800-777-6472.
If you wish to have your cash distributions go to an address
other than the address of record, you must provide IMSC with a
letter of instruction signed by all registered owners with
signatures guaranteed.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a 31% U.S. Federal
backup withholding tax on dividends, capital gains distributions
and redemption proceeds, you must furnish the Fund with your
certified tax identification number ("TIN") and certify that you
are not subject to backup withholding due to prior underreporting
of interest and dividends to the IRS. If you fail to provide a
certified TIN, or such other tax-related certifications as the
Fund may require, within 30 days of opening your new account, the
Fund reserves the right to involuntarily redeem your account and
send the proceeds to your address of record.
You can avoid the above withholding and/or redemption by
correctly furnishing your TIN, and making certain certifications,
in Section 2 of the Account Application at the time you open your
new account, unless the IRS requires that backup withholding be
applied to your account.
Certain payees, such as corporations, generally are exempt
from backup withholding. Please complete IRS Form W-9 with the
new account application to claim this exemption. If the
registration is for an UGMA/UTMA account, please provide the
social security number of the minor. Non-U.S. investors who do
not have a TIN must provide, with their Account Application, a
completed IRS Form W-8.
CERTIFICATES
In order to facilitate transfers, exchanges and redemptions,
most shareholders elect not to receive certificates. Should you
wish to have a certificate issued, please contact IMSC at 1-800-
777-6472 and request that one be sent to you. (Retirement plan
accounts are not eligible for this service). Please note that if
you were to lose your certificate, you would incur an expense to
replace it.
Certificates requested by telephone for shares valued up to
$50,000 will be issued to the current registration and mailed to
the address of record. Should you wish to have your certificates
mailed to a different address, or registered differently from the
current registration, contact IMSC at 1-800-777-6472.
EXCHANGE PRIVILEGE
Fund shareholders have an exchange privilege with other Ivy
funds (except Ivy International Fund, unless they have an
existing Ivy International Fund account). The Fund reserves the
right to reject any exchange orders.
Advisor Class shareholders may exchange their outstanding
Advisor Class shares for Advisor Class shares of another Ivy fund
on the basis of the relative NAV per Advisor Class share.
Exchanges into an Ivy fund in which shares are not already held
are subject to certain minimum investment restrictions. See
"Exchange of Shares" in the SAI or contact IMSC at 1-800-777-6472
for further details.
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. 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
fund into which the exchange is made. It is the policy of the
Fund to discourage the use of the exchange privilege for the
purpose of timing short-term market fluctuations. To protect the
interests of other shareholders of the Fund, the Fund may cancel
the exchange privileges of any persons that, in the opinion of
the Fund, are using market timing strategies or ar making more
than five exchanges per owner or controlling person per calendar
year.
EXCHANGES BY TELEPHONE: If Section 6D of the Account
Application is not completed, telephone exchange privileges will
be provided automatically. Although telephone exchanges may be a
convenient feature, you should realize that you may be giving up
a measure of security that you may otherwise have if you
terminated the privilege and exchanged your shares in writing. If
you do not wish to make telephone exchanges or let your
registered representative do so on your behalf, you must notify
IMSC in writing.
In order to execute an exchange, please contact IMSC at 1-
800-777-6472. Have the account number of your current fund and
the exact name in which it is registered available to give to the
telephone representative.
The Fund employs reasonable procedures that require personal
identification prior to acting on exchange instructions
communicated by telephone to confirm that such instructions are
genuine. In the absence of such procedures, the Fund may be
liable for any losses due to unauthorized or fraudulent telephone
instructions.
EXCHANGES IN WRITING: In a letter, request an exchange and
provide the following information:
- The name and class of the fund whose shares you
currently own.
- Your account number.
- The name(s) in which the account is registered.
- The name of the fund in which you wish your exchange to
be invested.
- The number of shares or the dollar amount you wish to
exchange.
The request must be signed by all registered owners.
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 continually maintain an account balance of at
least $10,000. 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. Shares must be uncertificated (i.e., held by the Fund)
while the plan is in effect. A Systematic Withdrawal Plan may not
be established if you are currently participating in the
Automatic Investment Method. For more information, please contact
IMSC at 1-800-777-6472.
If payments you receive through the Systematic Withdrawal
Plan exceed the dividends and capital appreciation of your
account, you will be reducing the value of your account.
Additional investments made by shareholders participating in the
Systematic Withdrawal Plan must equal at least $250 while the
plan is in effect. Redemptions are taxable events.
Amounts paid to you through the Systematic Withdrawal Plan
are derived from the redemption of shares in your account.
Should you wish at any time to add a Systematic Withdrawal
Plan to an existing account or change payee instructions, you
will need to submit a written request, signed by all registered
owners, with signatures guaranteed.
Retirement accounts are eligible for Systematic Withdrawal
Plans. Please contact IMSC at 1-800-777-6472 to obtain the
necessary paperwork to establish a plan.
If the U.S. Postal Service cannot deliver your checks, or if
deposits to a bank account are returned for any reason, your
redemptions will be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be automatically drawn
each month from your bank for investment in Fund shares by
completing Sections 6A and 7B of the Account Application. Attach
a "voided" check or deposit slip to your account application. At
pre-specified intervals, your bank account will be debited and
the proceeds will be credited to your Ivy fund account. The
minimum investment under this plan is $250 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 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 funds offer several tax-sheltered retirement plans
that may fit your needs:
- IRA (Individual Retirement Account)
- 401(k), Money Purchase Pension and Profit Sharing Plans
- SEP-IRA (Simplified Employee Pension Plan)
- 403(b)(7) Plans
- SIMPLE Plans (Individual Retirement Account and 401(k))
Minimum initial and subsequent investments for retirement
plans are $25.
Investors Bank & Trust, which serves as custodian or trustee
under the retirement plan prototypes available from the Fund,
charges certain nominal fees for annual maintenance. A portion of
these fees is remitted to IMSC, as compensation for its services
to the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to certain
requirements under the Code. Certain documentation, including IRS
Form W4-P, must be provided to IMSC prior to taking any
distribution. Please contact IMSC for details. The Ivy funds and
IMSC assume no responsibility to determine whether a distribution
satisfies the conditions of applicable tax laws, and will not be
responsible for any penalties assessed. For additional
information, please contact your broker or tax adviser.
Please call IMSC at 1-800-777-6472 for complete information
kits describing the plans, their benefits, restrictions,
provisions and fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Fund should be directed to IMSC at
1-800-777-6472.
ACCOUNT APPLICATION
IVY INTERNATIONAL BOND FUND
USE THIS APPLICATION FOR ADVISOR CLASS SHARES
Please mail applications and checks to: Ivy Mackenzie Services
Corp., P.O. Box 3022, Boca Raton, FL 33431-0922.
(This application should not be used for retirement accounts for
which Ivy is custodian.)
Account Number:
(Fund Use Only)
Dealer #:
Branch #:
Rep. I.D. #:
Acct. Type: 101/
Soc Cd:
Div Cd: 1/2
CG Cd: 1/2
Exc Cd: 0/1
Red Cd: 0/X
1 REGISTRATION
/ / Individual
/ / Joint Tenant
/ / Estate
/ / UGMA/UTMA
/ / Corporation
/ / Partnership
/ / Sole Proprietor
/ / Trust
/ / Other
Date of Trust
Owner, Custodian or Trustee
Co-owner or Minor
Minor's State of Residence
Street
City
State
Zip Code
Phone Number -- Day
Phone Number -- Evening
2 TAX ID
Citizenship: / / U.S. / / Other ________________
Social Security Number
Tax Identification Number
Under penalties of perjury, I certify by signing in Section
8 below that: (1) the number shown in this section is my
correct taxpayer identification number (TIN), and (2) I am
not subject to backup withholding because: (a) I have not
been notified by the Internal Revenue Service (IRS) that I
am subject to backup withholding as a result of a failure to
report all interest or dividends, or (b) the IRS has
notified me that I am no longer subject to backup
withholding. (Cross out item (2) if you have been notified
by the IRS that you are currently subject to backup
withholding because of underreporting interest or dividends
on your tax return.) Please see the "Tax Identification
Number" section of the Prospectus for additional information
on completing this section.
3 DEALER INFORMATION
The undersigned ("Dealer") agrees to all applicable
provisions in this Application, guarantees the signature and
legal capacity of the Shareholder, and agrees to notify IMSC
of any purchases made under a Letter of Intent or Rights of
Accumulation.
Dealer Name
Branch Office Address
City
State
Zip Code
Representative's Name and Number
Representative's Phone Number
Authorized Signature of Dealer
4 INVESTMENTS
A. Enclosed is my check for $___________ ($10,000 minimum)
made payable to Ivy International Bond Fund.
B. FOR DEALER USE ONLY
Confirmed trade orders: [Confirm Number, Number of
Shares, Trade Date]
5 DISTRIBUTION OPTIONS
I would like to reinvest dividends and capital gains into
additional shares in this account at net asset value unless
a different option is checked below.
A. / / Reinvest all dividends and capital gains into
additional shares of a different Ivy fund.
Fund Name
Account Number
B. / / Pay all dividends in cash and reinvest capital
gains into additional shares in this Fund or a
different Ivy fund.
Fund Name
Account Number
C. / / Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN C OR D
ABOVE, BE:
/ / Sent to the address listed in the registration.
/ / Sent to the special payee listed in Section
7A / / (By Mail)
7B / / (By E.F.T.)
6 OPTIONAL SPECIAL FEATURES
A. / / Automatic Investment Method (AIM)
- I wish to invest _________________
/ / once per month
/ / twice
/ / 3 times
/ / 4 times
- My bank account will be debited on the _________ day of
the month
Please invest $________________ each period starting in the
month of __________________ in the Advisor Class 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 Advisor Class
account in __________________[Fund Name].
/ / Monthly / / Quarterly / /Semiannually / / Annually
/ / Once / / Twice / / 3 times / / 4 times per month
I request the distribution be:
/ / Sent to the address listed in the registration.
/ / Sent to the special payee listed in Section 7.
/ / Invested into additional shares of the same class of a
different Ivy fund.
Fund Name
Account Number
Amount $__________________(Minimum $50) starting on or about
the
- _______ day of the month
- _______ day of the month
- _______ day of the month*
NOTE: Account minimum: $5,000 in shares at current offering
price
C. Electronic Funds Transfer for Redemption Proceeds**
I authorize the Agent to honor telephone instructions
for the redemption of Fund shares up to $50,000.
Proceeds may be wire transferred to the bank account
designated ($1,000 minimum). (Complete Section 7B)
D. Telephone Exchanges** / / Yes / / No
I authorize exchanges by telephone among the Ivy funds
upon instructions from any person as more fully
described in the Prospectus. To change this option once
established, written instructions must be received from
the shareholder of record or the current registered
representative.
If neither box is checked, the telephone exchange
privilege will be provided automatically.
E. Telephonic Redemptions** / / Yes / / No
The Fund or its agents are authorized to honor
telephone instructions from any person as more fully
described in the Prospectus for the redemption of Fund
shares. The amount of the redemption shall not exceed
$50,000 and the proceeds are to be payable to the
shareholder of record and mailed to the address of
record. To change this option once established, written
instructions must be received from the shareholder of
record or the current registered representative.
If neither box is checked, the telephone redemption
privilege will be provided automatically.
* There must be a period of at least seven calendar days
between each investment/withdrawal period.
** This option may not be used if shares are issued in
certificate form.
7 SPECIAL PAYEE
A. MAILING ADDRESS
Please send all disbursements to this special payee:
Name of Bank or Individual
Account Number (If Applicable)
Street
City/State/Zip
B. FED WIRE / E.F.T. INFORMATION
Financial Institution
ABA #
Account #
Street
City/State/Zip
(Please attach a voided check)
8 SIGNATURES
Investors should be aware that the failure to check the "No"
under Section 6D or 6E above means that the Telephone
Exchange/Redemption Privileges will be provided. The Funds
employ reasonable procedures that require personal
identification prior to acting on exchange/redemption
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such procedures,
a Fund may be liable for any losses due to unauthorized or
fraudulent telephone instructions. Please see "Exchange
Privilege" and "How to Redeem Shares" in the Prospectus for
more information on these privileges.
I certify to my legal capacity to purchase or redeem shares
of the Fund for my own account or for the account of the
organization named in Section 1. I have received a current
Prospectus and understand its terms are incorporated in this
application by reference. I am certifying my taxpayer
information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT
TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
______________________________ ________________________
Signature of Owner, Custodian, Date
Trustee or Corporate Officer
______________________________ ________________________
Signature of Joint Owner, Date
Co-Trustee or Corporate Officer
(Remember to sign Section 8)
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
ADVISOR CLASS SHARES
January 1, 1998
_________________________________________________________________
Ivy Fund (the "Trust") is an open-end management investment
company that currently consists of eighteen fully managed
portfolios, each of which (except for Ivy Latin America Strategy
Fund and Ivy International Bond Fund) is diversified. This
Statement of Additional Information ("SAI") relates to the
Advisor Class shares of the following four portfolios: Ivy Bond
Fund, Ivy Emerging Growth Fund, Ivy Growth Fund and Ivy Growth
with Income Fund (collectively, the "Funds," and each, a "Fund").
This SAI is not a prospectus and should be read in
conjunction with the prospectus for the Funds' Advisor Class
shares dated January 1, 1998 (the "Prospectus"), which may be
obtained upon request and without charge from the Distributor at
the address and telephone number printed below. Advisor Class
shares are only offered to certain investors (see the
Prospectus). The Funds also offer Class A, Class B and Class C
(and Class I shares, in the case of Ivy Bond Fund), which are
described in a separate prospectus and statement of additional
information that may be obtained from the Distributor.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
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 . . . . . . . . . . . . . . 5
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . 7
U.S. GOVERNMENT SECURITIES. . . . . . . . . . . . . . . . 7
MUNICIPAL SECURITIES. . . . . . . . . . . . . . . . . . . 8
ZERO COUPON BONDS . . . . . . . . . . . . . . . . . . . . 9
REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . 9
WARRANTS. . . . . . . . . . . . . . . . . . . . . . . . . 10
ADJUSTABLE RATE PREFERRED STOCKS. . . . . . . . . . . . . 10
CONVERTIBLE SECURITIES. . . . . . . . . . . . . . . . . . 10
SMALL COMPANY RISK. . . . . . . . . . . . . . . . . . . . 11
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS . . . . 12
DEPOSITORY RECEIPTS . . . . . . . . . . . . . . . . . . . 12
FOREIGN SECURITIES. . . . . . . . . . . . . . . . . . . . 13
INVESTING IN EMERGING MARKETS . . . . . . . . . . . . . . 14
FORWARD FOREIGN CURRENCY CONTRACTS. . . . . . . . . . . . 16
FOREIGN CURRENCIES. . . . . . . . . . . . . . . . . . . . 16
BORROWING . . . . . . . . . . . . . . . . . . . . . . . . 17
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED SECURITIES . . 17
RESTRICTED AND ILLIQUID SECURITIES. . . . . . . . . . . . 18
REAL ESTATE INVESTMENT TRUSTS (REITS) . . . . . . . . . . 18
OPTIONS TRANSACTIONS. . . . . . . . . . . . . . . . . . . 19
OPTIONS, IN GENERAL. . . . . . . . . . . . . . . . . 19
WRITING OPTIONS ON INDIVIDUAL SECURITIES . . . . . . 20
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. . . . . 21
PURCHASING AND WRITING OPTIONS ON SECURITIES
INDICES . . . . . . . . . . . . . . . . . . . . 21
RISKS OF OPTIONS TRANSACTIONS. . . . . . . . . . . . 22
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. . . . 23
GENERAL . . . . . . . . . . . . . . . . . . . . 23
INTEREST RATE FUTURES CONTRACTS. . . . . . . . . . . 25
OPTIONS ON INTEREST RATE FUTURES CONTRACTS . . . . . 26
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED
OPTIONS . . . . . . . . . . . . . . . . . . . . 26
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. . 27
SECURITIES INDEX FUTURES CONTRACTS. . . . . . . . . . . . 29
RISKS OF SECURITIES INDEX FUTURES. . . . . . . . . . 29
COMBINED TRANSACTIONS. . . . . . . . . . . . . . . . 31
INVESTMENT-GRADE DEBT SECURITIES. . . . . . . . . . . . . 31
LOW-RATED DEBT SECURITIES . . . . . . . . . . . . . . . . 31
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 32
ADDITIONAL RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 36
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . . . . . . 38
AUTOMATIC INVESTMENT METHOD . . . . . . . . . . . . . . . 38
EXCHANGE OF SHARES. . . . . . . . . . . . . . . . . . . . 39
RETIREMENT PLANS. . . . . . . . . . . . . . . . . . . . . 40
INDIVIDUAL RETIREMENT ACCOUNTS . . . . . . . . . . . 40
QUALIFIED PLANS. . . . . . . . . . . . . . . . . . . 42
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(B)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . . . 43
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS . . . . . . 43
SIMPLE PLANS . . . . . . . . . . . . . . . . . . . . 43
SYSTEMATIC WITHDRAWAL PLAN. . . . . . . . . . . . . . . . 44
GROUP SYSTEMATIC INVESTMENT PROGRAM . . . . . . . . . . . 44
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . . . . . . 45
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . 47
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI. . . . . . . . . 50
COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . 52
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . 54
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES. . . 54
DISTRIBUTION SERVICES . . . . . . . . . . . . . . . . . . 57
RULE 18F-3 PLAN. . . . . . . . . . . . . . . . . . . 58
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . 58
FUND ACCOUNTING SERVICES. . . . . . . . . . . . . . . . . 58
TRANSFER AGENT AND DIVIDEND PAYING AGENT. . . . . . . . . 59
ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . 59
AUDITORS. . . . . . . . . . . . . . . . . . . . . . . . . 60
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . . . . . . 60
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . 63
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . 64
REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 65
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD
CONTRACTS. . . . . . . . . . . . . . . . . . . . . . 68
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES. . 69
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES. . . . 70
DEBT SECURITIES ACQUIRED AT A DISCOUNT. . . . . . . . . . 70
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 71
DISPOSITION OF SHARES . . . . . . . . . . . . . . . . . . 72
FOREIGN WITHHOLDING TAXES . . . . . . . . . . . . . . . . 73
BACKUP WITHHOLDING. . . . . . . . . . . . . . . . . . . . 74
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . 74
YIELD. . . . . . . . . . . . . . . . . . . . . . . . 75
AVERAGE ANNUAL TOTAL RETURN. . . . . . . . . . . . . 76
OTHER QUOTATIONS, COMPARISONS AND GENERAL
INFORMATION . . . . . . . . . . . . . . . . . . 77
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 77
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS . . . . . . . . . 79
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objective and policies,
which are set forth below. 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 may invest up to 35% of its net assets in corporate
debt securities, including zero coupon bonds, 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, zero coupon bonds, and securities sold on a
"when-issued" or firm commitment basis. As a temporary measure
for extraordinary or emergency purposes, the Fund may borrow from
banks (up to 10% of the value of its total assets). The Fund may
with approval of the Trust's Board of Trustees (the "Trustees" or
"Board"), but currently does not intend to, lend portfolio
securities valued at not more that 30% of the Fund's 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 (including American Depository
Receipts ("ADRs"), Global Depository Receipts ("GDRs"), American
Depository Shares ("ADSs") and Global Depository Shares
("GDSs")), 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
cycles 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 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. All of the Funds may invest up to 5% of their net
assets 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; 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 each 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 will not exceed 15% of its total assets.
RISK FACTORS
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities.
Securities guaranteed by the U.S. Government include: (1) direct
obligations of the U.S. Treasury (such as Treasury bills, notes,
and bonds) and (2) Federal agency obligations guaranteed as to
principal and interest by the U.S. Treasury (such as GNMA
certificates, which are mortgage-backed securities). When such
securities are held to maturity, the payment of principal and
interest is unconditionally guaranteed by the U.S. Government,
and thus they are of the highest possible credit quality. U.S.
Government securities that are not held to maturity are subject
to variations in market value due to fluctuations in interest
rates.
Mortgage-backed securities are securities representing part
ownership of a pool of mortgage loans. For example, GNMA
certificates are such securities in which the timely payment of
principal and interest is guaranteed by the full faith and credit
of the U.S. Government. Although the mortgage loans in the pool
will have maturities of up to 30 years, the actual average life
of the loans typically will be substantially less because the
mortgages will be subject to principal amortization and may be
prepaid prior to maturity. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of
falling interest rates, the rate of prepayment tends to increase,
thereby shortening the actual average life of the security.
Conversely, rising interest rates tend to decrease the rate of
prepayment, thereby lengthening the actual average life of the
security (and increasing the security's price volatility).
Accordingly, it is not possible to predict accurately the average
life of a particular pool. Reinvestment of prepayment may occur
at higher or lower rates than the original yield on the
certificates. Due to the prepayment feature and the need to
reinvest prepayments of principal at current rates, mortgage-
backed securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of
declining interest rates. Such securities may appreciate or
decline in market value during periods of declining or rising
interest rates, respectively.
Securities issued by U.S. Government instrumentalities and
certain federal agencies are neither direct obligations of nor
guaranteed by the U.S. Treasury; however, they involve Federal
sponsorship in one way or another. Some are backed by specific
types of collateral, some are supported by the issuer's right to
borrow from the Treasury, some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the
issuer, others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and
instrumentalities include, but are not limited to, Federal Land
Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Banks, Federal National Mortgage Association, Federal Home
Loan Mortgage Corporation 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
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, and are issued at a significant discount
from face value. The discount approximates the total amount of
interest the bonds would accrue and compound over the period
until maturity at a rate of interest reflecting the market rate
at the time of issuance. If a Fund holds zero coupon bonds in
its portfolio, it would recognize income currently for Federal
income tax purposes in the amount of the unpaid, accrued interest
and generally would be required to distribute dividends repre-
senting such income to shareholders currently, even though the
cash representing such income would not have been received by the
Fund. Cash to pay dividends representing unpaid, accrued
interest may be obtained from, for example, sales proceeds of
portfolio securities and Fund shares and from loan proceeds.
However, this may result in a Fund's having to sell portfolio
securities at a time when it might otherwise choose not to do so,
and the Fund might incur a capital loss on such sales. Because
interest on zero coupon obligations is not distributed to a Fund
on a current basis, but is in effect compounded, the value of
such securities is subject to greater fluctuations in response to
changing interest rates than the value of debt obligations that
distribute income regularly.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which 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 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'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, until the warrant
expires, to purchase a given number of shares of a particular
issuer at a specified price. Such investments can provide a
greater potential for profit or loss than an equivalent
investment in the underlying security. However, prices of
warrants do not necessarily move in a tandem with the prices of
the underlying securities, and are, therefore, considered
speculative investments. Warrants pay no dividends and confer no
rights other than a purchase option. Thus, if a warrant held by
a Fund were not exercised by the date of its expiration, the Fund
would lose the entire purchase price of the 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
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.
A Fund may invest in convertible securities, such as
corporate bonds, notes, debentures and other securities that may
be converted into common stock. Investments in convertible
securities can provide income through interest and dividend
payments as well as an opportunity for capital appreciation by
virtue of their conversion or exchange features.
The convertible securities in which a Fund may invest
include preferred stock that may be converted or exchanged at a
stated or determinable exchange ratio into underlying shares of
common stock. The exchange ratio for any particular convertible
security may be adjusted from time to time due to stock splits,
dividends, spin-offs, other corporate distributions or scheduled
changes in the exchange ratio. Convertible debt securities and
convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities.
Although to a lesser extent than with debt securities generally,
the market value of convertible securities tends to decline as
interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion
or exchange feature, the market value of convertible securities
typically changes as the market value of the underlying common
stock changes, and, therefore, also tends to follow movements in
the general market for equity securities. When the market price
of the underlying common stock increases, the price of a
convertible security tends to rise as a reflection of the value
of the underlying common stock, although typically not as much as
the price of the underlying common stock. While no securities
investments are without risk, investments in convertible
securities generally entail less risk than investments in common
stock of the same issuer.
As debt securities, convertible securities are investments
which provide for a stream of income. Of course, like all debt
securities, there can be no assurance of income or principal
payments because the issuers of the convertible securities may
default on their obligations. Convertible securities generally
offer lower yields than non-convertible securities of similar
quality because of their conversion or exchange features.
Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer,
although convertible bonds, as corporate debt obligations, are
senior in right of payment to all equity securities, and
convertible preferred stock is senior to common stock, of the
same issuer. However, convertible bonds and convertible
preferred stock typically have lower coupon rates than similar
non-convertible securities. Convertible securities may be issued
as fixed income obligations that pay current income.
SMALL COMPANY RISK
Investing in smaller company stocks involves certain special
considerations and risks that are not usually associated with
investing in larger, more established companies. For example,
the securities of smaller companies may be subject to more abrupt
or erratic market movements, because they tend to be thinly
traded and are subject to a greater degree to changes in the
issuer's earnings and prospects. Small companies also tend to
have limited product lines, markets or financial resources.
Transaction costs in smaller company stocks also may be higher
than those of larger companies.
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 is rated Prime-1 by Moody's or A-1 by S&P
or, if not rated by Moody's or S&P, is issued by companies having
an outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA
by S&P.
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS
Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank for a definite
period of time and earning a specified return. Bankers'
acceptances are negotiable drafts or bills of exchange, normally
drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank (meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument at
maturity). In addition to investing in certificates of deposit
and bankers' acceptances, 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 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. A Fund's investments in
certificates of deposit of savings associations are limited to
obligations of Federal and state-chartered institutions whose
total assets exceed $1 billion and whose deposits are insured by
the FDIC.
DEPOSITORY RECEIPTS
ADRs, GDRs and similar instruments, the issuance of which is
typically administered by a U.S. or foreign bank or trust
company, evidence ownership of underlying securities issued by a
U.S. or foreign corporation. Unsponsored programs are organized
independently and without the cooperation of the issuer of the
underlying securities. As a result, available information
concerning the issuer may not be as current as for sponsored
depository instruments and their prices may be more volatile than
if they were sponsored by the issuers of the underlying
securities. ADRs are publicly traded on exchanges or over-the-
counter ("OTC") in the United States.
FOREIGN SECURITIES
A Fund may invest in securities of foreign issuers,
including non-U.S. dollar-denominated debt securities, Euro
dollar securities, sponsored and unsponsored ADRs, ADSs, GDRs
GDSs and debt securities issued, assumed or guaranteed by foreign
governments or political subdivisions or instrumentalities
thereof. Shareholders should consider carefully the substantial
risks involved in investing in securities issued by companies and
governments of foreign nations, which are in addition to the
usual risks inherent in 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, repatriation or
confiscatory taxation, taxation of income earned in a foreign
country and other foreign taxes, foreign exchange controls (which
may include suspension of the ability to transfer currency from a
given country), default in foreign government securities,
political or social instability or diplomatic developments which
could affect investments in securities of issuers in those
nations. In addition, in many countries there is less publicly
available information about issuers than is available for U.S.
companies. For example, ownership of unsponsored ADRs may not
entitle the owner to financial or other reports from the issuer
to which it might otherwise be entitled as the owner of a
sponsored ADR. Moreover, foreign companies are not generally
subject to uniform accounting, auditing and financial reporting
standards, and auditing practices and requirements may not be
comparable to those applicable to U.S. companies. In many
foreign countries, there is less government supervision and
regulation of business and industry practices, stock exchanges,
brokers, and listed companies than in the United States. Foreign
securities transactions may also be subject to higher brokerage
costs than domestic securities transactions. The foreign
securities markets of many of the countries in which a Fund may
invest may also be smaller, less liquid and subject to greater
price volatility than those in the United States. In addition, a
Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts.
Foreign stock markets have different clearance and
settlement procedures and in certain markets there have been
times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to conduct
such transactions. Delays in settlement could result in
temporary periods when assets of 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. 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.
INVESTING IN EMERGING MARKETS
Investors should recognize that investing in certain foreign
securities involves special considerations, including those set
forth below, that are not typically associated with investing in
United States securities and that may affect a Fund's performance
favorably or unfavorably. (See "Foreign Securities" under the
caption "Risk Factors and Investment Techniques" in the
Prospectus.)
In recent years, many emerging market countries around the
world have undergone political changes that have reduced
government's role in economic and personal affairs and have
stimulated investment and growth. Historically, there is a strong
direct correlation between economic growth and stock market
returns. While this is no guarantee of future performance, IMI
believes that investment opportunities (particularly in the
energy, environmental services, natural resources, basic
materials, power, telecommunications and transportation
industries) may result within the evolving economies of emerging
market countries from which the Fund and its shareholders will
benefit.
Investments in companies domiciled in developing countries
may be subject to potentially higher risks than investments in
developed countries. Such risks include (i) less social,
political and economic stability; (ii) a small market for
securities and/or a low or nonexistent volume of trading, which
result in a lack of liquidity and 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. Further, many emerging markets
have experienced and continue to experience high rates of
inflation.
Despite the dissolution of the Soviet Union, the Communist
Party may continue to exercise a significant role in certain
Eastern European countries. To the extent of the Communist
Party's influence, investments in such countries will involve
risks of nationalization, expropriation and confiscatory
taxation. The communist governments of a number of Eastern
European countries expropriated large amounts of private property
in the past, in many cases without adequate compensation, and
there can be no assurance that such expropriation will not occur
in the future. In the event of such expropriation, 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 net asset
value.
Certain Eastern European countries that do not have well-
established trading markets are characterized by an absence of
developed legal structures governing private and foreign
investments and private property. In addition, certain countries
require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in
a particular company, or limit the investment of foreign persons
to only a specific class of securities of a company that may have
less advantageous terms than securities of the company available
for purchase by nationals.
Authoritarian governments in certain Eastern European
countries may require that a governmental or quasi-governmental
authority act as custodian of 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"), with respect to
the custody 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.
FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency 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), and
typically is individually negotiated and privately traded by
currency traders and their customers. A forward contract
generally has no deposit requirement, and no commissions are
charged at any stage for trades. Although foreign exchange
dealers do not charge a fee for commissions, they do realize a
profit based on the difference between the price at which they
are buying and selling various currencies. Although these
contracts are intended to minimize the risk of loss due to a
decline in the value of the hedged currencies, at the same time,
they tend to limit any potential gain which might result should
the value of such currencies increase.
While 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. An imperfect correlation of
this type 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 or maintain a net exposure to a
forward contract where the consummation of the contract would
obligate the Fund to deliver an amount of currency that exceeds
the value of the Fund's portfolio securities or other assets
denominated in that currency. Further, a Fund generally will not
enter into a forward contract with a term greater than one year.
To the extent required by applicable law, a Fund will hold
cash or liquid securities in a segregated account with its
custodian in an amount equal (on a daily marked-to-market basis)
to the amount of the commitments under these contracts. At the
maturity of a forward contract, 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 position. Closing purchase
transactions with respect to forward contracts are usually
effected with the currency trader who is a party to the original
forward contract.
FOREIGN CURRENCIES
Investment in foreign securities will usually involve
currencies of foreign countries. In addition, a Fund may
temporarily hold foreign currency deposits during the completion
of investment programs and may purchase forward contracts.
Because of these factors, the value of the assets of 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
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 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 U.S. markets. A Fund's
share price will reflect movements of the stock and bond markets
in which it is invested (both U.S. and foreign), and of the
currencies in which its foreign investments are denominated.
Thus, the strength or weakness of the U.S. dollar against foreign
currencies accounts for part of 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
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. All borrowings will be
repaid before any additional investments are made.
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED SECURITIES
New issues of certain debt securities are often offered on a
"when-issued basis," meaning the payment obligation and the
interest rate are fixed at the time the buyer enters into the
commitment, but delivery and payment for the securities normally
take place after the date of the commitment to purchase. Firm
commitment agreements call for the purchase of securities at an
agreed-upon price on a specified future date. A Fund uses such
investment techniques in order to secure what is considered to be
an advantageous price and yield to the Fund and not for purposes
of leveraging the Fund's assets. In either instance, a Fund will
maintain in a segregated account with its custodian cash or
liquid securities equal (on a daily marked-to-market basis) to
the amount of its commitment to purchase the underlying
securities.
RESTRICTED AND ILLIQUID SECURITIES
An "illiquid security" is an asset that may not be sold or
disposed of in the ordinary course of business within seven days
at approximately the value at which a Fund has valued the
security on its books. A "restricted security" is a security
that cannot be offered to the public for sale without first being
registered under the Securities Act of 1933, and is considered to
be illiquid until such filing takes place. Restricted securities
may be sold only in privately negotiated transactions or in a
public offering with respect to which a registration statement is
in effect under the Securities Act of 1933. Where a registration
statement is required, a Fund may be required to bear all or part
of the registration expenses. Issuers of restricted securities
may not be subject to the disclosure and other investor
protection requirements that would be applicable if their
securities were publicly traded. There may also 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
do so. If, during such a period, adverse market conditions were
to develop, a Fund might obtain a less favorable price than the
price that prevailed when it decided to sell. Since it is not
possible to predict with assurance that the market for securities
eligible for resale under Rule 144A will continue to be liquid, a
Fund will monitor each of its investments in these securities,
focusing on factors such as valuation, liquidity and availability
of information. This investment practice could have the effect
of increasing the level of illiquidity in a Fund to the extent
that qualified institutional buyers become, for a time,
uninterested in purchasing these restricted securities.
Securities whose proceeds are subject to limitations on
repatriation of principal or profits for more than seven days,
and those for which market quotations are not readily available,
may be deemed illiquid for these purposes.
REAL ESTATE INVESTMENT TRUSTS (REITS)
A Fund may invest in equity real estate investment trusts
("REITs"). A REIT is a corporation, trust or association that
invests in real estate mortgages or equities for the benefit of
its investors. REITs are dependent upon management skill, may
not be diversified and are subject to the risks of financing
projects. Such entities 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. 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
OPTIONS, IN 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 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 cash or liquid securities equal to the
contract value. A call option is also covered if a Fund holds a
call on the same index as the call written where the exercise
price of the call held is (i) equal to or less than the exercise
price of the call written or (ii) greater than the exercise price
of the call written, provided that the Fund maintains in a
segregated account with the Custodian the difference in cash or
liquid securities. A put option is also "secured" if a Fund
holds a put on the same index as the put written where the
exercise price of the put held is (i) equal to or greater than
the exercise price of the put written or (ii) less than the
exercise price of the put written, provided that the Fund
maintains in a segregated account with the Custodian the
difference in cash or liquid securities.
RISKS OF OPTIONS TRANSACTIONS. The purchase and writing of
options involves certain risks. During the option period, the
covered call writer has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the
underlying securities above the exercise price, but, as long as
its obligation as a writer continues, has retained the risk of
loss should the price of the underlying security decline. The
writer of 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 and
securities markets, and 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 for hedging purposes. A futures
contract provides for the future sale by one party and purchase
by another party of a specified quantity of a commodity at a
specified price and time. When a purchase or sale of a futures
contract is made by a Fund, 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 a Fund but is instead a
settlement between the Fund and the broker of the amount one
would owe the other if the futures contract expired. In
computing daily net asset value, the 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) cash or liquid securities that, when added to the
amounts deposited with an FCM as margin, are equal to the market
value of the instruments underlying the contract. Alternatively,
a Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to
that of the index on which the futures contract is based), or by
holding a call option permitting the Fund to purchase the same
futures contract at a price no higher than the price of the
contract written by 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) cash or liquid securities that,
when added to the amounts deposited with an FCM as margin, equal
the total market value of the futures contract underlying the
call option. Alternatively, a Fund may cover its position by
entering into a long position in the same futures contract at a
price no higher than the strike price of the call option, by
owning the instruments underlying the futures contract, or by
holding a separate call option permitting the Fund to purchase
the same futures contract at a price not higher than the strike
price of the call option sold by 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. 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.
Insofar as such securities do 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) cash or liquid securities that, when
added to the amounts deposited with a futures commission merchant
("FCM") as margin, are equal to the market value of the futures
contract. Alternatively, a Fund may "cover" its position by
purchasing a put option on the same futures contract with a
strike price as high as or higher than the price of the contract
held by 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) cash or liquid securities that, when added to the
amounts deposited with an FCM as margin, are equal to the market
value of the instruments underlying the contract. Alternatively,
a Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to
that of the index on which the futures contract is based), or by
holding a call option permitting 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 some combination of futures, options, currency
and interest rate transactions ("component" transactions),
instead of a single transaction, as part of a single or combined
strategy when, in the opinion of IMI, it is in the best interests
of 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
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). A Fund may invest in debt securities that are
given an investment-grade rating by Moody's or S&P, and may also
invest in unrated debt securities that are considered by IMI to
be of comparable quality.
LOW-RATED DEBT SECURITIES
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, or 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 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 low-rated debt securities, 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 low-rated debt securities 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 low-rated debt
security, and cause large fluctuations in the daily net asset
value of the Fund's shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of low-rated debt securities,
especially in a thinly traded market. When secondary markets for
high yield securities become relatively less liquid, it may be
more difficult to value the securities, requiring additional
research and elements of judgment. Prices for low-rated debt
securities 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
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).
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, and (except as noted below) bears the cost
of providing, to investors the following rights and privileges.
The Trust reserves the right to amend or terminate any one or
more of these rights and privileges. Notice of amendments to or
terminations of rights and privileges will be provided to
shareholders in accordance with applicable law.
Certain of the rights and privileges described below refer
to funds, other than the Funds, whose shares are also distributed
by Ivy Mackenzie Distributors, Inc. ("IMDI"). 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 Global Science &
Technology Fund, Ivy Global Natural Resources Fund, Ivy Asia
Pacific Fund, Ivy International Small Companies Fund, Ivy
International Fund II, Ivy Pan-Europe Fund and Ivy Money Market
Fund (the other fourteen series of the Trust). Shareholders
should obtain a current prospectus before exercising any right or
privilege that may relate to these funds.
As of September 5, 1997, shares of the four funds that
comprised Mackenzie Series Trust (a separately registered
investment company formerly in the Ivy Mackenzie group of funds)
are no longer available for purchase or exchange.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a Fund
shareholder to have specified amounts automatically drawn each
month from his or her bank for investment in Fund shares, is
available for all classes of shares, except Class I. The minimum
initial and subsequent investment under this method is $250 per
month, (except in the case of a tax qualified retirement plan for
which the minimum initial and subsequent investment is $25 per
month). A shareholder may terminate the Automatic Investment
Method at any time upon delivery to Ivy Mackenzie Services Corp.
("IMSC") of telephone instructions or written notice. See
"Automatic Investment Method" in the Prospectus. To begin the
plan, complete Sections 6A and 7B of the Account Application.
EXCHANGE OF SHARES
As described in the Prospectus, Advisor Class shareholders
of each Fund have an exchange privilege with other Ivy funds
(except Ivy International Fund). Before effecting an exchange,
shareholders should obtain and read the currently effective
prospectus for the fund into which the exchange is to be made.
Advisor Class shareholders may exchange their outstanding
Advisor Class shares for Advisor Class shares of another Ivy fund
on the basis of the relative net asset value per Advisor Class
share. The minimum value of Advisor Class shares that may be
exchanged into an Ivy fund in which shares are not already held
is $10,000. No exchange out of a Fund (other than by a complete
exchange of all Fund shares) may be made if it would reduce the
shareholder's interest in the Advisor Class shares of the Fund to
less than $10,000. Exchanges are available only in states where
the exchange can legally be made.
Each exchange will be made on the basis of the relative net
asset value per share of the Ivy funds involved in the exchange
next computed following receipt by IMSC of telephone instructions
by IMSC or a properly executed request. Exchanges, whether
written or telephonic, must be received by IMSC by the close of
regular trading on the Exchange (normally 4:00 p.m., eastern
time) to receive the price computed on the day of receipt.
Exchange requests received after that time will receive the price
next determined following receipt of the request. The exchange
privilege may be modified or terminated at any time, upon at
least 60 days' notice to the extent required by applicable law.
See "Redemptions."
An exchange of shares between any of the Ivy funds will
result in a taxable gain or loss. Generally, this will be a
capital gain or loss (long-term or short-term, depending on the
holding period of the shares) in the amount of the difference
between the net asset value of the shares surrendered and the
shareholder's tax basis for those shares. However, in certain
circumstances, shareholders will be ineligible to take sales
charges into account in computing taxable gain or loss on an
exchange. See "Taxation."
With limited exceptions, gain realized by a tax-deferred
retirement plan will not be taxable to the plan and will not be
taxed to the participant until distribution. Each investor
should consult his or her tax adviser regarding the tax
consequences of an exchange transaction.
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 Ivy funds in accordance with
the terms of the applicable plan and the exchange privilege
available to all shareholders. Initial and subsequent purchase
payments in connection with tax-deferred retirement plans must be
at least $25 per participant.
The following fees will be charged to individual shareholder
accounts as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per account
For shareholders whose retirement accounts are diversified
across several Ivy funds, the annual maintenance fee will be
limited to not more than $20.
The following discussion describes 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 (which
primarily distributes exempt-interest dividends).
An individual who has not reached age 70-1/2 and who
receives compensation or earned income is eligible to contribute
to an IRA, whether or not he or she is an active participant in a
retirement plan. An individual who receives a distribution from
another IRA, a qualified retirement plan, a qualified annuity
plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible
to establish an IRA by rolling over the distribution either
directly or within 60 days after its receipt. Tax advice should
be obtained in connection with planning a rollover contribution
to an IRA.
In general, an eligible individual may contribute up to the
lesser of $2,000 or 100% of his or her compensation or earned
income to an IRA each year. If a husband and wife are both
employed, and both are under age 70-1/2, each may set up his or
her own IRA within these limits. If both earn at least $2,000
per year, the maximum potential contribution is $4,000 per year
for both. For years after 1996, the result is similar even if
one spouse has no earned income; if the joint earned income of
the spouses is at least $4,000, a contribution of up to $2,000
may be made to each spouse's IRA. For years before 1997,
however, if one spouse has (or elects to be treated as having) no
earned income for IRA purposes for a year, the working spouse may
contribute up to the lesser of $2,250 or 100% of his or her
compensation or earned income for the year to IRAs for both
spouses, provided that no more than $2,000 is contributed to the
IRA of one spouse. Rollover contributions are not subject to
these limits.
An individual may deduct his or her annual contributions to
an IRA in computing his or her Federal income tax within the
limits described above, provided he or she (or his or her spouse,
if they file a joint Federal income tax return) is not an active
participant in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan,
403(b) plan, simplified employee pension, or governmental plan.
If he or she (or his or her spouse) is an active participant, a
full deduction is only available if he or she has adjusted gross
income that is less than a specified level ($40,000 for married
couples filing a joint return, $25,000 for single individuals,
and $0 for a married individual filing a separate return). The
deduction is phased out ratably for active participants with
adjusted gross income between certain levels ($40,000 and $50,000
for married individuals filing a joint return, $25,000 and
$35,000 for single individuals, and $0 and $10,000 for married
individuals filing separate returns). Individuals who are active
participants with income above the specified phase-out level may
not deduct their IRA contributions. Rollover contributions are
not includible in income for Federal income tax purposes and
therefore are not deductible from it.
Generally, earnings on an IRA are not subject to current
Federal income tax until distributed. Distributions attributable
to tax-deductible contributions and to IRA earnings are taxed as
ordinary income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches age 59-1/2
are subject to a nondeductible penalty tax equal to 10% of the
taxable amount of the distribution. The 10% penalty tax does not
apply to amounts withdrawn from an IRA after the individual
reaches age 59-1/2, becomes disabled or dies, or if withdrawn in
the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated benefi-
ciary, if any, or rolled over into another IRA, or, for years
after 1996, amounts withdrawn and used to pay for deductible
medical expenses and amounts withdrawn by certain unemployed
individuals not in excess of amounts paid for certain health
insurance premiums. Distributions must begin to be withdrawn not
later than April 1 of the calendar year following the calendar
year in which the individual reaches age 70-1/2. Failure to take
certain minimum required distributions will result in the
imposition of a 50% non-deductible penalty tax. Extremely large
distributions in any one year (other than 1997, 1998 or 1999)
from an IRA (or from an IRA and other retirement plans) may also
result in a penalty tax.
QUALIFIED PLANS: For those self-employed individuals who
wish to purchase shares of one or more Ivy 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 arrange for Investors Bank & Trust
to furnish custodial services to the employer and any
participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT"): Section 403(b)(7) of the
Internal Revenue Code of 1986, as amended (the "Code") permits
public school systems and certain charitable organizations to use
mutual fund shares held in a custodial account to fund deferred
compensation arrangements with their employees. A custodial
account agreement is available for those employers whose
employees wish to purchase shares of the Trust in conjunction
with such an arrangement. The special application for a
403(b)(7) Account is available from IMSC.
Distributions from the 403(b)(7) Account may be made only
following death, disability, separation from service, attainment
of age 59-1/2, or incurring a financial hardship. A 10% penalty
tax generally applies to distributions to an individual before he
or she reaches age 59-1/2, unless the individual (1) has reached
age 55 and separated from service; (2) dies or becomes disabled;
(3) uses the withdrawal to pay tax-deductible medical expenses;
(4) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(5) rolls over the distribution. There is no set-up fee for
403(b)(7) Accounts and the annual maintenance fee is $20.00 per
account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS: An employer may
deduct contributions to a SEP up to the lesser of $30,000 or 15%
of compensation. SEP accounts generally are subject to all rules
applicable to IRA accounts, except the deduction limits, and are
subject to certain employee participation requirements. No new
salary reduction SEPs ("SARSEPs") may be established after 1996,
but existing SARSEPs may continue to be maintained, and non-
salary reduction SEPs may continue to be established as well as
maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a
SIMPLE 401(k) for years after 1996. An employee can make pre-tax
salary reduction contributions to a SIMPLE Plan, up to $6,000 a
year. Subject to certain limits, the employer will either match
a portion of employee contributions, or will make a contribution
equal to 2% of each employee's compensation without regard to the
amount the employee contributes. An employer cannot maintain a
SIMPLE Plan for its employees if any contributions or benefits
are credited to those employees under any other qualified
retirement plan maintained by the employer.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a Systematic Withdrawal Plan (a
"Withdrawal Plan"), by telephone instructions or by delivery to
IMSC of a written election to have his or her shares withdrawn
periodically (minimum distribution amount -- $50), accompanied by
a surrender to IMSC of all share certificates then outstanding in
such shareholder's name, properly endorsed by the shareholder.
To be eligible to elect a Withdrawal Plan, a shareholder must
continually maintain an account balance of at least $10,000 in
his or her account. Additional investments made by investors
participating in a Withdrawal Plan must equal at least $250 each
while the Withdrawal Plan is in effect. A Withdrawal Plan may
not be established if the investor is currently participating in
the Automatic Investment Method. A Withdrawal Plan may involve
the depletion of a shareholder's principal, depending on the
amount withdrawn.
A redemption under a Withdrawal Plan is a taxable event.
Shareholders contemplating participating in a Withdrawal Plan
should consult their tax advisers.
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 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
purchases at any time or suspend the offering of shares in
connection with group systematic investment programs, and to
restrict the offering of shareholder privileges, such as check
writing, simplified redemptions and other optional privileges, as
described in the Prospectus, to shareholders using group
systematic investment programs.
With respect to each shareholder account established on or
after September 15, 1972 under a group systematic investment
program, the Trust and IMI each currently charge a maintenance
fee of $3.00 (or portion thereof) that for each twelve-month
period (or portion thereof) that the account is maintained. The
Trust may collect such fee (and any fees due to IMI) through a
deduction from distributions to the shareholders involved or by
causing on the date the fee is assessed a redemption in each such
shareholder account sufficient to pay 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, 1994, during the six-
month period ended December 31, 1994 and during the fiscal years
ended December 31, 1995 and 1996, Ivy Bond Fund paid brokerage
commissions of $175,688, $42,425, $20,912 and $398, respectively.
During the fiscal years ended December 31, 1994, 1995 and
1996, Ivy Emerging Growth Fund paid brokerage commissions of
$83,831, $302,892 and $426,676, respectively.
During the fiscal years ended December 31, 1994, 1995 and
1996, Ivy Growth Fund paid brokerage commissions of $265,471,
$666,385 and $883,583, respectively.
During the fiscal years ended December 31, 1994, 1995 and
1996, Ivy Growth with Income Fund paid brokerage commissions of
$34,028, $192,913 and $293,827, respectively.
Each Fund may, under some circumstances, accept securities
in lieu of cash as payment for Fund shares. Each of these Funds
will accept securities only to increase its holdings in a
portfolio security or to take a new portfolio position in a
security that IMI deems to be a desirable investment for 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
only accept securities delivered in proper form and will not
accept securities subject to legal restrictions on transfer. The
acceptance of securities by the Trust must comply with the
applicable laws of certain states.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their
business addresses and principal occupations during the past five
years are:
POSITION
WITH THE BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and
Wilmington, MA 01887 controls); Director, Burr-
Age: 73 Brown Corp. (operational
amplifiers); Director,
Metritage Incorporated
(level measuring
instruments).
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc.
800 Hickory Blvd. (1983-present); Chairman,
Golfview Park-Box 500 Broyhill Family Foundation,
Lenoir, NC 28645 Inc. (1983-Present);
Age: 73 Chairman and President,
Broyhill Investments, Inc.
(1983-present); Chairman,
Broyhill Timber Resources
(1983-present); Management
of a personal portfolio of
fixed-income and equity
investments (1983-present);
Director of The Mackenzie
Funds Inc. (1988-1995).
Stanley Channick Trustee President and Chief
11 Bala Avenue Executive Officer, The
Bala Cynwyd, PA 19004 Whitestone Corporation
Age: 73 (insurance agency);
Chairman, Scott Management
Company (administrative
services for insurance
companies); President, The
Channick Group (consultants
to insurance companies and
national trade
associations); Director of
The Mackenzie Funds Inc.
(1994-1995).
Frank W. DeFriece, Jr. Trustee Director, Manager and Vice
The Landmark Centre President, Director and
113 Landmark Lane, Fund Manager, Massengill-
Suite B DeFriece Foundation
Bristol, TN 37620-2285 (charitable organization)
Age: 76 (1950-present); Trustee and
Vice Chairman, East
Tennessee Public
Communications Corp. (WSJK-
TV) (1984-present);
Director of The Mackenzie
Funds Inc. (1987-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of
Lyman Laboratory Physics, Harvard
of Physics University (1974-present).
Harvard University
Cambridge, MA 02138
Age: 71
Michael G. Landry Trustee President, Chief Executive
700 South Federal Hwy. and Officer and Director of
Suite 300 Chairman Mackenzie Investment
Boca Raton, FL 33432 Management Inc. (1987-
Age: 50 present); President,
[*Deemed to be an Director and Chairman of
"interested person" Ivy Management Inc. (1992-
of the Trust, as present); Chairman and
defined under the Director of Ivy Mackenzie
1940 Act.] Services Corp.(1993-
present); Chairman and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Director and
President of Ivy Mackenzie
Distributors, Inc. (1993-
1994); Director and
President of The Mackenzie
Funds Inc. (1987-1995).
Joseph G. Rosenthal Trustee Chartered Accountant
110 Jardin Drive (1958-present); Director of
Unit #12 The Mackenzie Funds Inc.
Concord, Ontario Canada (1987-1995).
L4K 2T7
Age: 62
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 73 Boston Ballet; Director,
Boston Children's Museum;
Director, Brimmer and May
School.
J. Brendan Swan Trustee President, Airspray
4701 North Federal Hwy. International, Inc.;
Suite 465 Joint Managing Director,
Pompano Beach, FL 33064 Airspray International
Age: 67 B.V. (an environmentally
sensitive packaging
company); Director of
Polyglass LTD.; Director,
The Mackenzie Funds Inc.
(1992-1995).
Keith J. Carlson Trustee Senior Vice President of
700 South Federal Hwy. and Mackenzie Investment
Suite 300 President Management, Inc. (1996
Boca Raton, FL 33432 -present); Senior Vice
Age: 40 President and Director of
[*Deemed to be an Mackenzie Investment
"interested person" Management, Inc. (1994
of the Trust, as -1996); Senior Vice
defined under the President and Treasurer of
1940 Act.] Mackenzie Investment
Management, Inc. (1989-
1994); Senior Vice
President and Director of
Ivy Management Inc. (1994-
present); Senior Vice
President, Treasurer and
Director of Ivy Management
Inc. (1992-1994); Vice
President of The Mackenzie
Funds Inc. (1987-1995);
Senior Vice President and
Director, Ivy Mackenzie
Services Corp. (1996-
present); President and
Director of Ivy Mackenzie
Services Corp. (1993-1996);
President, Chief Executive
Officer and Director of Ivy
Mackenzie Distributors,
Inc. (1994-present);
Executive Vice President
and Director of Ivy
Mackenzie Distributors,
Inc. (1993-1994).
C. William Ferris Secretary/ Senior Vice President,
700 South Federal Hwy. Treasurer Chief Financial Officer
Suite 300 and Secretary/Treasurer
Boca Raton, FL 33432 of Mackenzie Investment
Age: 52 Management Inc. (1995-
present); Senior Vice
President, Finance and
Administration/Compliance
Officer of Mackenzie
Investment Management Inc.
(1989-1994); Senior Vice
President, Secretary/
Treasurer and Clerk of Ivy
Management Inc. (1994-
present); Vice President,
Finance/Administration and
Compliance Officer of Ivy
Management Inc. (1992-
1994); Senior Vice
President, Secretary/
Treasurer and Director of
Ivy Mackenzie Distributors,
Inc. (1994-present);
Secretary/Treasurer and
Director of Ivy Mackenzie
Distributors, Inc. (1993-
1994); President and
Director of Ivy Mackenzie
Services Corp. (1996-
present); Secretary/
Treasurer and Director of
Ivy Mackenzie Services
Corp. (1993-1996);
Secretary/Treasurer of The
Mackenzie Funds Inc. (1993-
1995).
James W. Broadfoot Vice Executive Vice President,
700 South Federal Hwy. President Ivy Management Inc. (1996-
Suite 300 present); Senior Vice
Boca Raton, FL 33432 President, Ivy Management,
Age: 54 Inc. (1992-1996); Director
and Senior Vice President,
Mackenzie Investment
Management Inc. (1995-
present); Senior Vice
President, Mackenzie
Investment Management Inc.
(1990-1995).
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
Employees of IMI are permitted to make personal securities
transactions, subject to the requirements and restrictions set
forth in IMI's Code of Ethics. The Code of Ethics is designed to
identify and address certain conflicts of interest between
personal investment activities and the interests of investment
advisory clients such as the Fund. Among other things, the Code
of Ethics, which generally complies with standards recommended by
the Investment Company Institute's Advisory Group on Personal
Investing, prohibits certain types of transactions absent prior
approval, applies to portfolio managers, traders, research
analysts and others involved in the investment advisory process,
and imposes time periods during which personal transactions may
not be made in certain securities, and requires the submission of
duplicate broker confirmations and monthly reporting of
securities transactions. Exceptions to these and other
provisions of the Code of Ethics may be granted in particular
circumstances after review by appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1996)
TOTAL
PENSION OR COMPENSA-
RETIREMENT TION FROM
BENEFITS ESTIMATED TRUST AND
AGGREGATE ACCRUED AS ANNUAL FUND COM-
COMPENSA- PART OF BENEFITS PLEX PAID
NAME, TION FUND UPON TO
POSITION FROM TRUST EXPENSES RETIREMENT TRUSTEES
John S. $7,419 N/A N/A $10,000
Anderegg, Jr.
(Trustee)
Paul H. $7,419 N/A N/A $10,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson[**]
(Trustee and
President)
Stanley $4,949 N/A N/A $10,000
Channick[*]
(Trustee)
Frank W. $7,419 N/A N/A $10,000
DeFriece, Jr.
(Trustee)
Roy J. $7,419 N/A N/A $10,000
Glauber[*]
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $7,419 N/A N/A $10,000
Rosenthal
(Trustee)
Richard N. $10,000 N/A N/A $10,000
Silverman
(Trustee)
J. Brendan $7,419 N/A N/A $10,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/Treasurer)
[*] Appointed as a Trustee of the Trust at a meeting of the
Board held on February 10, 1996.
[**] Appointed as a Trustee of the Trust at a meeting of the
Board held on December 7, 1996.
As of October 20, 1997, 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 the
Funds. No Advisor Class shares had been issued as of that date.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI 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 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, a Delaware corporation, has approximately 10%
of its outstanding common stock listed for trading on the TSE.
MIMI is a subsidiary of Mackenzie Financial Corporation ("MFC"),
150 Bloor Street West, Toronto, Ontario, Canada, a public
corporation organized under the laws of Ontario whose shares are
listed for trading on The TSE. MFC is registered in Ontario as a
mutual fund dealer and advises Ivy Canada Fund and Ivy Global
Natural Resources Fund. IMI currently acts as manager and
investment adviser to the following additional investment
companies registered under the 1940 Act (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 Global Science & Technology Fund,
Ivy International Small Companies Fund, Ivy International Fund
II, Ivy Asia Pacific Fund, Ivy Pan-Europe 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 $100 million of the Fund's average net assets,
reduced to 0.50% of the Fund's average net assets in excess of
$100 million. Ivy Emerging Growth Fund and Ivy Growth Fund each
pay IMI a monthly fee for providing business management and
investment advisory services at an annual rate of 0.85% of each
Fund's average net assets. Ivy Growth with Income Fund pays IMI
a monthly fee for providing business management and investment
advisory services at an annual rate of 0.75% of the Funds average
net assets.
For the fiscal year ended June 30, 1994, for the six-month
period ended December 31, 1994 and for the fiscal years ended
December 31, 1995 and 1996, Ivy Bond Fund paid IMI $984,110,
$445,111 and $848,778 and $781,647, respectively (of which IMI
reimbursed $0, $10,764 and $2,615 and $0, respectively, pursuant
to required expense limitations).
During the fiscal years ended December 31, 1994, 1995 and
1996, Ivy Emerging Growth Fund paid IMI $168,819, $318,186 and
$657,579, respectively (of which IMI reimbursed $3,923, $0 and
$0, respectively, pursuant to voluntary expense limitations).
For the fiscal years ended December 31, 1994, 1995 and 1996,
Ivy Growth Fund paid IMI $2,133,471, $2,278,390 and $2,608,378,
respectively (of which IMI reimbursed $285,510, $11,680 and
$12,486, respectively, pursuant to voluntary expense
limitations).
For the fiscal years ended December 31, 1994, 1995 and 1996,
Ivy Growth with Income Fund paid IMI $277,991, $515,787 and
$629,322, 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.
IMI currently limits 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
the Fund's average net assets, which may lower that Fund's
expenses and increase its yield. The Fund's expense limitation
may be terminated or revised at any time, at which time its
expenses may increase and its yield may be reduced.
On August 23-24, 1996, 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 on August 25, 1996. 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.
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.
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.
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 and Ivy Global Natural Resources 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.
If a Distribution Agreement is terminated (or not renewed)
with respect to any of the Ivy funds (or class of shares
thereof), each may continue in effect with respect to any other
fund (or Class of shares thereof) as to which it has not been
terminated (or have 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 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. At a
meeting held on December 7, 1996, the Board last approved 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 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.
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown
Brothers Harriman & Co. (the "Custodian"), a private bank and
member of the principal securities exchanges, located at 40 Water
Street, Boston, Massachusetts 02109 (the "Custodian"), maintains
custody of the 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.
As compensation for those services, Ivy Growth Fund, Ivy Growth
with Income Fund and Ivy Emerging Growth Fund each 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: $1,250 when net
assets are $10 million and under; $2,500 when net assets are $20
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 year ended June 30, 1994, the six months
ended December 31, 1994 and the fiscal years ended December 31,
1995 and 1996, Ivy Bond Fund paid $85,737, $45,015, $102,160 and
$95,017, respectively, to MIMI under such agreement. During the
fiscal years ended December 31, 1994, 1995 and 1996, Ivy Emerging
Growth Fund paid MIMI $31,948, $45,324 and $89,558, respectively,
under such agreement. During the fiscal years ended December 31,
1994, 1995 and 1996, Ivy Growth Fund paid MIMI $103,232, $103,945
and $131,740, respectively under such agreement. During the
fiscal years ended December 31, 1994, 1995 and 1996, Ivy Growth
with Income Fund paid MIMI $33,702, $60,915 and $87,182,
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. Under the Agreement, each Fund
pays a monthly fee at an annual rate of $20.00 per open Advisor
Class account. In addition, each Fund pays a monthly fee at an
annual rate of $4.48 per account that is closed plus certain out-
of-pocket expenses. Certain broker-dealers that maintain
shareholder accounts with 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 pays MIMI a monthly
fee at the annual rate of .10% of the average daily net asset
value of its Advisor Class shares.
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 Funds' tax
returns.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Trust consists of an unlimited
number of shares of beneficial interest (no par value per share).
When issued, shares of each class of 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 eighteen series, each of which represents a fund.
The Trustees have further authorized the issuance of Classes A,
B, C and the Advisor Class 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, Ivy Global Science & Technology Fund, Ivy
Global Natural Resources Fund, Ivy International Small Companies
Fund, Ivy Asia Pacific Fund, Ivy International Fund II, Ivy Pan-
Europe Fund and Ivy International Bond Fund, as well Class I for
Ivy International Fund, Ivy International Fund II, Ivy Global
Science & Technology Fund, Ivy International Small Companies 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, and
to redesignate the shares of beneficial interest of "Ivy Growth
with Income Fund--Class C" as shares of beneficial interest of
"Ivy Growth with Income Fund--Class D," which establishment and
redesignation, respectively, became effective on April 30, 1996.
The voting, dividend, liquidation and other rights, preferences,
powers, restrictions, limitations, qualifications, terms and
conditions of the Class D shares of Ivy Growth with Income Fund,
as set forth in Ivy Fund's Declaration of Trust, as amended from
time to time, will not be changed by this redesignation.]
Shareholders have the right to vote for the election of
Trustees of the Trust and on any and all matters on which they
may be entitled to vote by law or by the provisions of the
Trust's By-Laws. The Trust is not required to hold a regular
annual meeting of shareholders, and it does not intend to do so.
Shares of each class of each Fund entitle their holders to one
vote per share (with proportionate voting for fractional shares).
Shareholders of a Fund are entitled to vote alone on matters that
only affect that Fund. All classes of shares of a Fund will vote
together, except with respect to the distribution plan applicable
to the Fund's Class A, Class B or Class C shares or when a class
vote is required by the 1940 Act. On matters relating to all
funds of the Trust, but affecting 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 September 30, 1997, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class A, Class B or Class I shares, except
that of the outstanding class B shares of Ivy Bond Fund, Merrill
Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd
Floor, Jacksonville, FL 32246, owned of record 179,994.520 shares
(17.47%); and except that of the outstanding Class B shares of
Ivy Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive East, 3rd Floor, Jacksonville, FL 32246,
owned of record 315,393.000 shares (17.72%); and except that of
the outstanding Class B shares of Ivy Growth Fund, IBT CUST IRA
FBO Glenn E. Pattyson, P.O. Box 11, Terrace Bay, Ontario, Canada,
POT 2W0, owned of record 16,058.530 shares (7.17%); and except
that of the outstanding Class C shares of Ivy Bond Fund, Merrill
Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd
Floor, Jacksonville, FL 32246, owned of record 131,013.000 shares
(47.60%), and CTY Carbonic Sales and SVC, Inc., Louis Morgan,
P.O. Box 25842, Oklahoma City, OK 73125, owned of record
18,618.307 shares (6.76%); and except that of the outstanding
Class C shares of Ivy Emerging Growth Fund, Merrill Lynch Pierce
Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, FL 32246, owned of record 113,748.000 shares
(31.38%); and except that of the outstanding Class C shares of
Ivy Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive East, 3rd Floor, Jacksonville, FL 32246, owned of
record 2,484.000 shares (36.29%), Rafter L. Cattle Co., HCR 77
#441, Uvalde, TX 78801, owned of record 2,460.130 shares
(35.94%), Martin S. Sawyer & Ruth C. Sawyer TTEE, 2301 Fremont
Drive, Sarasota, FL 34238-3016, owned of record 506.023 shares
(7.39%), and Painewebber FBO William G. Thomas, P.O. Box 3321,
Weehawken, NJ 07087-8154, owned of record 389.000 shares (5.68%);
and except that of the outstanding Class C shares of Ivy Growth
With Income Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive East, 3rd Floor, Jacksonville, FL 32246, owned of
record 3,389.000 shares (16.38%), Anthony L. Bassano & Marie E.
Bassano, 8934 Bari Court, Port Richie, FL 34668, owned of record
2,842.845 shares (13.74%), IBT CUST IRA FBO Vytautas Snieckus,
1250 E. 276th Street, Euclid, OH 44132, owned of record 2,349.000
shares (11.35%), IBT CUST 403(B) FBO Carol E. Greivell, 8629 N.
Servite #109, Milwaukee, WI 53223, owned of record 1,872.713
shares (9.05%), Donaldson Lufkin Jenrette Securities Corporation
Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
1,476.436 shares (7.13%), IBT CUST 403(B) FBO Helen Jankowski,
41993 VIA Renate, Temecula, CA 92591, owned of record 1,253.543
shares (6.05%), and Marsha L. Yarbrough, RT 2 Box 548, West
Blocton, AL 36184, owned of record 1,238.917 shares (5.98%).
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. However, because
the Prospectus pertains to more than one Fund, it is possible
that one of the Funds to which the Prospectus pertains might
become liable for any misstatement, inaccuracy, or incomplete
disclosure in the Prospectus concerning any other Fund to which
the Prospectus pertains.
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 Trust reserves the right 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 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.
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.
The Trust may redeem those Advisor Class accounts of
shareholders who have maintained an investment of less than
$10,000 in a Fund for a period of more than 12 months. All
Advisor Class accounts below that minimum will be redeemed
simultaneously when MIMI deems it advisable. The $10,000 balance
will be determined by actual dollar amounts invested by the
shareholder, unaffected by market fluctuations. The Trust will
notify any such shareholder by certified mail of its intention to
redeem such account, and the shareholder shall have 60 days from
the date of such letter to invest such additional sums as shall
raise the value of such account above that minimum. Should the
shareholder fail to forward such sum within 60 days of the date
of the Trust's letter of notification, the Trust will redeem the
shares held in such account and transmit the redemption in value
thereof to the shareholder. However, those shareholders who are
investing pursuant to the Automatic Investment Method will not be
redeemed automatically unless they have ceased making payments
pursuant to the plan for a period of at least six consecutive
months, and these shareholders will be given six-months' notice
by the Trust before such redemption. Shareholders in a qualified
retirement, pension or profit sharing plan who wish to avoid tax
consequences must "rollover" any sum so redeemed into another
qualified plan within 60 days. The Trustees of the Trust may
change the minimum account size.
If a shareholder has given authorization for telephonic
redemption privilege, shares can be redeemed and proceeds sent by
Federal wire to a single previously designated bank account.
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.
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) for taxable years
beginning before 1998, 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, as described below, 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.
Notwithstanding any of the foregoing, a Fund may recognize
gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if the Fund enters into a short
sale, offsetting notional principal contract, futures or forward
contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial
positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and
short sales) in stock, partnership interests, certain actively
traded trust instruments and certain debt instruments.
Constructive sale treatment of appreciated financial positions
does not apply to certain transactions closed in the 90-day
period ending with the 30th day after the close of a Fund's
taxable year, if certain conditions are met.
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.
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, the Fund itself
may be subject to a tax on a portion of the excess distribution,
whether or not the corresponding income is distributed by the
Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably
over the period during which 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. A Fund may elect to mark to market
its PFIC shares, resulting in the shares being treated as sold at
fair market value on the last business day of each taxable year.
Any resulting gain would be reported as ordinary income; any
resulting loss and any loss from an actual disposition of the
shares would be reported as ordinary loss to the extent of any
net gains reported in prior years. Under another election that
currently is available in some circumstances, 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.
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. Shareholders should be careful to
consider the tax implications of buying shares just prior to a
distribution. The price of shares purchased at this time may
reflect the amount of the forthcoming distribution. Those
purchasing just prior to a distribution will receive a
distribution which generally will be taxable to them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of his or her shares, a
shareholder will realize a taxable gain or loss depending upon
his or her basis in the shares. Such gain or loss will be
treated as capital gain or loss if the shares are capital assets
in the shareholder's hands and, if so, may be eligible for
reduced federal tax rates, 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, except in the case of certain electing individual
taxpayers who have limited creditable foreign taxes and no
foreign source income other than passive investment-type income,
a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or
her total foreign source taxable income. For this purpose, if 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.
Furthermore, the foreign tax credit is eliminated with respect to
foreign taxes withheld on dividends if the dividend-paying shares
of the shares of the Fund are held by the Fund or the
shareholder, as the case may be, for less than 16 days (46 days
in the case of preferred shares) during the 30-day period (90-day
period for preferred shares) beginning 15 days (45 days for
preferred shares) before the shares become ex-dividend.
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 taxable 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, Class B and Class C shares of Ivy
Bond Fund for the 30-day period ended December 31, 1996 was
6.89%, 6.51%, and 6.45%, respectively. As of December 31, 1996,
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 Advisor
Class shares during the designated period. Standardized Return
quotations for the Funds 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%.
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").
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.
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
Directory of Investment Managers, New York Times, Newsweek, No
Load Fund Investor, No Load Fund* X, Oakland Tribune, Pension
World, Pensions and Investment Age, Personal Investor, Rugg and
Steele, Time, U.S. News and World Report, USA Today, The Wall
Street Journal, and Washington Post.
FINANCIAL STATEMENTS
The following financial information is incorporated by
reference into this SAI: (1) each Fund's Portfolio of
Investments as of December 31, 1996, Statement of Assets and
Liabilities as of December 31, 1996, Statement of Operations for
the fiscal year ended December 31, 1996, Statement of Changes in
Net Assets for the fiscal years ended December 31, 1996 and
December 31, 1995, Financial Highlights, Notes to Financial
Statements, and Report of Independent Accountants, which are
included in the Fund's December 31, 1996 Annual Report to
shareholders; and (2) each Fund's Portfolio of Investments as of
June 30, 1997, Statement of Assets and Liabilities as of June 30,
1997, Statement of Operations for the six months ended June 30,
1997, Financial Highlights and Notes to Financial Statements,
which are included in the Fund's June 30, 1997 Semi-Annual
Reports to shareholders.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994 Issue (Moody's
Investors Service, New York, 1994), and "Standard & Poor's
Municipal Ratings Handbook," October 1994 Issue (McGraw Hill, New
York, 1994).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's are judged
by Moody's to be of the best quality, carrying the smallest
degree of investment risk. Interest payments are protected by a
large or exceptionally stable margin and principal is secure.
Bonds rated Aa are judged by Moody's to be of high quality by all
standards. Aa bonds are rated lower than Aaa bonds because
margins of protection may not be as large as those of Aaa bonds,
or fluctuations of protective elements may be of greater
amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger than those applicable to
Aaa securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are considered as upper
medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Bonds rated Baa by Moody's are considered medium-grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other terms
of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest. Bonds which are
rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the highest
commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by management of obligations which may be present
or may arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the
relative strengths of these factors. The designation of Prime-1
indicates the highest quality repayment capacity of the rated
issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt rating is a
current assessment of the creditworthiness of an obligor with
respect to a specific obligation. The ratings are based on
current information furnished by the issuer or obtained by S&P
from other sources it considers reliable. The ratings described
below may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA by S&P is considered by S&P to be the highest
grade obligation. Capacity to pay interest and repay principal
is extremely strong. Debt rated AA is judged by S&P to have a
very strong capacity to pay interest and repay principal and
differs from the highest rated issues only in small degree. Debt
rated A by S&P has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Debt rated BBB by S&P is regarded by S&P as having an
adequate capacity to pay interest and repay principal. Although
such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating. Debt rated B has a greater vulnerability to default
but currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used
for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating. Debt rated CCC has a currently
identifiable vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an actual or
implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt
service payments are continued.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
having an original maturity of no more than 365 days.
Commercial paper rated A by S&P has the following
characteristics: (i) liquidity ratios are adequate to meet cash
requirements; (ii) long-term senior debt rating should be A or
better, although in some cases BBB credits may be allowed if
other factors outweigh the BBB; (iii) the issuer should have
access to at least one additional channel of borrowing; (iv)
basic earnings and cash flow should have an upward trend with
allowances made for unusual circumstances; and (v) typically the
issuer's industry should be well established and the issuer
should have a strong position within its industry and the
reliability and quality of management should be unquestioned.
Issues rated A are further referred to by use of numbers 1, 2 and
3 to denote relative strength within this highest classification.
For example, the A-1 designation indicates that the degree of
safety regarding timely payment of debt is strong.
Issues rated B are regarded as having only speculative
capacity for timely payment. The C rating is assigned to short-
term debt obligations with a doubtful capacity for payment.
IVY ASIA PACIFIC FUND
IVY CANADA FUND
IVY CHINA REGION FUND
IVY GLOBAL FUND
IVY GLOBAL NATURAL RESOURCES FUND
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
IVY INTERNATIONAL FUND II
IVY INTERNATIONAL SMALL COMPANIES FUND
IVY LATIN AMERICA STRATEGY FUND
IVY NEW CENTURY FUND
IVY PAN-EUROPE FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
ADVISOR CLASS SHARES
January 1, 1998
_________________________________________________________________
Ivy Fund (the "Trust") is an open-end management investment
company that currently consists of eighteen fully managed
portfolios, each of which (except for Ivy Latin America Strategy
Fund and Ivy International Bond Fund) is diversified. This
Statement of Additional Information ("SAI") relates to the
Advisor Class shares of the following eleven portfolios: Ivy Asia
Pacific Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Global
Fund, Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International
Small Companies Fund, Ivy Latin America Strategy Fund, Ivy New
Century Fund and Ivy Pan-Europe Fund (collectively, the "Funds,"
and each, a "Fund").
This SAI is not a prospectus and should be read in
conjunction with the prospectus for the Funds' Advisor Class
shares dated January 1, 1998 (the "Prospectus"), which may be
obtained upon request and without charge from the Distributor at
the address and telephone number printed below. Advisor Class
shares are only offered to certain investors (see the
Prospectus). The Funds also offer Class A, Class B and Class C
shares (and Class I shares, in the case of Ivy Global Science &
Technology Fund, Ivy International Fund II and Ivy International
Small Companies Fund), which are described in a separate
prospectus and statement of additional information that may be
obtained from the Distributor.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
INVESTMENT ADVISER
(Ivy Canada Fund and Ivy Global Natural Resources Fund only)
Mackenzie Financial Corporation
150 Bloor Street West
Suite 400
Toronto, Ontario
CANADA M5S3B5
Telephone (416) 922-5322
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . 1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . 15
U.S. GOVERNMENT SECURITIES. . . . . . . . . . . . . . . . 15
CONVERTIBLE SECURITIES. . . . . . . . . . . . . . . . . . 16
DEBT SECURITIES, IN GENERAL . . . . . . . . . . . . . . . 17
ZERO COUPON BONDS . . . . . . . . . . . . . . . . . . . . 17
REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . 18
WARRANTS. . . . . . . . . . . . . . . . . . . . . . . . . 18
SMALL COMPANIES . . . . . . . . . . . . . . . . . . . . . 18
COMMERCIAL PAPER. . . . . . . . . . . . . . . . . . . . . 19
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS . . . . 19
DEPOSITORY RECEIPTS . . . . . . . . . . . . . . . . . . . 19
INVESTMENT-GRADE DEBT SECURITIES. . . . . . . . . . . . . 20
LOW-RATED DEBT SECURITIES . . . . . . . . . . . . . . . . 20
FOREIGN SECURITIES. . . . . . . . . . . . . . . . . . . . 21
INVESTING IN EMERGING MARKETS . . . . . . . . . . . . . . 22
CANADIAN SECURITIES . . . . . . . . . . . . . . . . . . . 24
INVESTING IN LATIN AMERICA. . . . . . . . . . . . . . . . 25
INVESTING IN ASIA PACIFIC SECURITIES. . . . . . . . . . . 28
INVESTING IN NATURAL RESOURCES. . . . . . . . . . . . . . 29
INVESTING IN THE CHINA REGION . . . . . . . . . . . . . . 30
PRECIOUS METALS AND OTHER PHYSICAL COMMODITIES. . . . . . 31
FORWARD FOREIGN CURRENCY CONTRACTS. . . . . . . . . . . . 31
FOREIGN CURRENCIES. . . . . . . . . . . . . . . . . . . . 32
REAL ESTATE INVESTMENT TRUSTS (REITs) . . . . . . . . . . 33
OPTIONS TRANSACTIONS. . . . . . . . . . . . . . . . . . . 33
OPTIONS, IN GENERAL. . . . . . . . . . . . . . . . . 33
WRITING OPTIONS ON INDIVIDUAL SECURITIES . . . . . . 35
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. . . . . 35
PURCHASING AND WRITING OPTIONS ON SECURITIES
INDICES . . . . . . . . . . . . . . . . . . . . 36
RISKS OF OPTIONS TRANSACTIONS. . . . . . . . . . . . 37
FUTURES CONTRACTS . . . . . . . . . . . . . . . . . . . . 38
FUTURES, IN GENERAL. . . . . . . . . . . . . . . . . 38
FOREIGN CURRENCY FUTURES CONTRACTS.. . . . . . . . . 39
RISKS ASSOCIATED WITH FUTURES. . . . . . . . . . . . 39
SECURITIES INDEX FUTURES CONTRACTS. . . . . . . . . . . . 40
RISKS OF SECURITIES INDEX FUTURES. . . . . . . . . . 41
COMBINED TRANSACTIONS . . . . . . . . . . . . . 43
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED SECURITIES . . 43
RESTRICTED AND ILLIQUID SECURITIES. . . . . . . . . . . . 43
BORROWING . . . . . . . . . . . . . . . . . . . . . . . . 44
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 44
ADDITIONAL RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 50
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . . . . . . 52
AUTOMATIC INVESTMENT METHOD . . . . . . . . . . . . . . . 53
EXCHANGE OF SHARES. . . . . . . . . . . . . . . . . . . . 53
RETIREMENT PLANS. . . . . . . . . . . . . . . . . . . . . 54
INDIVIDUAL RETIREMENT ACCOUNTS . . . . . . . . . . . 54
QUALIFIED PLANS. . . . . . . . . . . . . . . . . . . 56
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(B)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . . . 57
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS . . . . . . 57
SYSTEMATIC WITHDRAWAL PLAN. . . . . . . . . . . . . . . . 58
GROUP SYSTEMATIC INVESTMENT PROGRAM . . . . . . . . . . . 58
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . . . . . . 59
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI. . . . . . . . . 66
COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . 67
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . 69
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES. . . 69
DISTRIBUTION SERVICES . . . . . . . . . . . . . . . . . . 73
RULE 18F-3 PLAN. . . . . . . . . . . . . . . . . . . 75
CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . 75
FUND ACCOUNTING SERVICES. . . . . . . . . . . . . . . . . 76
TRANSFER AGENT AND DIVIDEND PAYING AGENT. . . . . . . . . 76
ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . 77
AUDITORS. . . . . . . . . . . . . . . . . . . . . . . . . 77
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . . . . . . 77
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . 79
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . 81
REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 81
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD
CONTRACTS. . . . . . . . . . . . . . . . . . . . . . 84
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
. . . . . . . . . . . . . . . . . . . . . . . . . . 86
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES. . . . 86
DEBT SECURITIES ACQUIRED AT A DISCOUNT. . . . . . . . . . 87
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 88
DISPOSITION OF SHARES . . . . . . . . . . . . . . . . . . 89
FOREIGN WITHHOLDING TAXES . . . . . . . . . . . . . . . . 89
BACKUP WITHHOLDING. . . . . . . . . . . . . . . . . . . . 90
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . 91
AVERAGE ANNUAL TOTAL RETURN. . . . . . . . . . . . . 91
CUMULATIVE TOTAL RETURN. . . . . . . . . . . . . . . 92
OTHER QUOTATIONS, COMPARISONS AND GENERAL
INFORMATION . . . . . . . . . . . . . . . . . . 92
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 93
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS . . . . . . . . . 95
APPENDIX B
SELECTED ECONOMIC AND MARKET DATA FOR
ASIA PACIFIC AND CHINA REGION COUNTRIES . . . . . 98
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objective and policies,
which are set forth below. The different types of securities and
investment techniques used by the Funds involve varying degrees
of risk.
IVY ASIA PACIFIC FUND: The Fund's principal investment
objective is long-term growth. Consideration of current income is
secondary to this principal objective. Under normal
circumstances the Fund invests at least 65% of its total assets
in securities issued in Asia-Pacific countries, which for
purposes of this SAI are defined to include China, Hong Kong,
India, Indonesia, Malaysia, Pakistan, the Philippines, Singapore,
Sri Lanka, South Korea, Taiwan, Thailand and Vietnam. Securities
of Asia-Pacific issuers include: (a) securities of companies
organized under the laws of an Asia-Pacific country or for which
the principal securities trading market is in the Asia-Pacific
region; (b) securities that are issued or guaranteed by the
government of an Asia-Pacific 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 the Asia-
Pacific region; and (d) any of the preceding types of securities
in the form of depository shares.
The Fund may participate in markets throughout the Asia-
Pacific region, and it is expected that the Fund will be invested
at all times in at least three Asia-Pacific countries. The Fund
does not expect to concentrate its investments in any particular
industry. See Appendix B of this SAI for further information
about the economic characteristics of certain Asia-Pacific
countries.
The Fund may invest up to 35% of its assets in investment-
grade debt securities of government or corporate issuers in
emerging market countries, investment-grade equity and debt
securities of issuers in developed countries (including the
United States), warrants, and 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 up to 5% of its net assets in zero coupon bonds, and in
debt securities rated Ba or below by Moody's Investor Services,
Inc. ("Moody's) or BB or below by Standard and Poor's Corporation
("S&P"), or if unrated, 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 engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total assets in
other investment companies that invest in securities issued in
Asia-Pacific countries, and (ii) up to 15% of its net assets in
restricted and other illiquid securities. The Fund may with
approval of its Board of Trustees (the "Trustees" or "Board"),
but currently does not intend to, lend portfolio 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 stock index and
foreign currency futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 15% of its
total assets.
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 or AAA or AA by
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"), Global Depository Receipts
("GDRs"), American Depository Shares ("ADSs") and Global
Depository Shares ("GDSs")), (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, 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 foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total assets in
other investment companies and (ii) up to 15% of its net assets
in restricted and other illiquid securities.
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), (ii) 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) considered
creditworthy by MFC under guidelines approved by the 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. See Appendix B to this SAI for
further information about the economic characteristics of certain
China Region countries.
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, 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, 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 with approval of the Trustees, but currently
does not intend to, lend portfolio securities valued at not more
that 30% of the Fund's total assets. The Fund may also invest in
sponsored or unsponsored ADRs, GDRs, ADSs and GDSs, warrants,
purchase securities on a "when-issued" or firm commitment basis,
engage in foreign currency exchange transactions and enter into
forward foreign currency contracts. The Fund may also invest (i)
up to 10% of its total assets in other investment companies and
(ii) up to 15% of its net assets in restricted and other illiquid
securities.
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 equivalent exposure 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 will invest at least 65% of its total assets in the common
stock of companies throughout the world, with at least three
different countries (one of which may be the United States)
represented in the Fund's overall portfolio holdings. Although
the Fund generally invests in common stock, it may also invest in
preferred stocks, sponsored or unsponsored ADRs, GDRs, ADSs and
GDSs, and investment-grade debt securities (i.e., those rated Baa
or higher by Moody's or BBB or higher by S&P, or if unrated,
considered by IMI to be of comparable quality), including
corporate bonds, notes, debentures, convertible bonds and zero
coupon bonds.
The Fund may 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 with approval of the Trustees, but currently
does not intend to, lend portfolio securities valued at not more
that 30% of the Fund's total assets. The Fund may also invest in
equity real estate investment trusts, warrants, purchase
securities on a "when-issued" or firm commitment basis, engage in
foreign currency exchange transactions and enter into forward
foreign currency contracts. The Fund may also invest (i) up to
10% of its total assets in other investment companies and (ii) up
to 15% of its net assets in restricted and other illiquid
securities.
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 on 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 equivalent exposure
in such contracts does not exceed 20% of its total assets.
IVY GLOBAL NATURAL RESOURCES FUND: The Fund's investment
objective is long-term growth. Any income realized will be
incidental. Under normal conditions, the Fund invests at least
65% of its total assets in the equity securities of companies
throughout the world that own, explore or develop natural
resources and other basic commodities, or supply goods and
services to such companies. Under this investment policy, at
least three different countries (one of which may be the United
States) will be represented in the Fund's overall portfolio
holdings. "Natural resources" generally include precious metals
(such as gold, silver and platinum), ferrous and nonferrous
metals (such as iron, aluminum and copper), strategic metals
(such as uranium and titanium), coal, oil, natural gases, timber,
undeveloped real property and agricultural commodities. Although
the Fund generally invests in common stock, it may also invest in
preferred stock, securities convertible into common stock and
sponsored or unsponsored ADRs, GDRs, ADSs and GDSs. The Fund may
also invest directly in precious metals and other physical
commodities.
IMI believes that certain political and economic changes in
the global environment in recent years have had and will continue
to have a profound effect on global supply and demand of natural
resources, and that rising demand from developing markets and new
sources of supply should create attractive investment
opportunities. In selecting the Fund's investments, IMI will
seek to identify securities of companies that, in IMI's opinion,
appear to be undervalued relative to the value of the companies'
natural resource holdings.
For temporary defensive purposes, the Fund may invest
without limit in 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 one-third of the value of its total assets from
banks, but may not purchase securities at any time during which
the value of the Fund's outstanding loans exceeds 10% of the
value of the Fund's total assets. The Fund may engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest (i) up to 10% of
its total assets in other investment companies and (ii) up to 15%
of its net assets in restricted and other illiquid securities.
The Fund may with approval of the Trustees, but currently does
not intend to, lend portfolio securities.
For hedging purposes only, the Fund may engage in
transactions in (and options on) foreign currency futures
contracts, provided that the Fund's equivalent exposure in such
contracts does not exceed 15% of its total assets.
IVY GLOBAL SCIENCE & TECHNOLOGY FUND: The Fund's principal
investment objective is long-term capital growth. Any income
realized will be incidental. Under normal conditions, the Fund
will invest at least 65% of its total assets in the common stock
of companies that are expected to benefit from the development,
advancement and use of science and technology. Under this
investment policy, at least three different countries (one of
which may be the United States) will be represented in the Fund's
overall portfolio holdings. Industries likely to be represented
in the Fund's portfolio include computers and peripheral
products, software, electronic components and systems,
telecommunications, media and information services,
pharmaceuticals, hospital supply and medical devices,
biotechnology, environmental services, chemicals and synthetic
materials, and defense and aerospace. The Fund may also invest
in companies that are expected to benefit indirectly from the
commercialization of technological and scientific advances. In
recent years, rapid advances in these industries have stimulated
unprecedented growth. While this is no guarantee of future
performance, IMI believes that these industries offer substantial
opportunities for long-term capital appreciation.
Although the Fund generally invests in common stock, it may
also invest in preferred stock, securities convertible into
common stock, sponsored or unsponsored ADRs, GDRs, ADSs and GDSs,
and investment-grade debt securities (i.e., those rated Baa or
higher by Moody's or BBB or higher by S&P, or if unrated,
considered by IMI to be of comparable quality), including
corporate bonds, notes, debentures, convertible bonds and zero-
coupon bonds. The Fund may also invest up to 5% of its net
assets in debt securities that are rated Ba or below by Moody's
or BB or below by S&P, or if unrated, 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. (A description of the
ratings assigned by Moody's and S&P is contained in Appendix A to
this SAI).
The Fund may with approval of the Trustees, but currently
does not intend to, lend portfolio securities valued at not more
than 30% of the Fund's total assets. The Fund may also invest in
warrants, purchase securities on a "when-issued" or firm
commitment basis, engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total assets in
other investment companies and (ii) up to 15% of its net assets
in restricted and other illiquid securities.
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 on stock indices
and on individual securities, provided the premium paid for such
options does not exceed 10% of the value of the Fund's net
assets. The Fund may also sell covered put options with respect
to up to 50% of the value of its net assets, and may sell covered
call options so long as not more than 20% of the Fund's net
assets is subject to being purchased upon the exercise of the
calls. For hedging purposes only, the Fund may engage in
transactions in (and options on) stock index and foreign currency
futures contracts, provided that the Fund's equivalent exposure
in such contracts does not exceed 20% of the value of its total
assets.
IVY INTERNATIONAL FUND II: The Fund's principal investment
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. Under this investment
policy, at least three different countries (other than the United
States) will be represented in the Fund's overall portfolio
holdings. For temporary defensive purposes, the Fund may also
invest in equity securities principally traded in U.S. markets.
IMI, the Fund's investment manager, 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. IMI
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, considered by IMI to be
of comparable quality), preferred stocks, sponsored or
unsponsored ADRs, GDRs, ADSs and GDSs, 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 also purchase securities on a
"when-issued" or firm commitment basis, and may engage in
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest (i) up to 10% of
its total assets in other investment companies and (ii) up to 15%
of its net assets in restricted and other illiquid securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
IVY INTERNATIONAL SMALL COMPANIES FUND: The Fund's
principal investment objective is long-term growth primarily
through investment in foreign equity securities. Consideration of
current income is secondary to this principal objective. Under
normal circumstances the Fund invests at least 65% of its total
assets in common and preferred stocks (and securities convertible
into common stocks) of foreign issuers having total market
capitalization of less than $1 billion. Under this investment
policy, at least three different countries (other than the United
States) will be represented in the Fund's overall portfolio
holdings. For temporary defensive purposes, the Fund may also
invest in equity securities principally traded in the United
States. The Fund will invest its assets in a variety of economic
sectors, industry segments and individual securities in order to
reduce the effects of price volatility in any area and to enable
shareholders to participate in markets that do not necessarily
move in concert with the U.S. market. The factors that IMI
considers in determining the appropriate distribution of
investments among various countries and regions include prospects
for relative economic growth, expected levels of inflation,
government policies influencing business conditions and the
outlook for currency relationships.
In selecting the Fund's investments, IMI will seek to
identify securities that are attractively priced relative to
their intrinsic value. The intrinsic value of a particular
security is analyzed by reference to characteristics such as
relative price/earnings ratio, dividend yield and other relevant
factors (such as applicable financial, tax, social and political
conditions).
When economic or market conditions warrant, the Fund may
invest without limit in U.S. Government securities, investment-
grade debt securities, zero coupon bonds, 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.
The Fund may also invest up to 5% 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).
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 engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total assets in
other investment companies and (ii) up to 15% of its net assets
in restricted and other illiquid securities. The Fund may with
approval of the Trustees, but currently does not intend to, lend
portfolio 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 stock index and
foreign currency futures contracts, provided that the Fund's
equivalent exposure in such contracts does not exceed 15% of its
total assets.
IVY LATIN AMERICA STRATEGY FUND: The Fund's principal
investment objective is 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 ADRs, GDRs, ADSs and GDSs, 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 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 total
assets).
The Fund may with approval of the Trustees, but currently
does not intend to, lend portfolio securities valued at not more
that 30% of the Fund's total assets. The Fund may also invest in
warrants, purchase securities on a "when-issued" or firm
commitment basis, engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
The Fund may also invest (i) up to 10% of its total assets in
other investment companies and (ii) up to 15% of its net assets
in restricted and other illiquid securities. The Fund 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 equivalent exposure 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 sponsored or unsponsored ADRs, GDRs
ADSs and GDSs 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, 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 with approval of the Trustees, but
currently does not intend to, lend portfolio securities valued at
not more that 30% of the Fund's total assets, engage in foreign
currency exchange transactions and enter into forward foreign
currency contracts. The Fund may also invest (i) up to 10% of
its total assets in other investment companies, and (ii) up to
15% of its net assets in restricted and other illiquid
securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
IVY PAN-EUROPE FUND: The Fund's principal investment
objective is long-term capital growth. Consideration of current
income is secondary to this principal objective. The Fund seeks
to achieve its investment objective by investing primarily in the
equity securities of companies domiciled or otherwise doing
business (as described below) in European countries.
Under normal circumstances, the Fund will invest at least
65% of its total assets in the equity securities of "European
companies," which include any issuer (a) that is organized under
the laws of a European country; (b) that derives 50% or more of
its total revenues from goods produced or sold, investments made
or services performed in Europe; or (c) for which the principal
trading market is in Europe. The Fund may also invest up to 35%
of its total assets in the equity securities of issuers domiciled
outside of Europe. The equity securities in which the Fund may
invest include common stock, preferred stock and common stock
equivalents such as warrants and convertible debt securities.
The Fund may also invest in sponsored or unsponsored ADRs,
European Depository Receipts ("EDRs"), GDRs, ADSs, European
Depository Shares ("EDSs") and GDSs. The Fund does not expect to
concentrate its investments in any particular industry.
The Fund may invest up to 35% of its net assets in debt
securities, but will not invest more than 20% of its net assets
in debt securities rated Ba or below by Moody's or BB or below by
S&P (commonly referred to as "high yield" or "junk" bonds), or if
unrated, considered by IMI to be of comparable quality. The
Fund may also purchase securities on a "when-issued" or firm
commitment basis, engage in foreign currency exchange
transactions and enter into forward foreign currency contracts.
In addition, the Fund may invest up to 5% of its net assets in
zero coupon bonds. The Fund may with approval of its Board of
Trustees (the "Trustees" or "Board"), but currently does not
intend to, lend portfolio securities.
For temporary defensive purposes or when IMI believes that
circumstances warrant, the Fund may invest without limit in U.S.
Government securities, investment-grade debt securities (i.e.,
those rated Baa or higher by Moody's or BBB or higher by S&P, or
if unrated, considered by IMI to be of comparable quality),
warrants, and cash or cash equivalents such as domestic or
foreign bank obligations (including certificates of deposit, time
deposits and bankers' acceptances), short-term notes, repurchase
agreements, and domestic or foreign commercial paper (which, if
issued by a corporation, must be rated Prime-1 by Moody's or A-1
by S&P, or if unrated has been issued by a company that at the
time of investment has an outstanding debt issue rated AAA or AA
by S&P or Aaa or Aa by Moody's).
For temporary or emergency purposes, the Fund may borrow up
to one-third of the value of its total assets from banks, but may
not purchase securities at any time during which the value of the
Fund's outstanding loans exceeds 10% of the value of the Fund's
total assets. The Fund may also invest (i) up to 10% of its
total assets in other investment companies, and (ii) up to 15% of
its net assets in restricted and other illiquid securities.
The Fund may purchase put and call options on securities and
stock indices, provided the premium paid for such options does
not exceed 5% of the Fund's net assets. The Fund may also sell
covered put options with respect to up to 10% of the value of its
net assets, and may write covered call options so long as not
more than 25% of the Fund's net assets is subject to being
purchased upon the exercise of the calls. For hedging purposes
only, the Fund may engage in transactions in (and options on)
stock index and foreign currency futures contracts, provided that
the Fund's equivalent exposure in such contracts does not exceed
15% of its total assets.
RISK FACTORS
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities.
Securities guaranteed by the U.S. Government include: (1) direct
obligations of the U.S. Treasury (such as Treasury bills, notes,
and bonds) and (2) Federal agency obligations guaranteed as to
principal and interest by the U.S. Treasury (such as GNMA
certificates, which are mortgage-backed securities). When such
securities are held to maturity, the payment of principal and
interest is unconditionally guaranteed by the U.S. Government,
and thus they are of the highest possible credit quality. U.S.
Government securities that are not held to maturity are subject
to variations in market value due to fluctuations in interest
rates.
Mortgage-backed securities are securities representing part
ownership of a pool of mortgage loans. For example, GNMA
certificates are such securities in which the timely payment of
principal and interest is guaranteed by the full faith and credit
of the U.S. Government. Although the mortgage loans in the pool
will have maturities of up to 30 years, the actual average life
of the loans typically will be substantially less because the
mortgages will be subject to principal amortization and may be
prepaid prior to maturity. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of
falling interest rates, the rate of prepayment tends to increase,
thereby shortening the actual average life of the security.
Conversely, rising interest rates tend to decrease the rate of
prepayment, thereby lengthening the actual average life of the
security (and increasing the security's price volatility).
Accordingly, it is not possible to predict accurately the average
life of a particular pool. Reinvestment of prepayment may occur
at higher or lower rates than the original yield on the
certificates. Due to the prepayment feature and the need to
reinvest prepayments of principal at current rates, mortgage-
backed securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of
declining interest rates. Such securities may appreciate or
decline in market value during periods of declining or rising
interest rates, respectively.
Securities issued by U.S. Government instrumentalities and
certain federal agencies are neither direct obligations of nor
guaranteed by the U.S. Treasury; however, they involve Federal
sponsorship in one way or another. Some are backed by specific
types of collateral, some are supported by the issuer's right to
borrow from the Treasury, some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the
issuer, others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and
instrumentalities include, but are not limited to, Federal Land
Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Banks, Federal National Mortgage Association, Federal Home
Loan Mortgage Corporation, and Student Loan Marketing
Association.
CONVERTIBLE SECURITIES
Because convertible securities can be converted into equity
securities, their values will normally vary in some proportion
with those of the underlying equity securities. Convertible
securities usually provide a higher yield than the underlying
equity, however, so that the price decline of a convertible
security may sometimes be less substantial than that of the
underlying equity security.
A Fund may invest in convertible securities, such as
corporate bonds, notes, debentures and other securities that may
be converted into common stock. Investments in convertible
securities can provide income through interest and dividend
payments as well as an opportunity for capital appreciation by
virtue of their conversion or exchange features.
The convertible securities in which a Fund may invest
include preferred stock that may be converted or exchanged at a
stated or determinable exchange ratio into underlying shares of
common stock. The exchange ratio for any particular convertible
security may be adjusted from time to time due to stock splits,
dividends, spin-offs, other corporate distributions or scheduled
changes in the exchange ratio. Convertible debt securities and
convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities.
Although to a lesser extent than with debt securities generally,
the market value of convertible securities tends to decline as
interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion
or exchange feature, the market value of convertible securities
typically changes as the market value of the underlying common
stock changes, and, therefore, also tends to follow movements in
the general market for equity securities. When the market price
of the underlying common stock increases, the price of a
convertible security tends to rise as a reflection of the value
of the underlying common stock, although typically not as much as
the price of the underlying common stock. While no securities
investments are without risk, investments in convertible
securities generally entail less risk than investments in common
stock of the same issuer.
As debt securities, convertible securities are investments
which provide for a stream of income. Of course, like all debt
securities, there can be no assurance of income or principal
payments because the issuers of the convertible securities may
default on their obligations. Convertible securities generally
offer lower yields than non-convertible securities of similar
quality because of their conversion or exchange features.
Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer,
although convertible bonds, as corporate debt obligations, are
senior in right of payment to all equity securities, and
convertible preferred stock is senior to common stock, of the
same issuer. However, convertible bonds and convertible
preferred stock typically have lower coupon rates than similar
non-convertible securities. Convertible securities may be issued
as fixed income obligations that pay current income.
DEBT SECURITIES, IN GENERAL
Investment in debt securities involves both interest rate
and credit risk. Generally, the value of debt instruments rises
and falls inversely with fluctuations in interest rates. As
interest rates decline, the value of debt securities generally
increases. Conversely, rising interest rates tend to cause the
value of debt securities to decrease. Bonds with longer
maturities generally are more volatile than bonds with shorter
maturities. The market value of debt securities also varies
according to the relative financial condition of the issuer. In
general, lower-quality bonds offer higher yields due to the
increased risk that the issuer will be unable to meet its
obligations on interest or principal payments at the time called
for by the debt instrument.
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, and are issued at a significant discount
from face value. The discount approximates the total amount of
interest the bonds would accrue and compound over the period
until maturity at a rate of interest reflecting the market rate
at the time of issuance. If a Fund holds zero coupon bonds in
its portfolio, it would recognize income currently for Federal
income tax purposes in the amount of the unpaid, accrued interest
and generally would be required to distribute dividends repre-
senting such income to shareholders currently, even though the
cash representing such income would not have been received by the
Fund. Cash to pay dividends representing unpaid, accrued
interest may be obtained from, for example, sales proceeds of
portfolio securities and Fund shares and from loan proceeds.
However, this may result in a Fund's having to sell portfolio
securities at a time when it might otherwise choose not to do so,
and the Fund might incur a capital loss on such sales. Because
interest on zero coupon obligations is not distributed to a Fund
on a current basis, but is in effect compounded, the value of
such securities is subject to greater fluctuations in response to
changing interest rates than the value of debt obligations that
distribute income regularly.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which a Fund buys
a money market instrument and obtains a simultaneous commitment
from the seller to repurchase the instrument at a specified time
and at an agreed-upon yield. Under guidelines approved by the
Board, 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
The holder of a warrant has the right, until the warrant
expires, to purchase a given number of shares of a particular
issuer at a specified price. Such investments can provide a
greater potential for profit or loss than an equivalent
investment in the underlying security. However, prices of
warrants do not necessarily move in tandem with the prices of the
underlying securities, and are, therefore, considered speculative
investments. Warrants pay no dividends and confer no rights
other than a purchase option. Thus, if a warrant held by a Fund
were not exercised by the date of its expiration, the Fund would
lose the entire purchase price of the warrant. A Fund's
investments in warrants will not exceed 5% of the value of its
net assets.
SMALL COMPANIES
Investing in smaller company stocks involves certain special
considerations and risks that are not usually associated with
investing in larger, more established companies. For example,
the securities of smaller companies may be subject to more abrupt
or erratic market movements, because they tend to be thinly
traded and are subject to a greater degree to changes in the
issuer's earnings and prospects. Small companies also tend to
have limited product lines, markets or financial resources.
Transaction costs in smaller company stocks also may be higher
than those of larger companies.
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 is rated Prime-1 by Moody's or A-1 by S&P
or, if not rated by Moody's or S&P, is issued by companies having
an outstanding debt issue rated Aaa or Aa by Moody's or AAA or AA
by S&P.
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS
Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank for a definite
period of time and earning a specified return. Bankers'
acceptances are negotiable drafts or bills of exchange, normally
drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank (meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument at
maturity). In addition to investing in certificates of deposit
and bankers' acceptances, 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 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. A Fund's investments in
certificates of deposit of savings associations are limited to
obligations of Federal and state-chartered institutions whose
total assets exceed $1 billion and whose deposits are insured by
the FDIC.
DEPOSITORY RECEIPTS
ADRs, GDRs and similar instruments, the issuance of which is
typically administered by a U.S. or foreign bank or trust
company, evidence ownership of underlying securities issued by a
U.S. or foreign corporation. Unsponsored programs are organized
independently and without the cooperation of the issuer of the
underlying securities. As a result, available information
concerning the issuer may not be as current as for sponsored
depository instruments and their prices may be more volatile than
if they were sponsored by the issuers of the underlying
securities. ADRs are publicly traded on exchanges or over-the-
counter ("OTC") in the United States.
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). A Fund may invest in debt securities that are
given an investment-grade rating by Moody's or S&P, and may also
invest in unrated debt securities that are considered by IMI to
be of comparable quality.
LOW-RATED DEBT SECURITIES
A Fund may invest in corporate debt securities rated Ba or
lower by Moody's, or 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 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 low-rated debt securities, 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 low-rated debt securities 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 low-rated debt
security, and cause large fluctuations in the daily net asset
value of the Fund's shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of low-rated debt securities,
especially in a thinly traded market. When secondary markets for
high yield securities become relatively less liquid, it may be
more difficult to value the securities, requiring additional
research, and elements of judgment. Prices for low-rated debt
securities 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 securities of foreign issuers,
including non-U.S. dollar-denominated debt securities, Euro
dollar securities, sponsored and unsponsored ADRs, ADSs, GDRs
GDSs and debt securities issued, assumed or guaranteed by foreign
governments or political subdivisions or instrumentalities
thereof. Shareholders should consider carefully the substantial
risks involved in investing in securities issued by companies and
governments of foreign nations, which are in addition to the
usual risks inherent in 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,
repatriation or confiscatory taxation, taxation of income earned
in a foreign country and other foreign taxes, foreign exchange
controls (which may include suspension of the ability to transfer
currency from a given country), default in foreign government
securities, political or social instability or diplomatic
developments which could affect investments in securities of
issuers in those nations. In addition, in many countries there
is less publicly available information about issuers than is
available for U.S. companies. For example, ownership of
unsponsored ADRs may not entitle the owner to financial or other
reports from the issuer to which it might otherwise be entitled
as the owner of a sponsored ADR. Moreover, foreign companies are
not generally subject to uniform accounting, auditing and
financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to U.S.
companies. In many foreign countries, there is less government
supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the United
States. Foreign securities transactions may also be subject to
higher brokerage costs than domestic securities transactions.
The foreign securities markets of many of the countries in which
a Fund may invest may also be smaller, less liquid and subject to
greater price volatility than those in the United States. In
addition, a Fund may encounter difficulties or be unable to
pursue legal remedies and obtain judgment in foreign courts.
Foreign stock markets have different clearance and
settlement procedures and in certain markets there have been
times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to conduct
such transactions. Delays in settlement could result in
temporary periods when assets of 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. 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.
INVESTING IN EMERGING MARKETS
Investors should recognize that investing in certain foreign
securities involves special considerations, including those set
forth below, that are not typically associated with investing in
United States securities and that may affect a Fund's performance
favorably or unfavorably. (See "Foreign Securities" under the
caption "Risk Factors and Investment Techniques" in the
Prospectus.)
In recent years, many emerging market countries around the
world have undergone political changes that have reduced
government's role in economic and personal affairs and have
stimulated investment and growth. Historically, there is a strong
direct correlation between economic growth and stock market
returns. While this is no guarantee of future performance, IMI
believes that investment opportunities (particularly in the
energy, environmental services, natural resources, basic
materials, power, telecommunications and transportation
industries) may result within the evolving economies of emerging
market countries from which the Fund and its shareholders will
benefit.
Investments in companies domiciled in developing countries
may be subject to potentially higher risks than investments in
developed countries. Such risks include (i) less social,
political and economic stability; (ii) a small market for
securities and/or a low or nonexistent volume of trading, which
result in a lack of liquidity and greater price volatility; (iii)
certain national policies that may restrict 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. Further, many emerging markets
have experienced and continue to experience high rates of
inflation.
Despite the dissolution of the Soviet Union, the Communist
Party may continue to exercise a significant role in certain
Eastern European countries. To the extent of the Communist
Party's influence, investments in such countries will involve
risks of nationalization, expropriation and confiscatory
taxation. The communist governments of a number of Eastern
European countries expropriated large amounts of private property
in the past, in many cases without adequate compensation, and
there can be no assurance that such expropriation will not occur
in the future. In the event of such expropriation, 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 net asset
value.
Certain Eastern European countries that do not have well-
established trading markets are characterized by an absence of
developed legal structures governing private and foreign
investments and private property. In addition, certain countries
require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in
a particular company, or limit the investment of foreign persons
to only a specific class of securities of a company that may have
less advantageous terms than securities of the company available
for purchase by nationals.
Authoritarian governments in certain Eastern European
countries may require that a governmental or quasi-governmental
authority act as custodian of 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"), with respect to
the custody 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 normally invests a significant portion of
its assets 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 $1190.8 billion as of November, 1996 and its
1,304 listed companies had a November trading volume of
2,610,118,602 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.
INVESTING IN ASIA PACIFIC SECURITIES
Certain Asia-Pacific countries in which Ivy Asia Pacific
Fund may invest are developing countries, and may be in the
initial stages of their industrialization cycle. The economic
structures of developing countries generally are less diverse and
mature than in the United States, and their political systems may
be relatively unstable. Historically, markets of developing
countries have been more volatile than the markets of developed
countries, yet such markets often have provided higher rates of
return to investors.
Investing in securities of issuers in Asia-Pacific countries
involves certain considerations not typically associated with
investing in securities of United States companies, including (i)
restrictions on foreign investment and on repatriation of capital
invested in Asian countries, (ii) currency fluctuations, (iii)
the cost of converting foreign currency into United States
dollars, (iv) potential price volatility and lesser liquidity of
shares traded on Asia-Pacific country securities markets and (v)
political and economic risks, including the risk of
nationalization or expropriation of assets and the risk of war.
Certain Asia-Pacific countries may be more vulnerable to the
ebb and flow of international trade and to trade barriers and
other protectionist or retaliatory measures. Investments in
countries that have recently opened their capital markets and
that appear to have relaxed their central planning requirement,
as well as in countries that have privatized some of their state-
owned industries, should be regarded as speculative.
The settlement period of securities transactions in foreign
markets in general may be longer than in domestic markets, and
such delays may be of particular concern in developing countries.
For example, the possibility of political upheaval and the
dependence on foreign economic assistance may be greater in
developing countries than in developed countries, either one of
which may increase settlement delays.
Securities exchanges, issuers and broker-dealers in some
Asia-Pacific countries are subject to less regulatory scrutiny
than in the United States. In addition, due to the limited size
of the markets for Asia-Pacific securities, the prices for such
securities may be more vulnerable to adverse publicity,
investors' perceptions or traders' positions or strategies, which
could cause a decrease not only in the value but also in the
liquidity of the Fund's investments.
INVESTING IN NATURAL RESOURCES
Since the Ivy Global Natural Resources Fund normally invests
a substantial portion of its assets in securities of companies
engaged in natural resources activities, the Fund may be subject
to greater risks and market fluctuations than funds with more
diversified portfolios. The value of the Fund's securities will
fluctuate in response to market conditions generally, and will be
particularly sensitive to the markets for those natural resources
in which a particular issuer is involved. The values of natural
resources may also fluctuate directly with respect to real and
perceived inflationary trends and various political developments.
In selecting the Fund's portfolio of investments, IMI will
consider each company's ability to create new products, secure
any necessary regulatory approvals, and generate sufficient
customer demand. A company's failure to perform well in any one
of these areas, however, could cause its stock to decline
sharply.
Ivy Global Natural Resources Fund's investments in precious
metals (such as gold) and other physical commodities are subject
to special risk considerations, including substantial price
fluctuations over short periods of time. On the other hand,
investments in precious metals coins or bullion could help to
moderate fluctuations in the value of the Fund's portfolio, since
the prices of precious metals have at times tended not to
fluctuate as widely as shares of issuers engaged in the mining of
precious metals. Because precious metals and other commodities
do not generate investment income, however, the return on such
investments will be derived solely from the appreciation and
depreciation on such investments. The Fund may also incur
storage and other costs relating to its investments in precious
metals and other commodities, which may, under certain
circumstances, exceed custodial and brokerage costs associated
with investments in other types of securities. When the Fund
purchases a precious metal, IMI currently intends that it will
only be in a form that is readily marketable.
Natural resource industries throughout the world may be
subject to greater political, environmental and other
governmental regulation than many other industries. Changes in
governmental policies and the need for regulatory approvals may
have an adverse effect on the products and services of natural
resources companies. For example, the exploration, development
and distribution of coal, oil and gas in the United States are
subject to significant Federal and state regulation, which may
affect rates of return on such investments and the kinds of
services that may be offered to companies in those industries.
In addition, many natural resource companies have been subject to
significant costs associated with compliance with environmental
and other safety regulations. Such regulations may also hamper
the development of new technologies. The direction, type or
effect of any future regulations affecting natural resource
industries are virtually impossible to predict.
To take advantage of potential growth opportunities, Ivy
Global Natural Resources 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, because they tend to be traded in lower
volume and because the companies are subject to greater business
risk.
Under normal conditions, Ivy Global Natural Resources Fund
is likely to be invested heavily in foreign securities.
Investing in securities of foreign issuers and denominated in
foreign currencies involves risks not typically associated with
investing in United States securities, including fluctuations in
foreign exchange rates, exposure to adverse political and
economic developments and the possible imposition of exchange
controls and related restrictions. In addition, competition is
intense for many natural resource companies. As a result, the
value of the securities issues by such companies may to subject
to increased share price volatility.
INVESTING IN THE CHINA REGION
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 Ivy China Region 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 Ivy
China Region 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, restriction 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. See also "Selected Economic and
Market Data for Asia Pacific and China Region Countries" in
Appendix B to this SAI.
PRECIOUS METALS AND OTHER PHYSICAL COMMODITIES
Commodities trading is generally considered a speculative
activity. For example, prices of precious metals are affected by
factors such as cyclical economic conditions, political events
and monetary policies of various countries. Accordingly, markets
for precious metals may at times be volatile and there may be
sharp price fluctuations even during periods when prices overall
are rising. Investments in physical commodities may also present
practical problems of delivery, storage and maintenance, possible
illiquidity, the unavailability of accurate market valuations and
increased expenses.
Under current U.S. tax law, the Ivy Global Natural Resources
Fund may not receive more than 10% of its yearly income from
gains resulting from selling precious metals or any other
physical commodity. Accordingly, the Fund may be required to
hold its precious metals or sell them at a loss, or to sell its
portfolio securities at a gain, when for investment reasons it
would not otherwise do so.
FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency 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), and
typically is individually negotiated and privately traded by
currency traders and their customers. A forward contract
generally has no deposit requirement, and no commissions are
charged at any stage for trades. Although foreign exchange
dealers do not charge a fee for commissions, they do realize a
profit based on the difference between the price at which they
are buying and selling various currencies. Although these
contracts are intended to minimize the risk of loss due to a
decline in the value of the hedged currencies, at the same time,
they tend to limit any potential gain which might result should
the value of such currencies increase.
While 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. An imperfect correlation of
this type 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 or maintain a net exposure to a
forward contract where the consummation of the contract would
obligate the Fund to deliver an amount of currency that exceeds
the value of the Fund's portfolio securities or other assets
denominated in that currency. Further, a Fund generally will not
enter into a forward contract with a term greater than one year.
To the extent required by applicable law, a Fund will hold
cash or liquid securities in a segregated account with its
custodian in an amount equal (on a daily marked-to-market basis)
to the amount of the commitments under these contracts. At the
maturity of a forward contract, 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 position. Closing purchase
transactions with respect to forward contracts are usually
effected with the currency trader who is a party to the original
forward contract.
FOREIGN CURRENCIES
Investment in foreign securities will usually involve
currencies of foreign countries. In addition, a Fund may
temporarily hold foreign currency deposits during the completion
of investment programs and may purchase forward contracts.
Because of these factors, the value of the assets of 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
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 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 U.S. markets. A Fund's
share price will reflect movements of the stock and bond markets
in which it is invested (both U.S. and foreign), and of the
currencies in which its foreign investments are denominated.
Thus, the strength or weakness of the U.S. dollar against foreign
currencies accounts for part of 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.
REAL ESTATE INVESTMENT TRUSTS (REITs)
Ivy Global Fund may invest in equity real estate investment
trusts ("REITs"). A REIT is a corporation, trust or association
that invests in real estate mortgages or equities for the benefit
of its investors. REITs are dependent upon management skill, may
not be diversified and are subject to the risks of financing
projects. Such entities 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. 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
OPTIONS, IN 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 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 cash or liquid securities equal to the
contract value. A call option is also covered if a Fund holds a
call on the same index as the call written where the exercise
price of the call held is (i) equal to or less than the exercise
price of the call written or (ii) greater than the exercise price
of the call written, provided that the Fund maintains in a
segregated account with the Custodian the difference in cash or
liquid securities. A put option is also "secured" if a Fund
holds a put on the same index as the put written where the
exercise price of the put held is (i) equal to or greater than
the exercise price of the put written or (ii) less than the
exercise price of the put written, provided that the Fund
maintains in a segregated account with the Custodian the
difference in cash or liquid securities.
RISKS OF OPTIONS TRANSACTIONS. The purchase and writing of
options involves certain risks. During the option period, the
covered call writer has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the
underlying securities above the exercise price, but, as long as
its obligation as a writer continues, has retained the risk of
loss should the price of the underlying security decline. The
writer of 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 and
securities markets, and to select the proper type, time and
duration of options.
FUTURES CONTRACTS
FUTURES, IN GENERAL. A Fund may enter into futures
contracts for hedging purposes. A futures contract provides for
the future sale by one party and purchase by another party of a
specified quantity of a commodity at a specified price and time.
When a purchase or sale of a futures contract is made by a 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 a Fund but is instead a settlement between
the Fund and the broker of the amount one would owe the other if
the futures contract expired. In computing daily net asset
value, the Fund will mark-to-market its open futures position.
Although some futures contracts call for making or taking
delivery of the underlying securities, generally these
obligations are closed out prior to delivery of offsetting
purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an
offsetting purchase price is less than the original sale price, a
Fund generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price,
the Fund generally realizes a capital gain, or if it is less, the
Fund generally realizes a capital loss. The transaction costs
must also be included in these calculations. When purchasing a
futures contract, a Fund will maintain with its Custodian (and
mark-to-market on a daily basis) cash or liquid securities that,
when added to the amounts deposited with a futures commission
merchant ("FCM") as margin, are equal to the market value of the
futures contract.
When selling a futures contact, a Fund will maintain with
its custodian in a segregated account (and mark-to-market on a
daily basis) cash or liquid securities that, when added to the
amounts deposited with an FCM as margin, are equal to the market
value of the instruments underlying the contract. Alternatively,
a Fund may "cover" its position by owning the instruments
underlying the contract.
A Fund will only enter into futures contracts which are
standardized and traded on a U.S. or foreign exchange, board of
trade, or similar entity or quoted on an automated quotation
system. A Fund will not enter into a futures contract if,
immediately thereafter, the aggregate initial margin deposits for
futures contracts held by the Fund plus premiums paid by it for
open futures option positions, less the amount by which any such
positions are "in-the-money," would exceed 5% of the liquidation
value of the Fund's portfolio (or the Fund's net asset value),
after taking into account unrealized profits and unrealized
losses on any such contracts the Fund has entered into.
FOREIGN CURRENCY FUTURES CONTRACTS. A Fund may engage in
foreign currency futures contracts for hedging purposes. A
foreign currency futures contract provides for the future sale by
one party and purchase by another party of a specified quantity
of a foreign currency at a specified price and time.
RISKS ASSOCIATED WITH FUTURES. There are several risks
associated with the use of futures contracts as hedging
techniques. A purchase or sale of a futures contract may result
in losses in excess of the amount invested in the futures
contract. There can be no guarantee that there will be a
correlation between price movements in the hedging vehicle and in
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 on securities, including technical influences in futures
trading, and differences between the financial instruments being
hedged and the instruments underlying the standard contracts
available for trading in such respects as interest rate levels,
maturities, and creditworthiness of issuers. A decision as to
whether, when and how to hedge involves the exercise of skill and
judgment, and even a well-conceived hedge may be unsuccessful to
some degree because of market behavior or unexpected interest
rate trends.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit. The daily limit
governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may
work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily
limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial
losses.
There can be no assurance that a liquid market will exist at
a time when a Fund seeks to close out a futures position, and the
Fund would remain obligated to meet margin requirements until the
position is closed. In addition, there can be no assurance that
an active secondary market will continue to exist.
Currency futures contracts may be traded on foreign
exchanges. Such transactions may not be regulated as effectively
as similar transactions in the United States; may not involve a
clearing mechanism and related guarantees; and are subject to the
risk of governmental actions affecting trading in, or the prices
of, foreign securities. The value of such position also could be
adversely affected by (i) other complex foreign political, legal
and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays
in 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. 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.
Insofar as such securities do 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) cash or liquid securities that, when
added to the amounts deposited with a futures commission merchant
("FCM") as margin, are equal to the market value of the futures
contract. Alternatively, a Fund may "cover" its position by
purchasing a put option on the same futures contract with a
strike price as high as or higher than the price of the contract
held by 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) cash or liquid securities that, when added to the
amounts deposited with an FCM as margin, are equal to the market
value of the instruments underlying the contract. Alternatively,
a Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to
that of the index on which the futures contract is based), or by
holding a call option permitting 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 some combination of futures, options, currency
and interest rate transactions ("component" transactions),
instead of a single transaction, as part of a single or combined
strategy when, in the opinion of IMI, it is in the best interests
of 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
New issues of certain debt securities are often offered on a
"when-issued basis," meaning the payment obligation and the
interest rate are fixed at the time the buyer enters into the
commitment, but delivery and payment for the securities normally
take place after the date of the commitment to purchase. Firm
commitment agreements call for the purchase of securities at an
agreed-upon price on a specified future date. A Fund uses such
investment techniques in order to secure what is considered to be
an advantageous price and yield to the Fund and not for purposes
of leveraging the Fund's assets. In either instance, a Fund will
maintain in a segregated account with its custodian cash or
liquid securities equal (on a daily marked-to-market basis) to
the amount of its commitment to purchase the underlying
securities.
RESTRICTED AND ILLIQUID SECURITIES
An "illiquid security" is an asset that may not be sold or
disposed of in the ordinary course of business within seven days
at approximately the value at which a Fund has valued the
security on its books. A "restricted security" is a security
that cannot be offered to the public for sale without first being
registered under the Securities Act of 1933, and is considered to
be illiquid until such filing takes place. Restricted securities
may be sold only in privately negotiated transactions or in a
public offering with respect to which a registration statement is
in effect under the Securities Act of 1933. Where a registration
statement is required, a Fund may be required to bear all or part
of the registration expenses. Issuers of restricted securities
may not be subject to the disclosure and other investor
protection requirements that would be applicable if their
securities were publicly traded. There may also 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
do so. If, during such a period, adverse market conditions were
to develop, a Fund might obtain a less favorable price than the
price that prevailed when it decided to sell. Since it is not
possible to predict with assurance that the market for securities
eligible for resale under Rule 144A will continue to be liquid, a
Fund will monitor each of its investments in these securities,
focusing on factors such as valuation, liquidity and availability
of information. This investment practice could have the effect
of increasing the level of illiquidity in a Fund to the extent
that qualified institutional buyers become, for a time,
uninterested in purchasing these restricted securities.
Securities whose proceeds are subject to limitations on
repatriation of principal or profits for more than seven days,
and those for which market quotations are not readily available,
may be deemed illiquid for these purposes.
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). 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. All borrowings will be
repaid before any additional investments are made.
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 Asia Pacific Fund, Ivy China Region
Fund, Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, Ivy International
Small Companies Fund, Ivy Latin America Strategy Fund, Ivy New
Century Fund and Ivy Pan-Europe Fund may not:
(i) 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
(ii) 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.
Further, as a matter of fundamental policy, each of Ivy Asia
Pacific Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Global
Fund, Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy International Small Companies Fund, Ivy New
Century Fund and Ivy Pan-Europe 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 Asia
Pacific Fund, Ivy China Region Fund, Ivy International Fund II,
Ivy Latin America Strategy Fund and Ivy New Century Fund may not:
(i) participate in an underwriting or selling group in
connection with the public distribution of securities
except for its own capital stock.
Further, as a matter of fundamental policy, each of Ivy
China Region Fund, Ivy Global Science & Technology Fund, Ivy
Latin America Strategy Fund and Ivy New Century Fund may not:
(i) purchase securities on margin.
Further, as a matter of fundamental policy, each of Ivy
China Region Fund, Ivy Global Science & Technology Fund, Ivy
International Fund II, Ivy Latin America Strategy Fund and Ivy
New Century Fund may not:
(i) 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.
Further, as a matter of fundamental policy, Ivy Asia Pacific
Fund, Ivy Canada Fund, Ivy Global Fund, Ivy Global Natural
Resources Fund, Ivy International Fund II, Ivy International
Small Companies Fund and Ivy Pan-Europe Fund may not:
(i) Purchase securities on margin, except such short-term
credits as are necessary for the clearance of
transactions, but Ivy Asia Pacific Fund, Ivy Global
Fund, Ivy Global Natural Resources Fund, Ivy
International Fund II, Ivy International Small
Companies Fund and Ivy Pan-Europe Fund may make margin
deposits in connection with transactions in options,
futures and options on futures; or
(ii) 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) the entry
into repurchase agreements with banks or broker-
dealers, or, with respect to Ivy Asia Pacific Fund, Ivy
Global Fund, Ivy Global Natural Resources Fund, Ivy
International Fund II, Ivy International Small
Companies Fund and Ivy Pan-Europe Fund, (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.
Further, as a matter of fundamental policy, Ivy Canada Fund, Ivy
Global Fund, Ivy Global Natural Resources Fund, Ivy International
Small Companies Fund and Ivy Pan-Europe Fund may not:
(i) Make investments in securities for the purpose of
exercising control over or management of the issuer; or
(ii) 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.
Further, as a matter of fundamental policy, each of Ivy Asia
Pacific Fund, Ivy Global Natural Resources Fund, Ivy Global
Science & Technology Fund, Ivy International Fund II, Ivy
International Small Companies Fund and Ivy Pan-Europe Fund may
not:
(i) borrow money, except as a temporary measure for
extraordinary or emergency purposes, and provided that
the Fund maintains asset coverage of 300% for all
borrowings.
Further, as a matter of fundamental policy, Ivy Asia Pacific
Fund, Ivy Global Fund, Ivy Global Natural Resources Fund, Ivy
International Small Companies Fund and Ivy Pan-Europe 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.
Further, as a matter of fundamental policy, each of Ivy
China Region Fund, Ivy International Fund II, Ivy Latin America
Strategy Fund and Ivy New Century Fund may not:
(i) purchase or sell real estate or commodities and
commodity contracts.
Each of Ivy China Region Fund, Ivy International Fund II,
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) sell securities short.
Further, as a matter of fundamental policy, each of Ivy Asia
Pacific Fund, Ivy China Region Fund, Ivy Global Natural Resources
Fund, Ivy Global Science & Technology Fund, Ivy International
Small Companies 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 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, Ivy China Region 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) 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;
(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. All borrowings
will be repaid before any additional investments are
made;
(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) 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
(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.
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.
Further, as a matter of fundamental policy, Ivy Global Fund may
not:
(i) 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 Global Science &
Technology Fund may not:
(i) participate in an underwriting or selling group in
connection with the public distribution of securities,
except for its own capital stock, and except to the
extent that, in connection with the disposition of
portfolio securities, it may be deemed to be an
underwriter under the Federal securities laws;
(ii) purchase or sell real estate or commodities and
commodity contracts; provided, however, that the Fund
may purchase securities secured by real estate or
interests therein, or securities issued by companies
that invest in real estate or interests therein, and
except that, subject to the policies and restrictions
set forth in the Prospectus and elsewhere in this SAI,
(i) the Fund may enter into futures contracts, and
options thereon, and (ii) the Fund may enter into
forward foreign currency contracts and currency futures
contracts, and options thereon; or
(iii)sell securities short, except for short sales "against
the box."
Further, as a matter of fundamental policy, Ivy International
Fund II 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); or
(ii)purchase the securities of any other open-end
investment company, except as part of a plan of merger
or consolidation.
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 of the Fund's assets.
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 of Ivy Asia Pacific Fund, Ivy
China Region Fund, Ivy Global Natural Resources Fund, Ivy Global
Science & Technology Fund, Ivy International Small Companies
Fund, Ivy Latin America Strategy Fund, Ivy New Century Fund and
Ivy Pan-Europe Fund may not:
(i) 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 (except
for Ivy Pan-Europe 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 Asia
Pacific Fund, Ivy China Region Fund, Ivy Global Science &
Technology Fund, Ivy International Fund II, 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.
Further, as a matter of non-fundamental policy, each of Ivy Asia
Pacific Fund, Ivy China Region Fund, Ivy Global Natural Resources
Fund, Ivy International Small Companies Fund, Ivy Latin America
Strategy Fund, Ivy New Century Fund and Ivy Pan-Europe 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 Investment
Company Act of 1940 and rules thereunder.
Further, as a matter of non-fundamental policy, each of Ivy China
Region Fund, Ivy Global Science & Technology Fund, Ivy
International Fund II, Ivy Latin America Strategy Fund and Ivy
New Century Fund may not:
(i) invest in companies for the purpose of exercising
control of management; or
(ii) 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
Canada Fund, Ivy Global Fund, Ivy Global Natural Resources Fund,
Ivy International Small Companies Fund and Ivy Pan-Europe Fund
may not:
(i) 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, each of Ivy
Canada Fund, Ivy Global Fund, Ivy International Small Companies
Fund and Ivy Pan-Europe Fund may not:
(i) purchase or sell real estate limited partnership
interests.
Further, as a matter of non-fundamental policy, each of Ivy
Asia Pacific Fund, Ivy Global Natural Resources Fund, Ivy
International Fund II, Ivy International Small Companies Fund and
Ivy Pan-Europe Fund may not:
(i) sell securities short, except for short sales "against
the box."
Further, as a matter of non-fundamental policy, each of Ivy
Asia Pacific Fund, Ivy Global Natural Resources Fund, Ivy
International Small Companies Fund and Ivy Pan-Europe Fund may
not:
(i) participate on a joint or a joint and several basis in
any trading account in securities. The "bunching" of
orders of the Fund and of other accounts under the
investment management of the Fund's investment adviser,
for the sale or purchase of portfolio securities shall
not be considered participation in a joint securities
trading account.
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.
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 and (except as noted below) bears the cost
of providing to investors the following rights and privileges.
The Trust reserves the right to amend or terminate any one or
more of these rights and privileges. Notice of amendments to or
terminations of rights and privileges will be provided to
shareholders in accordance with applicable law.
Certain of the rights and privileges described below refer
to funds, other than the Funds, whose shares are also distributed
by Ivy Mackenzie Distributors, Inc. ("IMDI"). These funds are:
Ivy Growth Fund, Ivy Growth with Income Fund, Ivy Emerging Growth
Fund, Ivy International Fund II, Ivy Pan-Europe Fund, Ivy
International Bond Fund, Ivy Bond Fund and Ivy Money Market Fund
(the other eight series of the Trust). Shareholders should
obtain a current prospectus before exercising any right or
privilege that may relate to these funds.
Effective April 18, 1997, Ivy International Fund suspended
the offer of its shares to new investors. Accordingly, Advisor
Class shares of Ivy International Fund are not available for
purchase.
As of September 5, 1997, shares of the four funds that
comprised Mackenzie Series Trust (a separately registered
investment company formerly in the Ivy Mackenzie group of funds)
are no longer available for purchase or exchange.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a Fund
shareholder to have specified amounts automatically drawn each
month from his or her bank for investment in Fund shares, is
available for all classes of shares, except Class I. The minimum
initial and subsequent investment under this method is $250 per
month (except in the case of a tax qualified retirement plan for
which the minimum initial and subsequent investment is $25 per
month). A shareholder may terminate the Automatic Investment
Method at any time upon delivery to Ivy Mackenzie Services Corp.
("IMSC") of telephone instructions or written notice. See
"Automatic Investment Method" in the Prospectus. To begin the
plan, complete Sections 6A and 7B of the Account Application.
EXCHANGE OF SHARES
As described in the Prospectus, Advisor Class shareholders
of each Fund have an exchange privilege with other Ivy Funds
(except Ivy International Fund). Before effecting an exchange,
shareholders should obtain and read the currently effective
prospectus for the fund into which the exchange is to be made.
Advisor Class shareholders may exchange their outstanding
Advisor Class shares for Advisor Class shares of another Ivy fund
on the basis of the relative net asset value per Advisor
Class share. The minimum value of Advisor Class shares that may
be exchanged into an Ivy fund in which shares are not already
held is $10,000. No exchange out of a Fund (other than by a
complete exchange of all Fund shares) may be made if it would
reduce the shareholder's interest in the Advisor Class shares of
the Fund to less than $10,000. Exchanges are available only in
states where the exchange can legally be made.
Each exchange will be made on the basis of the relative net
asset values per share of the Ivy funds involved in the exchange
next computed following receipt by IMSC of telephone instructions
by IMSC or a properly executed request. Exchanges, whether
written or telephonic, must be received by IMSC by the close of
regular trading on the Exchange (normally 4:00 p.m., eastern
time) to receive the price computed on the day of receipt.
Exchange requests received after that time will receive the price
next determined following receipt of the request. The exchange
privilege may be modified or terminated at any time, upon at
least 60 days' notice to the extent required by applicable law.
See "Redemptions."
An exchange of shares between any of the Funds will result
in a taxable gain or loss. Generally, this will be a capital
gain or loss (long-term or short-term, depending on the holding
period of the shares) in the amount of the difference between the
net asset value of the shares surrendered and the shareholder's
tax basis for those shares. However, in certain circumstances,
shareholders will be ineligible to take sales charges into
account in computing taxable gain or loss on an exchange. See
"Taxation."
With limited exceptions, gain realized by a tax-deferred
retirement plan will not be taxable to the plan and will not be
taxed to the participant until distribution. Each investor
should consult his or her tax adviser regarding the tax
consequences of an exchange transaction.
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 Ivy funds in accordance with
the terms of the applicable plan and the exchange privilege
available to all shareholders. Initial and subsequent purchase
payments in connection with tax-deferred retirement plans must be
at least $25 per participant.
The following fees will be charged to individual shareholder
accounts as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per account
For shareholders whose retirement accounts are diversified
across several Ivy funds, the annual maintenance fee will be
limited to not more than $20.
The following discussion describes 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 (which
primarily distributes exempt-interest dividends).
An individual who has not reached age 70-1/2 and who
receives compensation or earned income is eligible to contribute
to an IRA, whether or not he or she is an active participant in a
retirement plan. An individual who receives a distribution from
another IRA, a qualified retirement plan, a qualified annuity
plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible
to establish an IRA by rolling over the distribution either
directly or within 60 days after its receipt. Tax advice should
be obtained in connection with planning a rollover contribution
to an IRA.
In general, an eligible individual may contribute up to the
lesser of $2,000 or 100% of his or her compensation or earned
income to an IRA each year. If a husband and wife are both
employed, and both are under age 70-1/2, each may set up his or
her own IRA within these limits. If both earn at least $2,000
per year, the maximum potential contribution is $4,000 per year
for both. For years after 1996, the result is similar even if
one spouse has no earned income; if the joint earned income of
the spouses is at least $4,000, a contribution of up to $2,000
may be made to each spouse's IRA. For years before 1997,
however, if one spouse has (or elects to be treated as having) no
earned income for IRA purposes for a year, the working spouse may
contribute up to the lesser of $2,250 or 100% of his or her
compensation or earned income for the year to IRAs for both
spouses, provided that no more than $2,000 is contributed to the
IRA of one spouse. Rollover contributions are not subject to
these limits.
An individual may deduct his or her annual contributions to
an IRA in computing his or her Federal income tax within the
limits described above, provided he or she (or his or her spouse,
if they file a joint Federal income tax return) is not an active
participant in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan,
403(b) plan, simplified employee pension, or governmental plan.
If he or she (or his or her spouse) is an active participant, a
full deduction is only available if he or she has adjusted gross
income that is less than a specified level ($40,000 for married
couples filing a joint return, $25,000 for single individuals,
and $0 for a married individual filing a separate return). The
deduction is phased out ratably for active participants with
adjusted gross income between certain levels ($40,000 and $50,000
for married individuals filing a joint return, $25,000 and
$35,000 for single individuals, and $0 and $10,000 for married
individuals filing separate returns). Individuals who are active
participants with income above the specified phase-out level may
not deduct their IRA contributions. Rollover contributions are
not includible in income for Federal income tax purposes and
therefore are not deductible from it.
Generally, earnings on an IRA are not subject to current
Federal income tax until distributed. Distributions attributable
to tax-deductible contributions and to IRA earnings are taxed as
ordinary income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches age 59-1/2
are subject to a nondeductible penalty tax equal to 10% of the
taxable amount of the distribution. The 10% penalty tax does not
apply to amounts withdrawn from an IRA after the individual
reaches age 59-1/2, becomes disabled or dies, or if withdrawn in
the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated benefi-
ciary, if any, or rolled over into another IRA, or, for years
after 1996, amounts withdrawn and used to pay for deductible
medical expenses and amounts withdrawn by certain unemployed
individuals not in excess of amounts paid for certain health
insurance premiums. Distributions must begin to be withdrawn not
later than April 1 of the calendar year following the calendar
year in which the individual reaches age 70-1/2. Failure to take
certain minimum required distributions will result in the
imposition of a 50% non-deductible penalty tax. Extremely large
distributions in any one year (other than 1997, 1998 or 1999)
from an IRA (or from an IRA and other retirement plans) may also
result in a penalty tax.
QUALIFIED PLANS: For those self-employed individuals who
wish to purchase shares of one or more Ivy 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 arrange for Investors Bank & Trust
to furnish custodial services to the employer and any
participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT"): Section 403(b)(7) of the
Internal Revenue Code of 1986, as amended (the "Code"), permits
public school systems and certain charitable organizations to use
mutual fund shares held in a custodial account to fund deferred
compensation arrangements with their employees. A custodial
account agreement is available for those employers whose
employees wish to purchase shares of the Trust in conjunction
with such an arrangement. The special application for a
403(b)(7) Account is available from IMSC.
Distributions from the 403(b)(7) Account may be made only
following death, disability, separation from service, attainment
of age 59-1/2, or incurring a financial hardship. A 10% penalty
tax generally applies to distributions to an individual before he
or she reaches age 59-1/2, unless the individual (1) has reached
age 55 and separated from service; (2) dies or becomes disabled;
(3) uses the withdrawal to pay tax-deductible medical expenses;
(4) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(5) rolls over the distribution. There is no set-up fee for
403(b)(7) Accounts and the annual maintenance fee is $20.00 per
account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS: An employer may
deduct contributions to a SEP up to the lesser of $30,000 or 15%
of compensation. SEP accounts generally are subject to all rules
applicable to IRA accounts, except the deduction limits, and are
subject to certain employee participation requirements. No new
salary reduction SEPs ("SARSEPs") may be established after 1996,
but existing SARSEPs may continue to be maintained, and non-
salary reduction SEPs may continue to be established as well as
maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a
SIMPLE 401(k) for years after 1996. An employee can make pre-tax
salary reduction contributions to a SIMPLE Plan, up to $6,000 a
year. Subject to certain limits, the employer will either match
a portion of employee contributions, or will make a contribution
equal to 2% of each employee's compensation without regard to the
amount the employee contributes. An employer cannot maintain a
SIMPLE Plan for its employees if any contributions or benefits
are credited to those employees under any other qualified
retirement plan maintained by the employer.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a Systematic Withdrawal Plan (a
"Withdrawal Plan"), by telephone instructions or by delivery to
IMSC of a written election to have his or her shares withdrawn
periodically (minimum distribution amount -- $50), accompanied by
a surrender to IMSC of all share certificates then outstanding in
such shareholder's name, properly endorsed by the shareholder.
To be eligible to elect a Withdrawal Plan, a shareholder must
continually maintain an account balance of at least $10,000 in
his or her account. Additional investments made by investors
participating in a Withdrawal Plan must equal at least $250 each
while the Withdrawal Plan is in effect. A Withdrawal Plan may
not be established if the investor is currently participating in
the Automatic Investment Method. A Withdrawal Plan may involve
the depletion of a shareholder's principal, depending on the
amount withdrawn.
A redemption under a Withdrawal Plan is a taxable event.
Shareholders contemplating participating in a Withdrawal Plan
should consult their tax advisers.
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 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 purchases at any time or
suspend the offering of shares in connection with group
systematic investment programs, and to restrict the offering of
shareholder privileges, such as check writing, simplified
redemptions and other optional privileges, as described in the
Prospectus, to shareholders using group systematic investment
programs.
With respect to each shareholder account established on or
after September 15, 1972 under a group systematic investment
program, the Trust and IMI each currently charge a maintenance
fee of $3.00 (or portion thereof) that for each twelve-month
period (or portion thereof) that the account is maintained. The
Trust may collect such fee (and any fees due to IMI) through a
deduction from distributions to the shareholders involved or by
causing on the date the fee is assessed a redemption in each such
shareholder account sufficient to pay 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 and Ivy Global
Natural Resources Fund) 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
(or MFC for Ivy Canada Fund and Ivy Global Natural Resources
Fund) attempts to deal directly with the principal market makers,
except in those circumstances where IMI (or MFC for Ivy Canada
Fund and Ivy Global Natural Resources Fund) believes that a
better price and execution are available elsewhere.
Each Fund' investment manager (MFC, for Ivy Canada Fund and
Ivy Global Natural Resources Fund, and IMI for all of the other
Funds) 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 the investment manager in servicing all of its accounts.
In addition, not all of these services may be used by the
investment manager in connection with the services it provides to
a particular Fund or the Trust. A Fund's investment manager 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. The investment manager will not,
however, execute brokerage transactions other than at the best
price and execution.
During the fiscal year ended June 30, 1994, during the six-
month period ended December 31, 1994 and during the fiscal years
ended December 31, 1995 and 1996, Ivy Canada Fund paid brokerage
commissions of $202,849, $98,390, $79,464 and $102,121,
respectively.
During the fiscal years ended December 31, 1994, 1995 and
1996, Ivy China Region Fund paid brokerage commissions of
$26,579, $70,459 and $62,812, respectively.
During the fiscal year ended June 30, 1994, during the six-
month period ended December 31, 1994, and during the fiscal years
ended December 31, 1995 and 1996, Ivy Global Fund paid brokerage
commissions of $58,828, $43,367, $96,124 and $90,904,
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. During the fiscal year ended December 31,
1996, Ivy Latin America Strategy Fund and Ivy New Century Fund
each paid brokerage commissions of $15,756 and $95,606,
respectively.
During the period from July 22, 1996 (commencement of
operations to December 31, 1996) Ivy Global Science & Technology
Fund paid brokerage commissions of $37,065. Brokerage commission
information is not available for Ivy Asia Pacific Fund, Ivy
Global Natural Resources Fund and Ivy International Small
Companies Fund, which did not commence operations until January
1, 1997, or for Ivy International Fund II or Ivy Pan-Europe Fund,
which did not commence operations until May 13, 1997.
Each Fund may, under some circumstances, accept securities
in lieu of cash as payment for Fund shares. Each Fund will
accept securities only to increase its holdings in a portfolio
security or to take a new portfolio position in a security that
IMI (MFC, in the case of Ivy Canada Fund and Ivy Global Natural
Resources Fund) deems to be a desirable investment for 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 only
accept securities delivered in proper form and will not accept
securities subject to legal restrictions on transfer. The
acceptance of securities by the Trust must comply with the
applicable laws of certain states.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their
business addresses and principal occupations during the past five
years are:
POSITION
WITH THE BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics Research
60 Concord Street Corp. (instruments and
Wilmington, MA 01887 controls); Director, Burr-
Age: 73 Brown Corp. (operational
amplifiers); Director,
Metritage Incorporated
(level measuring
instruments); Trustee of
Mackenzie Series Trust
(1992-1997).
Paul H. Broyhill Trustee Chairman, BMC Fund, Inc.
800 Hickory Blvd. (1983-present); Chairman,
Golfview Park-Box 500 Broyhill Family Foundation,
Lenoir, NC 28645 Inc. (1983-Present);
Age: 73 Chairman and President,
Broyhill Investments, Inc.
(1983-present); Chairman,
Broyhill Timber Resources
(1983-present); Management
of a personal portfolio of
fixed-income and equity
investments (1983-present);
Trustee of Mackenzie Series
Trust (1988-1997); Director
of The Mackenzie Funds Inc.
(1988-1995).
Stanley Channick Trustee President and Chief
11 Bala Avenue Executive Officer, The
Bala Cynwyd, PA 19004 Whitestone Corporation
Age: 73 (insurance agency);
Chairman, Scott Management
Company (administrative
services for insurance
companies); President, The
Channick Group (consultants
to insurance companies and
national trade
associations); Trustee of
Mackenzie Series Trust
(1994-1997); Director of
The Mackenzie Funds Inc.
(1994-1995).
Frank W. DeFriece, Jr. Trustee Director, Manager and Vice
The Landmark Centre President, Director and
113 Landmark Lane, Fund Manager, Massengill-
Suite B DeFriece Foundation
Bristol, TN 37620-2285 (charitable organization)
Age: 76 (1950-present); Trustee and
Vice Chairman, East
Tennessee Public
Communications Corp. (WSJK-
TV) (1984-present); Trustee
of Mackenzie Series Trust
(1985-1997); Director of
The Mackenzie Funds Inc.
(1987-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of
Lyman Laboratory Physics, Harvard
of Physics University (1974-present);
Harvard University Trustee of Mackenzie Series
Cambridge, MA 02138 Trust (1994-1997).
Age: 71
Michael G. Landry Trustee President, Chief Executive
700 South Federal Hwy. and Officer and Director of
Suite 300 Chairman Mackenzie Investment
Raton, FL 33432 Management Inc. (1987-
Age: 50 present); President,
[*Deemed to be an Director and Chairman of
"interested person" Ivy Management Inc. (1992-
of the Trust, as present); Chairman and
defined under the Director of Ivy Mackenzie
1940 Act.] Services Corp.(1993-
present); Chairman and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Director and
President of Ivy Mackenzie
Distributors, Inc. (1993-
1994); Director and
President of The Mackenzie
Funds Inc. (1987-1995);
Trustee of Mackenzie Series
Trust (1987-1997);
President of Mackenzie
Series Trust (1987-1996);
Chairman of Mackenzie
Series Trust (1996-
present).
Joseph G. Rosenthal Trustee Chartered Accountant
110 Jardin Drive (1958-present); Trustee of
Unit #12 Mackenzie Series Trust
Concord, Ontario Canada (1985-1997); Director of
L4K 2T7 The Mackenzie Funds Inc.
Age: 62 (1987-1995).
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 73 Boston Ballet; Director,
Boston Children's Museum;
Director, Brimmer and May
School.
J. Brendan Swan Trustee President, Airspray
4701 North Federal Hwy. International, Inc.;
Suite 465 Joint Managing Director,
Pompano Beach, FL 33064 Airspray International
Age: 67 B.V. (an environmentally
sensitive packaging
company); Director of
Polyglass LTD.; Director,
The Mackenzie Funds Inc.
(1992-1995); Trustee of
Mackenzie Series Trust
(1992-1997).
Keith J. Carlson Trustee Senior Vice President of
700 South Federal Hwy. and Mackenzie Investment
Suite 300 President Management, Inc. (1996
Boca Raton, FL 33432 -present); Senior Vice
Age: 40 President and Director of
[*Deemed to be an Mackenzie Investment
"interested person" Management, Inc. (1994
of the Trust, as -1996); Senior Vice
defined under the President and Treasurer of
1940 Act.] Mackenzie Investment
Management, Inc. (1989-
1994); Senior Vice
President and Director of
Ivy Management Inc. (1994-
present); Senior Vice
President, Treasurer and
Director of Ivy Management
Inc. (1992-1994); Vice
President of The Mackenzie
Funds Inc. (1987-1995);
Senior Vice President and
Director, Ivy Mackenzie
Services Corp. (1996-
present); President and
Director of Ivy Mackenzie
Services Corp. (1993-1996);
Trustee and President of
Mackenzie Series Trust
(1996-1997); Vice President
of Mackenzie Series Trust
(1994-1996); Treasurer of
Mackenzie Series Trust
(1985-1994); President,
Chief Executive Officer and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Executive Vice
President and Director of
Ivy Mackenzie Distributors,
Inc. (1993-1994).
C. William Ferris Secretary/ Senior Vice President,
700 South Federal Hwy. Treasurer Chief Financial Officer
Suite 300 and Secretary/Treasurer
Boca Raton, FL 33432 of Mackenzie Investment
Age: 52 Management Inc. (1995-
present); Senior Vice
President, Finance and
Administration/Compliance
Officer of Mackenzie
Investment Management Inc.
(1989-1994); Senior Vice
President, Secretary/
Treasurer and Clerk of Ivy
Management Inc. (1994-
present); Vice President,
Finance/Administration and
Compliance Officer of Ivy
Management Inc. (1992-
1994); Senior Vice
President, Secretary/
Treasurer and Director of
Ivy Mackenzie Distributors,
Inc. (1994-present);
Secretary/Treasurer and
Director of Ivy Mackenzie
Distributors, Inc. (1993-
1994); President and
Director of Ivy Mackenzie
Services Corp. (1996-
present); Secretary/
Treasurer and Director of
Ivy Mackenzie Services
Corp. (1993-1996);
Secretary/Treasurer of The
Mackenzie Funds Inc. (1993-
1995); Secretary/Treasurer
of Mackenzie Series Trust
(1994-1997).
James W. Broadfoot Vice Executive Vice President,
700 South Federal Hwy. President Ivy Management Inc. (1996-
Suite 300 present); Senior Vice
Boca Raton, FL 33432 President, Ivy Management,
Age: 54 Inc. (1992-1996); Director
and Senior Vice President,
Mackenzie Investment
Management Inc. (1995-
present); Senior Vice
President, Mackenzie
Investment Management Inc.
(1990-1995).
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI
Employees of IMI are permitted to make personal securities
transactions, subject to the requirements and restrictions set
forth in IMI's Code of Ethics. The Code of Ethics is designed to
identify and address certain conflicts of interest between
personal investment activities and the interests of investment
advisory clients such as the Fund. Among other things, the Code
of Ethics, which generally complies with standards recommended by
the Investment Company Institute's Advisory Group on Personal
Investing, prohibits certain types of transactions absent prior
approval, applies to portfolio managers, traders, research
analysts and others involved in the investment advisory process,
and imposes time periods during which personal transactions may
not be made in certain securities, and requires the submission of
duplicate broker confirmations and monthly reporting of
securities transactions. Exceptions to these and other
provisions of the Code of Ethics may be granted in particular
circumstances after review by appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1996)
TOTAL
PENSION OR COMPENSA-
RETIREMENT TION FROM
BENEFITS ESTIMATED TRUST AND
AGGREGATE ACCRUED AS ANNUAL FUND COM-
COMPENSA- PART OF BENEFITS PLEX PAID
NAME, TION FUND UPON TO
POSITION FROM TRUST EXPENSES RETIREMENT TRUSTEES
John S. $7,419 N/A N/A $10,000
Anderegg, Jr.
(Trustee)
Paul H. $7,419 N/A N/A $10,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson[**]
(Trustee and
President)
Stanley $4,949 N/A N/A $10,000
Channick[*]
(Trustee)
Frank W. $7,419 N/A N/A $10,000
DeFriece, Jr.
(Trustee)
Roy J. $7,419 N/A N/A $10,000
Glauber[*]
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman of
the Board)
Joseph G. $7,419 N/A N/A $10,000
Rosenthal
(Trustee)
Richard N. $10,000 N/A N/A $10,000
Silverman
(Trustee)
J. Brendan $7,419 N/A N/A $10,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/Treasurer)
[*] Appointed as a Trustee of the Trust at a meeting of the
Board held on February 10, 1996.
[**] Appointed as a Trustee of the Trust at a meeting of the
Board held on December 7, 1996.
As of October 20, 1997, 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 the
Funds. No Advisor Class shares had been issued as of that date.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment advisory
services to each Fund (other than Ivy Canada Fund and Ivy Global
Natural Resources Fund) pursuant to a Business Management and
Investment Advisory Agreement (the "Agreement"). IMI provides
business management services to Ivy Canada Fund and Ivy Global
Natural Resources Fund pursuant to a Business Management
Agreement (the "Management Agreement"). The Agreement (or the
Management Agreement, in the case of Ivy Canada Fund and Ivy
Global Natural Resources Fund) was approved (i) by the sole
shareholder of Ivy China Region Fund on October 23, 1993, (ii) by
the sole shareholder of each of Ivy Latin America Strategy Fund
and Ivy New Century Fund on October 28, 1994, (iii) by the sole
shareholder of each of Ivy Global Fund and Ivy Canada Fund on
January 27, 1995, (iv) by the sole shareholder of Ivy Global
Science & Technology Fund on July 16, 1996, (v) by the sole
shareholder of each of Ivy Asia Pacific Fund, Ivy Global Natural
Resources Fund and Ivy International Small Companies Fund on
December 13, 1996, and (vi) by the sole shareholder of each of
Ivy International Fund II and Ivy Pan-Europe Fund on April 30,
1997. Prior to shareholder approval, the Agreement (or the
Management Agreement, in the case of Ivy Canada Fund and Ivy
Global Natural Resources Fund) was approved 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 or in any related agreement (the "Independent
Trustees")) (i) on August 23, 1993 with respect to Ivy China
Region Fund, (ii) on September 17, 1994 with respect to Ivy Latin
America Strategy Fund and Ivy New Century Fund, (iii) on
September 29, 1994 with respect to each of Ivy Canada Fund and
Ivy Global Natural Resources Fund, (iv) on June 8, 1996 with
respect to Ivy Global Science & Technology Fund, (v) on December
7, 1996 with respect to each of Ivy Asia Pacific Fund, Ivy Global
Natural Resources Fund and Ivy International Small Companies
Fund, (vi) on February 8, 1997 with respect to Ivy Pan-Europe
Fund, and (vii) on April 29, 1997 with respect to Ivy
International Fund II.
Until January 31, 1995 MIMI served as the manager and
investment adviser to Ivy Global Fund and as manager to Ivy
Canada Fund, which were then series of The Mackenzie Funds Inc.
(the "Company"). On January 31, 1995, MIMI's interest in the
Agreement (in the case of Ivy Global Fund) and in the Management
Agreement (in the case of 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. MIMI, a
Delaware corporation, has approximately 10% of its outstanding
common stock listed for trading on the TSE. MIMI is a subsidiary
of MFC, 150 Bloor Street West, Toronto, Ontario, Canada, a public
corporation organized under the laws of Ontario and registered in
Ontario as a mutual fund dealer whose shares are listed for
trading on the TSE. MFC provides investment advisory services to
Ivy Canada Fund and Ivy Global Natural Resources Fund pursuant to
an Investment Advisory Agreement (the "MFC Agreement"). The MFC
Agreement was approved (i) by the sole shareholder of Ivy Canada
Fund on January 27, 1995 and (ii) by the sole shareholder of Ivy
Global Natural Resources Fund on December 13, 1996. Prior to
shareholder approval, the MFC Agreement was approved by the Board
(including a majority of Independent Trustees) (i) on September
29, 1994 with respect to Ivy Canada Fund and (ii) on December 7,
1996 with respect to Ivy Global Natural Resources Fund.
IMI currently acts as manager and investment adviser to the
following additional investment companies registered under the
1940 Act: Ivy Growth Fund, Ivy Emerging Growth Fund, Ivy Growth
with Income Fund, Ivy Bond Fund, Ivy International Bond Fund and
Ivy Money Market Fund.
The Agreement obligates IMI to make investments for the
accounts of each Fund (except Ivy Canada Fund and Ivy Global
Natural Resources 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 each of Ivy Canada Fund and Ivy Global Natural
Resources Fund, in accordance with its best judgment and within
the investment objectives and restrictions set forth in the
Prospectus with respect to each of Ivy Canada Fund and Ivy Global
Natural Resources 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 each of Ivy Canada Fund and
Ivy Global Natural Resources 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 and Ivy Global Natural Resources 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 each of Ivy Canada Fund and Ivy Global Natural
Resources Fund is operated in compliance with each such 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 net
assets, reduced to 0.75% on average net assets over $500 million.
Each of the other Funds (except Ivy Canada Fund and Ivy Global
Natural Resources Fund) pays IMI a monthly fee for providing
business management and investment advisory serves at an annual
rate of 1.00% of each of the Fund's average net assets. Ivy
Canada Fund and Ivy Global Natural Resources Fund each pays IMI a
monthly fee for providing business management services at an
annual rate of 0.50% of each such Fund's average net assets.
For advisory services, Ivy Canada Fund and Ivy Global
Natural Resources Fund each pays MFC a monthly fee at an annual
rate of 0.35% and 0.50%, respectively, of the average net assets
of each such Fund. For the fiscal year ended June 30, 1994, for
the six-month period ended December 31, 1994 and for the fiscal
years ended December 31, 1995 and 1996, Ivy Canada Fund paid MFC
fees of $120,495, $54,763, $67,229 and $65,289, respectively.
During the fiscal years ended December 31, 1994, 1995 and
1996, Ivy China Region Fund paid IMI $193,875, $200,605 and
$233,804 respectively (of which IMI reimbursed $1,036, $0 and $0,
respectively, pursuant to required expense limitations and of
which IMI reimbursed $106,631, $106,085 and $65,675,
respectively, pursuant to voluntary expense limitations).
During the fiscal year ended June 30, 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 $172,136 and $78,234, respectively, from Ivy Canada Fund and
$155,540 and $107,966, respectively, (of which MIMI reimbursed
$34,779 and $15,264, respectively, pursuant to voluntary expense
limitations) from Ivy Global Fund. During the fiscal years ended
December 31, 1995 and 1996, IMI received fees of $96,041 and
$93,270, respectively, from Ivy Canada Fund (of which IMI
reimbursed $63,466 and $0, respectively, pursuant to required
expense limitations) and $239,963 and $301,433, respectively,
from Ivy Global Fund (of which IMI reimbursed $62,242 and $0
pursuant to voluntary expense limitations).
During the period from November 1, 1994 (commencement of
operations) to December 31, 1994 and during the fiscal years
ended December 31, 1995 and 1996, Ivy Latin America Strategy Fund
paid IMI fees of $1,006, $95,380 and $42,550, respectively (of
which IMI reimbursed $13,333, $93,340 and $0, respectively,
pursuant to required expense limitations and of which IMI
reimbursed $523 and $2,040 and $99,630, respectively, pursuant to
voluntary expense limitations) and Ivy New Century Fund paid IMI
fees of $912, $91,226 and $109,125, respectively (of which IMI
reimbursed $16,415, $87,348 and $0, respectively, pursuant to
required expense limitations and of which IMI reimbursed $512,
$3,878 and $67,600, respectively, pursuant to voluntary expense
limitations).
During the period from July 22, 1996 (commencement of
operations) to December 31, 1996, Ivy Global Science & Technology
Fund paid IMI fees of $20,965 (of which IMI reimbursed $14,813
pursuant to voluntary expense limitations).
Advisory fee information is not yet available for Ivy Asia
Pacific Fund, Ivy Global Natural Resources Fund and Ivy
International Small Companies Fund, which commenced operations on
January 1, 1997, or for Ivy International Fund II or Ivy Pan-
Europe Fund, which commenced operations on May 13, 1997.
Under the Agreement (or the Management Agreement and the
Advisory Agreement with respect to Ivy Canada Fund and Ivy Global
Natural Resources 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.
IMI currently limits each Fund's (with the exception of Ivy
Canada Fund) 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% (1.50% in the case of Ivy International Fund
II) of the Fund's average net assets, which may lower that Fund's
expenses and increase its yield. Each Fund's expense limitation
may be terminated or revised at any time, at which time its
expenses may increase and its yield may be reduced.
On September 12-13, 1997, the Board (including a majority of
the Independent Trustees) (i) approved the continuance of the
Agreement with respect to Ivy China Region Fund, Ivy Global Fund,
Ivy Latin America Strategy Fund and Ivy New Century Fund and (ii)
approved the continuance of the Management Agreement for Ivy
Canada Fund. The initial term of the Agreement (or the
Management Agreement with respect to Ivy Global Natural Resources
Fund) between IMI and each of Ivy Asia Pacific Fund, Ivy Global
Natural Resources Fund and Ivy International Small Companies
Fund, which commenced on January 1, 1997, will run for a period
of two years from the date of commencement. The initial term of
the Agreement between IMI and each of Ivy International Fund II
and Ivy Pan-Europe Fund, which commenced on May 13, 1997, will
run for a period of two years from the date of commencement.
Each Agreement (or Management Agreement, with respect to Ivy
Canada Fund and Ivy Global Natural Resources 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
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 (or Management Agreement with respect to Ivy
Canada Fund and Ivy Global Natural Resources 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.
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 on August 25, 1996. At a meeting held on February 8, 1997,
the Board approved the Distribution Agreement on behalf of Ivy
Pan-Europe Fund. At a meeting held on April 29, 1997, the Board
approved the Distribution Agreement on behalf of Ivy
International Fund II. 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.
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.
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.
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 and Ivy Global Natural Resources 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.
If a Distribution Agreement is terminated (or not renewed)
with respect to any of the Ivy funds (or class of shares
thereof), each may continue in effect with respect to any other
fund (or Class of shares thereof) as to which it has not been
terminated (or have 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 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. At a
meeting held on December 7, 1996, the Board last approved the
Rule 18f-3 plan on behalf of each Fund. At a meeting held on
February 8, 1997, the Board adopted the Rule 18f-3 plan on behalf
of Ivy Pan-Europe Fund. At a meeting held on April 29, 1997, the
Board adopted the Rule 18f-3 plan on behalf of Ivy International
Fund II. 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 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.
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown
Brothers Harriman & Co. (the "Custodian"), a private bank and
member of the principal securities exchanges, located at 40 Water
Street, Boston, Massachusetts 02109, maintains custody of the
assets of each Fund held in the United States. Rules adopted
under the 1940 Act permit the Trust to maintain its foreign
securities (Canadian securities, with respect to Ivy Canada Fund
and Ivy Global Natural Resources 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 and Ivy Global Natural Resources
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 and Ivy
Global Natural Resources Fund's non-Canadian foreign securities).
Similarly, pursuant to those rules, Ivy Canada Fund's and Ivy
Global Natural Resources 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 and Ivy Global Natural Resources 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 year ended June 30, 1994, for the six-month
period ended December 31, 1994 and for the fiscal years ended
December 31, 1995 and 1996, Ivy Canada Fund paid MIMI $32,492,
$16,442, $32,399 and 33,091, respectively, under the agreement.
During the fiscal years ended December 31, 1994, 1995 and 1996,
Ivy China Region Fund paid MIMI $32,137, $32,653 and $35,038,
respectively, under the agreement. For the fiscal year ended
June 30, 1994, for the six-month period ended December 31, 1994
and for the fiscal years ended December 31, 1995 and 1996, Ivy
Global Fund paid MIMI $31,448, $15,957, $32,982 and 34,802,
respectively, under the agreement. During the period from July
22, 1996 (commencement of operations) to December 31, 1996, Ivy
Global Science & Technology Fund paid MIMI $9,171 under the
agreement. 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. During the period from November 1, 1994
(commencement of operations) to December 31, 1994 and during the
fiscal years ended December 31, 1995 and 1996, Ivy Latin America
Strategy Fund paid MIMI $2,505, $15,094 and $16,731,
respectively, under the agreement. During the period from
November 1, 1994 (commencement of operations) to December 31,
1994 and during the fiscal years ended December 31, 1995 and
1996, Ivy New Century Fund paid MIMI $2,505, $15,112 and $25,951,
respectively, under the agreement.
No payments were made by Ivy Asia Pacific Fund, Ivy Global
Natural Resources Fund and Ivy International Small Companies
Fund, which commenced operations on January 1, 1997, or Ivy
International Fund II and Ivy Pan-Europe Fund, which commenced
operations on May 13, 1997.
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. Under the Agreement, each Fund
pays a monthly fee at an annual rate of $20.00 per open Advisor
Class account. In addition, each Fund pays a monthly fee at an
annual rate of $4.48 per account that is closed plus certain out-
of-pocket expenses. Certain broker-dealers that maintain
shareholder accounts with 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 pays MIMI a monthly
fee at the annual rate of .10% of the average daily net asset
value of its Advisor Class shares.
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 Funds' tax
returns.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Trust consists of an unlimited
number of shares of beneficial interest (no par value per share).
When issued, shares of each class of 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 eighteen series, each of which represents a fund.
The Trustees have further authorized the issuance of Classes A,
B, C, and the Advisor Class for Ivy Asia Pacific Fund, Ivy Bond
Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Emerging Growth
Fund, Ivy Global Fund, Ivy Global Natural Resources Fund, Ivy
Global Science & Technology Fund, Ivy Growth Fund, Ivy Growth
with Income Fund, Ivy International Fund, Ivy International Fund
II, Ivy International Bond Fund, Ivy Latin America Strategy Fund,
Ivy Money Market Fund, Ivy New Century Fund and Ivy Pan-Europe
Fund, as well as Class I shares for Ivy Bond Fund, Ivy Global
Science & Technology Fund, Ivy International Fund II, Ivy
International Fund and Ivy International Small Companies Fund,
and Class D for Ivy Growth with Income Fund. [FN][The Class D
shares of Ivy Growth with Income Fund were initially issued as
"Ivy Growth with Income Fund -- Class C" to shareholders of
Mackenzie Growth & Income Fund, a former series of the Company,
in connection with the reorganization between that fund and Ivy
Growth with Income Fund and not offered for sale to the public.
On February 29, 1996, the Trustees of the Trust resolved by
written consent to establish a new class of shares designated as
"Class C" for all Ivy Fund portfolios and to redesignate the
shares of beneficial interest of "Ivy Growth with Income Fund--
Class C" as shares of beneficial interest of "Ivy Growth with
Income Fund--Class D," which establishment and redesignation,
respectively, became effective on April 30, 1996. The voting,
dividend, liquidation and other rights, preferences, powers,
restrictions, limitations, qualifications, terms and conditions
of the Class D shares of Ivy Growth with Income Fund, as set
forth in Ivy Fund's Declaration of Trust, as amended from time to
time, will not be changed by this redesignation.]
Shareholders have the right to vote for the election of
Trustees of the Trust and on any and all matters on which they
may be entitled to vote by law or by the provisions of the
Trust's By-Laws. The Trust is not required to hold a regular
annual meeting of shareholders, and it does not intend to do so.
Shares of each class of each Fund entitle their holders to one
vote per share (with proportionate voting for fractional shares).
Shareholders of a Fund are entitled to vote alone on matters that
only affect that Fund. All classes of shares of a Fund will vote
together, except with respect to the distribution plan applicable
to the Fund's Class A, Class B or Class C shares or when a class
vote is required by the 1940 Act. On matters relating to all
funds of the Trust, but affecting 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 September 30, 1997, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class A shares, except that of the outstanding
Class A shares of Ivy Asia Pacific Fund, Mackenzie Investment
Management Inc., 700 S. Federal Hwy., Suite 300, Boca Raton, FL
33432, owned of record 12,933.551 shares (28.28%), Merill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, FL 32246, owned of record 3,172.000 shares (6.93%),
and Wedbush Morgan Securities, 1000 Wilshire Blvd., Los Angeles,
CA 91208, owned of record 2,673.000 shares (5.84%); and except
that of the outstanding Class A shares of Ivy China Region Fund,
Resources Trust Company, P.O. Box 3865, Englewood, CO 80155-3865,
owned of record 231,878.862 shares (12.98%); and except that of
the outstanding Class A shares of Ivy Global Science & Technology
Fund, Donaldson Lufkin Jenrette Securities Corporation, Inc.,
P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
148,724.187 shares (20.74%); and except that at the outstanding
Class A shares of Ivy International Fund, Charles Schwab & Co.,
Inc., 101 Montgomery Street, San Francisco, CA 94104, owned of
record 15,854,513.288 shares (37.05%), and Merrill Lynch Pierce
Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, FL 32246, owned of record 2,152,658.000 shares
(5.03%);and except that of the outstanding Class A shares of Ivy
International Fund II, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive East, 3rd Floor, Jacksonville, FL 32246, owned of
record 386,950.000 shares (27.84%), and Charles Schwab & Co.
Inc., 101 Montgomery Street, San Francisco, CA 94104, owned of
record 177,531.815 shares (12.77%); and except that of the
outstanding Class A shares of Ivy International Small Companies
Fund, Donaldson Lufkin Jenrette Securities Corporation, Inc.,
P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
26,599.450 shares (22.27%), Mackenzie Investment Management Inc.,
700 S. Federal Hwy., Suite 300, Boca Raton, FL,33432,owned of
record 10,001.000 shares (8.37%), and Merrill Lynch Pierce Fenner
& Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville, FL
32246, owned of record 6,484.000 shares (5.43%); and except that
of the outstanding Class A shares of Ivy Latin America Strategy
Fund, Donaldson Lufkin Jenrette Securities Corporation, Inc.,
P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
87,948.203 shares (15.25%), and Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville, FL
32246, owned of record 58,401.000 shares (10.13%); and except
that of the outstanding Class A shares of Ivy New Century Fund,
Charles Schwab & Co. Inc., 101 Montgomery Street, San Francisco,
CA 94104, owned of record 94,236.910 shares (6.28%); and except
that of the outstanding Class A shares of Ivy Pan-Europe Fund,
Mackenzie Investment Management Inc., 700 S. Federal Hwy. Suite
300, Boca Raton, FL 33432, owned of record 15,001.000 shares
(73.47%), and Resources Trust Company, P.O. Box 5900, Denver, CO
80217, owned of record 4,428.698 shares (21.69%).
To the knowledge of the Trust, as of September 30, 1997, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class B shares, except that of the outstanding
Class B shares of Ivy Asia Pacific Fund, Merrill Lynch Pierce
Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, FL 32246, owned of record 44,345.000 shares
(69.58%), and Edward M. Kern & Gayla D. Kern TTEES, 2290 Montagne
Drive, Florissant, MO 63033, owned of record 3,803.298 shares
(5.96%); and except that of the outstanding Class B shares of Ivy
Bond Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive East, 3rd Floor, Jacksonville, FL 32246, owned of record
179,994.520 shares (17.47%); 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, FL
32246, owned of record 31,340.000 shares (14.39%), and JW Charles
Clearing Corp. FBO Joseph Zerger IRA, 1550 E. Oakland Park Blvd.,
Fort Lauderdale, FL 33334-4425, owned of record 14,588.638 shares
(6.70%); and except that of the outstanding Class B shares of Ivy
China Region Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive East, 3rd Floor, Jacksonville, FL 32246, owned of
record 113,303.000 shares (11.01%); and except that of the
outstanding Class B shares of Ivy Emerging Growth Fund, Merrill
Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd
Floor, Jacksonville, FL 32246, owned of record 315,393.000 shares
(17.72%); and except that of the outstanding Class B shares of
Ivy Global Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive East, 3rd Floor, Jacksonville, FL 32246, owned of
record 79,574.000 shares (8.65%); and except that of the
outstanding Class B shares of Ivy Global Natural Resources Fund,
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East,
3rd Floor, Jacksonville, FL 32246, owned of record 97,278.000
shares (38.06%); and except that of the outstanding Class B
shares of Ivy Growth Fund, IBT CUST IRA FBO Glenn E. Pattyson,
P.O. Box 11, Terrace Bay, Ontario, Canada, POT 2W0, owned of
record 16,058.530 shares (7.17%); and except that of the
outstanding Class B shares of Ivy International Fund, Merrill
Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd
Floor, Jacksonville, FL 32246, owned of record 6,824,811.000
shares (46.42%); and except that of the outstanding Class B
shares of Ivy International Fund II, Merrill Lynch Pierce Fenner
& Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville, FL
32246, owned of record 2,978,451.050 shares (65.23%); and except
that of the outstanding Class B shares of Ivy International Small
Companies Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive East, 3rd Floor, Jacksonville, FL 32246, owned of
record 27,529.000 shares (28.18%), and Painewebber FBO Rockingham
Newspapers, Inc., 1050 Wildcrest Drive, Houston, TX 77042, owned
of record 11,451.000 shares (11.72%); and except that of the
outstanding Class B shares of Ivy Latin America Strategy Fund,
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East,
3rd Floor, Jacksonville, FL 32246, owned of record 122,615.000
shares (33.98%), and Donaldson Lufkin Jenrette Securities
Corporation Inc., P.O. Box 2052, Jersey City, NJ 07303, owned of
record 24,270.747 shares (6.72%); and except that of the
outstanding Class B shares of Ivy Money Market Fund, Molly
Kaufman, TTEE, 19987 Moran Lane, Saratoga, CA 95070, owned of
record 278,684.220 shares (12.89%), Painewebber, 2030 Fransworth
Drive, Nashville, TN 37205, owned of record 126,516.230 shares
(5.85%), and Smith Barney, Inc., 388 Greenwich Street, New York,
NY 10013, owned of record 121,470.440 shares (5.62%); 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, FL 32246, owned of record 442,486.000
shares (34.38%); and except that of the outstanding Class B
shares of Ivy Pan-Europe Fund, Charles Kraft & Florence Kraft
TTEES, 11605 NE 36th Court, Vancouver, WA 98686, owned of record
616.740 shares (69.78%), and Rose M. Novak & Martin T Novak, 2009
Ardin Drive, Jeffersonville, PA 19403, owned of record 267.058
shares (30.21%).
To the knowledge of the Trust, as of September 30, 1997, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class C shares, except that of the outstanding
Class C shares of Ivy Asia Pacific Fund, The Ohio Company FBO
Mansbach, G., 155 East Broad Street, Columbus, KY 41105, owned of
record 24,390.244 shares (80.02%), and Merrill Lynch Pierce
Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, FL 32246, owned of record 2,479.000 shares (8.19%);
and except that of the outstanding Class C shares of Ivy Bond
Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive
East, 3rd Floor, Jacksonville, FL 32246, owned of record
131,013.000 shares (47.60%), and CTY Carbonic Sales and SVC,
Inc., Louis Morgan, P.O. Box 25842, Oklahoma City, OK 73125,
owned of record 18,618.307 shares (6.76%); and except that of the
outstanding Class C shares of Ivy Canada Fund, Francisco
Rodriguez Carreras & Louis Rodriguez Aguilar, c/o Zarlene
Imports, 1550 E. Oakland Park Blvd., Fort Lauderdale, FL 33334-
4425, owned of record 30,731.72 shares (54.11%), Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, FL 32246, owned of record 12,181.000 shares
(21.45%), and JW Charles Clearing Corp. FBO Giancarlo Dimizio
IRA, 4900 N. Ocean Blvd, #1107, Fort Lauderdale, FL 33308, owned
of record 3,737.544 shares (6.58%); and except that of the
outstanding Class C shares of Ivy China Region Fund, Merrill
Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd
Floor, Jacksonville, FL 32246, owned of record 33,344.000 shares
(28.77%), and The Ohio Company FBO Gerald Mansbach, 155 E. Broad
Street, Columbus, OH 43215, owned of record 26,790.606 shares
(23.12%); and except that of the outstanding Class C shares of
Ivy Emerging Growth Fund, Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive East, 3rd Floor, Jacksonville, FL 32246,
owned of record 113,748.000 shares (31.38%); and except that of
the outstanding Class C shares of Ivy Global Fund, The Ohio
Company FBO, Mansbach G, 155 E. Broad Street, Columbus, OH 43215,
owned of record 19,409.938 shares (29.78%), and Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, FL 32246, owned of record 12,345.000 shares
(18.94%), Painewebber, FBO Regina J. Nolan, 1021 St. Gregory
Street, Cincinnati, OH 45202, owned of record 4,629.630 shares
(7.10%), Linda Powers Kunze and Tod John Kunze, 10214 Old
Orchard, Brecksville, OH 44141, owned of record 3,742.515 shares
(5.74%), and Smith Barney,Inc., 388 Greenwich Street, New York,
NY 10013, owned of record 3,371.185 shares (5.17%); and except
that of the outstanding Class C shares of Ivy Global Natural
Resources Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer
Lake Drive East, 3rd Floor, Jacksonville, FL 32246, owned of
record 4,504.000 shares (46.08%), Painewebber FBO John L.
Hammons, P.O. Box 3321, Weehawken, NJ 07087-8154, owned of record
1,014.370 shares (10.37%), and Anthony L. Bassano & Marie E.
Bassano, 8934 Bari Court, Port Richey, FL 34668, owned of record
922.509 shares (9.43%), and The Ohio Company, FBO H.M. Miller,
155 E. Broad Street, Columbus, OH 45429, owned of record 516.796
shares (5.28%); and except that of the outstanding Class C shares
of Ivy Global Science & Technology Fund, Merrill Lynch Pierce
Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, FL 32246, owned of record 30,407.000 shares
(8.45%); and except that of the outstanding Class C shares of Ivy
Growth Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive East, 3rd Floor, Jacksonville, FL 32246, owned of record
2,484.000 shares (36.29%), Rafter L. Cattle Co., HCR 77 #441,
Uvalde, TX 78801, owned of record 2,460.130 shares (35.94%),
Martin S. Sawyer & Ruth C. Sawyer TTEE, 2301 Fremont Drive,
Sarasota, FL 34238-3016, owned of record 506.023 shares (7.39%),
and Painewebber FBO William G. Thomas, P.O. Box 3321, Weehawken,
NJ 07087-8154, owned of record 389.000 shares (5.68%); and except
that of the outstanding Class C shares of Ivy Growth With Income
Fund, Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive
East, 3rd Floor, Jacksonville, FL 32246, owned of record
3,389.000 shares (16.38%), Anthony L. Bassano & Marie E. Bassano,
8934 Bari Court, Port Richie, FL 34668, owned of record 2,842.845
shares (13.74%), IBT CUST IRA FBO Vytautas Snieckus, 1250 E.
276th Street, Euclid, OH 44132, owned of record 2,349.000 shares
(11.35%), IBT CUST 403(B) FBO Carol E. Greivell, 8629 N. Servite
#109, Milwaukee, WI 53223, owned of record 1,872.713 shares
(9.05%), Donaldson Lufkin Jenrette Securities Corporation Inc.,
P.O. Box 2052, Jersey City, NJ 07303-9998, owned of record
1,476.436 shares (7.13%), IBT CUST 403(B) FBO Helen Jankowski,
41993 VIA Renate, Temecula, CA 92591, owned of record 1,253.543
shares (6.05%), and Marsha L. Yarbrough, RT 2 Box 548, West
Blocton, AL 36184, owned of record 1,238.917 shares (5.98%); and
except that of the outstanding Class C shares of Ivy
International Fund, Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive East, 3rd Floor, Jacksonville, FL 32246, owned of
record 2,961,991.000 shares (65.74%); and except that of the
outstanding Class C shares of Ivy International Fund II, Merrill
Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd
Floor, Jacksonville, FL 32246, owned of record 1,906,033.000
shares (69.71%); and except that of the outstanding Class C
shares of Ivy International Small Companies Fund, Merrill Lynch
Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, FL 32246, owned of record 130,453.000 shares
(71.53%), and The Ohio Company, FBO Gerald Mansbach, 155 E. Broad
Street, Columbus, OH 43215, owned of record 24,727.992 shares
(13.55%); and except that of the outstanding Class C shares of
Ivy Latin America Strategy Fund, Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville, FL
32246, owned of record 35,640.000 shares (67.86%), and Donaldson
Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052,
Jersey City, NJ 07303, owned of record 2,956.167 shares (5.62%);
and except that of the outstanding Class C shares of Ivy Money
Market Fund, IBT CUST IRA FBO Randall Schlagel, 3619 Pauly Lane,
St. Bonifacious, MN 55375, owned of record 15,238.030 shares
(33.95%), IBT CUST IRA FBO David J. Esler, 160 Arrowhead #3,
Mukwonago, WI 53149, owned of record 8,015.010 shares (17.85%),
Lori K. Murphy, 2340 A. North 70th Street, Wauwatosa, WI 53213,
owned of record 6,331.460 shares (14.10%), Stanley M. Collum &
Linda F. Collum, 4817 Wolf Lane, Yukon, OK 73099, owned of record
3,737.310 shares (8.32%), Louisa Z. Bradley, 2500 N. Glade Suite
102, Bethany, OK 73009-4921, owned of record 3,028.920 shares
(6.74%), and Varghese Pallath & Susamma Pallath, 431 Wildrose
Avenue, Bergenfield, NJ 07621-3411, owned of record 2,585.900
shares (5.76%); and except that of the outstanding Class C shares
of Ivy New Century Fund, Merrill Lynch Pierce Fenner & Smith,
4800 Deer Lake Drive East, 3rd Floor, Jacksonville, FL 32246,
owned of record 114,395.000 shares (29.95%).
To the knowledge of the Trust, as of September 30, 1997, no
shareholder owned beneficially or of record 5% or more of any
Fund's outstanding Class I shares, except that of the outstanding
Class I shares of Ivy International Fund, The John E. Fetzer
Institute, Inc., 9292 W. KL Ave, Kalamazoo, MI 49009, owned of
record 446,603.062 shares (16.15%), Lynspen and Company, 420
North 20th Street, Birmingham, AL 35203, owned of record
324,765.135 shares (11.74%), State Street Bank TTEE FBO Allison
Engines, 200 Newport Ave, 7th Floor, North Quincy, MA 02171,
owned of record 283,870.900 shares (10.26%), Enele Co. FBO
Washington State Power Co., 1211 SW 5th Avenue, Suite 1900,
Portland, OR 97204, owned of record 226,137.319 shares (8.17%),
Vernat Company, P.O. Box 669, Rutland, VT 05702, owned of record
223,837.824 shares (8.09%), David & Co., P.O. Box 188,
Murfreesboro, TN 37133-0188, owned of record 172,479.335 shares
(6.23%), and S. Mark Taper Foundation, 12011 San Vicente Blvd.,
Suite 400, Los Angeles, CA 90049, owned of record 153,271.003
shares (5.54%).
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. However, because
the Prospectus pertains to more than one Fund, it is possible
that one of the Funds to which the Prospectus pertains might
become liable for any misstatement, inaccuracy, or incomplete
disclosure in the Prospectus concerning any other Fund to which
the Prospectus pertains.
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, Presidents' 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 Trust reserves the right 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 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.
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.
The Trust may redeem those Advisor Class accounts of
shareholders who have maintained an investment of less than
$10,000 in a Fund for a period of more than 12 months. All
Advisor Class accounts below that minimum will be redeemed
simultaneously when MIMI deems it advisable. The $10,000 balance
will be determined by actual dollar amounts invested by the
shareholder, unaffected by market fluctuations. The Trust will
notify any such shareholder by certified mail of its intention to
redeem such account, and the shareholder shall have 60 days from
the date of such letter to invest such additional sums as shall
raise the value of such account above that minimum. Should the
shareholder fail to forward such sum within 60 days of the date
of the Trust's letter of notification, the Trust will redeem the
shares held in such account and transmit the redemption in value
thereof to the shareholder. However, those shareholders who are
investing pursuant to the Automatic Investment Method will not be
redeemed automatically unless they have ceased making payments
pursuant to the plan for a period of at least six consecutive
months, and these shareholders will be given six-months' notice
by the Trust before such redemption. Shareholders in a qualified
retirement, pension or profit sharing plan who wish to avoid tax
consequences must "rollover" any sum so redeemed into another
qualified plan within 60 days. The Trustees of the Trust may
change the minimum account size.
If a shareholder has given authorization for telephonic
redemption privilege, shares can be redeemed and proceeds sent by
Federal wire to a single previously designated bank account.
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.
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) for taxable years
beginning before 1998, 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, as described below, 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.
Notwithstanding any of the foregoing, a Fund may recognize
gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if the Fund enters into a short
sale, offsetting notional principal contract, futures or forward
contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial
positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and
short sales) in stock, partnership interests, certain actively
traded trust instruments and certain debt instruments.
Constructive sale treatment of appreciated financial positions
does not apply to certain transactions closed in the 90-day
period ending with the 30th day after the close of a Fund's
taxable year, if certain conditions are met.
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.
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, the Fund itself
may be subject to a tax on a portion of the excess distribution,
whether or not the corresponding income is distributed by the
Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably
over the period during which 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. A Fund may elect to mark to market
its PFIC shares, resulting in the shares being treated as sold at
fair market value on the last business day of each taxable year.
Any resulting gain would be reported as ordinary income; any
resulting loss and any loss from an actual disposition of the
shares would be reported as ordinary loss to the extent of any
net gains reported in prior years. Under another election that
currently is available in some circumstances, 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.
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. Shareholders should be careful to
consider the tax implications of buying shares just prior to a
distribution. The price of shares purchased at this time may
reflect the amount of the forthcoming distribution. Those
purchasing just prior to a distribution will receive a
distribution which generally will be taxable to them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of his or her shares, a
shareholder will realize a taxable gain or loss depending upon
his or her basis in the shares. Such gain or loss will be
treated as capital gain or loss if the shares are capital assets
in the shareholder's hands and, if so, may be eligible for
reduced federal tax rates, 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, except in the case of certain electing individual
taxpayers who have limited creditable foreign taxes and no
foreign source income other than passive investment-type income,
a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or
her total foreign source taxable income. For this purpose, if 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.
Furthermore, the foreign tax credit is eliminated with respect to
foreign taxes withheld on dividends if the dividend-paying shares
of the shares of the Fund are held by the Fund or the
shareholder, as the case may be, for less than 16 days (46 days
in the case of preferred shares) during the 30-day period (90-day
period for preferred shares) beginning 15 days (45 days for
preferred shares) before the shares become ex-dividend.
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 taxable 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 Advisor
Class shares during the designated period. Standardized Return
quotations for the Funds 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%.
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").
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.
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
Directory of Investment Managers, New York Times, Newsweek, No
Load Fund Investor, No Load Fund* X, Oakland Tribune, Pension
World, Pensions and Investment Age, Personal Investor, Rugg and
Steele, Time, U.S. News and World Report, USA Today, The Wall
Street Journal, and Washington Post.
FINANCIAL STATEMENTS
The following financial information is incorporated by
reference into this SAI: (1) each Fund's Portfolio of
Investments as of December 31, 1996, Statement of Assets and
Liabilities as of December 31, 1996, Statement of Operations for
the fiscal year ended December 31, 1996 (for the period from July
22, 1996 (commencement of operations) to December 31, 1996 for
Ivy Global Science & Technology Fund), Statement of Changes in
Net Assets for the fiscal years ended December 31, 1996 and
December 31, 1995 (for the period from July 22, 1996
(commencement of operations) to December 31, 1996 for Ivy Global
Science & Technology Fund), Financial Highlights, Notes to
Financial Statements, and Report of Independent Accountants,
which are included in the Fund's December 31, 1996 Annual Report
to shareholders; (2) each Fund's Portfolio of Investments as of
June 30, 1997, Statement of Assets and Liabilities as of June 30,
1997, Statement of Operations for the six months ended June 30,
1997 (for the period from May 13, 1997 (commencement of
operations) through June 30, 1997 for both Ivy International Fund
II and Ivy Pan-Europe Fund), Financial Highlights and Notes to
Financial Statements, which are included in the Fund's June 30,
1997 Semi-Annual Reports to shareholders; (3) the Statement of
Assets and Liabilities for each of Ivy Asia Pacific Fund, Ivy
Global Natural Resources Fund and Ivy International Small
Companies Fund as of December 10, 1996 (and the Notes thereto);
(4) the Statement of Assets and Liabilities for each of Ivy
International Fund II and Ivy Pan-Europe Fund as of April 28,
1997 (and the Notes thereto); and (5) the Statements of Assets
and Liabilities as of September 30, 1997, the Statements of
Operations for the Period from May 13, 1997 (commencement of
operations) to September 30, 1997, the Statements of Changes in
Net Assets for the Period from May 13, 1997 (commencement of
operations) to September 30, 1997 for each of Ivy International
Fund II and Ivy Pan-Europe Fund (and the Notes thereto).
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994 Issue (Moody's
Investors Service, New York, 1994), and "Standard & Poor's
Municipal Ratings Handbook," October 1994 Issue (McGraw Hill, New
York, 1994).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's are judged
by Moody's to be of the best quality, carrying the smallest
degree of investment risk. Interest payments are protected by a
large or exceptionally stable margin and principal is secure.
Bonds rated Aa are judged by Moody's to be of high quality by all
standards. Aa bonds are rated lower than Aaa bonds because
margins of protection may not be as large as those of Aaa bonds,
or fluctuations of protective elements may be of greater
amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger than those applicable to
Aaa securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are considered as upper
medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Bonds rated Baa by Moody's are considered medium-grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other terms
of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest. Bonds which are
rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the highest
commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by management of obligations which may be present
or may arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the
relative strengths of these factors. The designation of Prime-1
indicates the highest quality repayment capacity of the rated
issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt rating is a
current assessment of the creditworthiness of an obligor with
respect to a specific obligation. The ratings are based on
current information furnished by the issuer or obtained by S&P
from other sources it considers reliable. The ratings described
below may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA by S&P is considered by S&P to be the highest
grade obligation. Capacity to pay interest and repay principal
is extremely strong. Debt rated AA is judged by S&P to have a
very strong capacity to pay interest and repay principal and
differs from the highest rated issues only in small degree. Debt
rated A by S&P has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Debt rated BBB by S&P is regarded by S&P as having an
adequate capacity to pay interest and repay principal. Although
such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating. Debt rated B has a greater vulnerability to default
but currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used
for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating. Debt rated CCC has a currently
identifiable vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an actual or
implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt
service payments are continued.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
having an original maturity of no more than 365 days.
Commercial paper rated A by S&P has the following
characteristics: (i) liquidity ratios are adequate to meet cash
requirements; (ii) long-term senior debt rating should be A or
better, although in some cases BBB credits may be allowed if
other factors outweigh the BBB; (iii) the issuer should have
access to at least one additional channel of borrowing; (iv)
basic earnings and cash flow should have an upward trend with
allowances made for unusual circumstances; and (v) typically the
issuer's industry should be well established and the issuer
should have a strong position within its industry and the
reliability and quality of management should be unquestioned.
Issues rated A are further referred to by use of numbers 1, 2 and
3 to denote relative strength within this highest classification.
For example, the A-1 designation indicates that the degree of
safety regarding timely payment of debt is strong.
Issues rated B are regarded as having only speculative
capacity for timely payment. The C rating is assigned to short-
term debt obligations with a doubtful capacity for payment.
APPENDIX B
SELECTED ECONOMIC AND MARKET DATA FOR
ASIA PACIFIC AND 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 six times the size of the United States.
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.
1996
GDP ($US POPULATION PER CAPITA
BILLIONS) (MILLIONS) GDP ($US)
--------- --------- ---------
Hong Kong 144.1 5.7 25,281
Korea 455.6 43.4 10,498
Singapore 81.5 2.7 30,185
Taiwan 237.7 20.6 11,539
Thailand 166.5 54.5 30,055
Malaysia 84.1 17.6 4,778
Indonesia 170.7 179.4 952
Philippines 74.1 60.6 1,223
China 672.4 1,160.04 580
China Region 2,086.7 1,544.54 1,351
USA 7,080.0 248.7 28,468
Source: International Marketing Data and Statistics, 21st Ed.
(Euromonitor 1997).
Total GDP for the China Region was about $2.1 billion in
1995, approximately twenty nine percent of the GDP of the United
States. Year over year growth in GDP for the China Region is
significant, averaging 14.13% for the five-year period 1991-1995
compared with only 5.10% for the United States for the same
period. The following tables show the annual change in GDP and
inflation, as measured by the Consumer Price Indexes (CPI), in
1991-1995 and the average for the five-year period 1991-1995.
CHANGE IN GROSS DOMESTIC PRODUCT
AVERAGE
1991 1992 1993 1994 1995 1991-95
----- ----- ----- ----- ------ -------
Hong Kong 14.76% 16.58% 15.17% 13.55% 9.33% 13.88%
Korea 20.16% 11.43% 11.13% 14.17% 15.18% 14.41%
Singapore 11.88% 7.12% 14.52% 14.04% 9.63% 11.44%
Taiwan 11.69% 10.95% 10.06% 3.14% 3.91% 7.95%
Thailand 14.97% 12.47% 11.89% 13.60% 15.21% 13.63%
Malaysia 11.85% 14.07% 10.32% 13.68% 13.83% 12.75%
Indonesia 16.29% 14.26% 26.89% 14.99% 1.01% 14.69%
Philippines 15.86% 8.30% 9.13% 14.84% 12.48% 12.12%
China 14.20% 18.97% 30.64% 39.58% 28.29% 26.34%
United States 3.63% 5.19% 5.37% 6.23% 5.07% 5.10%
Sources: International Marketing Data and Statistics, 21ST Ed.
(Euromonitor 1997).
CHANGE IN CONSUMER PRICE INDEXES
AVERAGE
1991 1992 1993 1994 1995 1991-95
----- ----- ----- ----- ----- -------
Hong Kong 11.6% 9.3% 8.6% 8.1% 8.7% 9.26%
Korea 9.7% 6.2% 4.8% 6.3% 4.5% 6.30%
Singapore 3.5% 2.3% 2.4% 3.0% 1.7% 2.58%
Taiwan 3.6% 4.5% 2.9% 4.5% 3.7% 3.84%
Thailand 5.7% 4.1% 3.6% 5.1% 7.3% 5.16%
Malaysia 4.4% 4.8% 3.4% 3.7% 5.3% 4.32%
Indonesia 9.2% 7.5% 9.7% 8.5% 9.4% 8.86%
Philippines 18.7% 8.9% 7.6% 9.1% 11.2% 11.10%
China 5.1% 6.7% 9.1% 24.2% 16.9% 12.40%
United States 4.2% 3.0% 3.0% 2.6% 2.8% 3.12%
Sources: OECD Economic Outlook, June 1996, Vol. 59; Key
Indicators and Developing Asian & Pacific Countries, 1994, Volume
XXV; Emerging Stock Market Factbook 1996.
As the economic in the China Region have experienced
different levels of growth, so too have their stock markets. 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)
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
China 2,028 18,255 40,567 43,521 42,055
Hong Kong 121,689 170,793 381,459 267,331 301,065
Korea 96,373 107,448 139,420 191,778 181,955
Singapore 58,520 61,180 147,810 177,670 203,230
Taiwan 124,864 101,124 195,198 247,325 187,206
Thailand 35,815 58,259 130,510 131,479 141,507
Malaysia 58,627 94,004 220,328 199,276 222,729
Indonesia 6,823 12,038 32,953 47,241 66,585
Philippines 10,197 13,794 40,327 55,519 58,859
Sources: World Stock Exchange Factbook, 1997; Emerging Stock
Markets Factbook, 1996; Hong Kong Stock Exchange Market.
ANNUAL PERCENTAGE CHANGES IN LOCAL
STOCK MARKET INDEXES
1991 1992 1993 1994 1995
------ ------ ------ ------ ------
China 192.8% -12.9% 6.8% -22.30% -14.3%
Hong Kong -42.0% -28.3% -115.7% 31.1 -23.0%
Korea -12.2% 11.0% 27.7% 18.6% -14.1%
Singapore 25.1% -2.4% 59.2% -15.1% 4.09%
Taiwan 1.6% -26.6% 79.8% 17.4% -27.4%
Thailand 16.1% 25.6% 88.4% -19.2% -5.8%
Malaysia 9.9% 15.8% 98.0% -23.8% 2.5%
Indonesia -40.8% 10.9% 114.6% -20.2% 9.4%
Philippines 76.7% 9.1% 154.4% -12.8% -6.9%
Sources: Emerging Stock Market Factbook, 1996; Hong Kong Stock
Exchange.
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
1991 1992 1993 1994 1995
----- ----- ----- ----- -----
Hong Kong 13.8 12.9 16.7 13.1 13.7
Korea 21.3 21.4 25.1 34.5 19.8
Singapore 19.5 19.2 24.7 30.4 23.3
Taiwan 22.3 16.6 34.7 36.8 21.4
Thailand 12.0 13.9 27.5 21.2 21.7
Malaysia 21.3 21.8 43.5 29.0 25.1
Indonesia 11.6 12.2 28.9 20.2 19.8
Philippines 11.3 14.1 38.8 30.8 19.0
Sources: World Stock Exchange Factbook, 1996; Emerging Stock
Market Factbook, 1996.
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, 1991-1995.
CURRENCY MOVEMENTS VERSUS US DOLLAR (% CHANGE)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1991 1992 1993 1994 1995
------ ----- ------ ------ -----
Hong Kong 0.23% 0.39% 0.06% 0.13% 0.13%
Korea -6.19% -3.91% -2.50% 2.43% 0.16%
Singapore 6.53% -0.88% 2.24% 9.16% 3.18%
Taiwan 4.24% 1.29% -4.73% 0.27% -3.8%
Thailand 0.99% -1.76% 0.04% 1.47% -0.34%
Malaysia -0.82% 3.88% 2.98% 5.18% 0.57%
Indonesia -5.03% -4.00% -1.92% -4.52% -4.03%
Philippines 3.86% 2.10% -5.47% 9.63% -7.5%
China (Official) -4.06% -5.84% -0.84% -45.6% 1.53%
Sources: International Financial Statistics, Volume L, Number 4,
April 1997; Emerging Stock Market Factbook, 1996.
IVY INTERNATIONAL 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
ADVISOR CLASS SHARES
January 1, 1998
_________________________________________________________________
Ivy Fund (the "Trust") is an open-end management investment
company that currently consists of eighteen fully managed
portfolios, each of which (except for the Fund and Ivy Latin
America Strategy Fund) is diversified. This Statement of
Additional Information ("SAI"), relates to the Advisor Class
shares of Ivy International Bond Fund (the "Fund").
This SAI is not a prospectus and should be read in
conjunction with the prospectus for the Fund's Advisor Class
shares dated January 1, 1998 (the "Prospectus"), which may be
obtained upon request and without charge from the Distributor at
the address and telephone number printed below. Advisor Class
shares are only offered to certain investors (see the
Prospectus). The Fund also offers Class A, Class B and Class C
shares, which are described in a separate prospectus and
statement of additional information that may be obtained from the
Distributor.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
TABLE OF CONTENTS
PAGE
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FOREIGN SECURITIES. . . . . . . . . . . . . . . . . . . . 2
FOREIGN CURRENCIES. . . . . . . . . . . . . . . . . . . . 3
FORWARD FOREIGN CURRENCY CONTRACTS. . . . . . . . . . . . 4
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
WHEN-ISSUED PURCHASES AND FIRM COMMITMENT AGREEMENTS. . . 5
ZERO COUPON BONDS . . . . . . . . . . . . . . . . . . . . 6
RESTRICTED AND ILLIQUID SECURITIES. . . . . . . . . . . . 7
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
OPTIONS, IN GENERAL. . . . . . . . . . . . . . . . . 7
WRITING OPTIONS ON INDIVIDUAL SECURITIES . . . . . . 9
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. . . . . 10
PURCHASING AND WRITING OPTIONS ON SECURITIES
INDICES . . . . . . . . . . . . . . . . . . . . 10
RISKS OF OPTIONS TRANSACTIONS. . . . . . . . . . . . 11
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. . . . 12
SECURITIES INDEX FUTURES CONTRACTS. . . . . . . . . . . . 17
RISKS OF SECURITIES INDEX FUTURES. . . . . . . . . . 18
COMBINED TRANSACTIONS . . . . . . . . . . . . . 20
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 20
ADDITIONAL RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 21
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . . . . . . 23
AUTOMATIC INVESTMENT METHOD . . . . . . . . . . . . . . . 23
EXCHANGE OF SHARES. . . . . . . . . . . . . . . . . . . . 24
RETIREMENT PLANS. . . . . . . . . . . . . . . . . . . . . 24
INDIVIDUAL RETIREMENT ACCOUNTS . . . . . . . . . . . 25
QUALIFIED PLANS. . . . . . . . . . . . . . . . . . . 27
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(b)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . . . 28
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAs . . . . . . 28
SYSTEMATIC WITHDRAWAL PLAN. . . . . . . . . . . . . . . . 28
GROUP SYSTEMATIC INVESTMENT PROGRAM . . . . . . . . . . . 29
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . . . . . . 30
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . 32
PERSONNEL INVESTMENTS BY EMPLOYEES OF IMI . . . . . . . . 36
COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . 37
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . 38
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES. . . 38
DISTRIBUTION SERVICES . . . . . . . . . . . . . . . . . . 40
RULE 18F-3 PLAN. . . . . . . . . . . . . . . . . . . 41
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . 41
FUND ACCOUNTING SERVICES. . . . . . . . . . . . . . . . . 42
TRANSFER AGENT AND DIVIDEND PAYING AGENT. . . . . . . . . 42
ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . 42
AUDITORS. . . . . . . . . . . . . . . . . . . . . . . . . 43
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . . . . . . 43
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . 45
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . 47
REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 47
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD
CONTRACTS. . . . . . . . . . . . . . . . . . . . . . 50
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES. . 51
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES. . . . 51
DEBT SECURITIES ACQUIRED AT A DISCOUNT. . . . . . . . . . 52
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 53
DISPOSITION OF SHARES . . . . . . . . . . . . . . . . . . 54
FOREIGN WITHHOLDING TAXES . . . . . . . . . . . . . . . . 55
BACKUP WITHHOLDING. . . . . . . . . . . . . . . . . . . . 56
AVERAGE ANNUAL TOTAL RETURN. . . . . . . . . . . . . 56
OTHER QUOTATIONS, COMPARISONS AND GENERAL
INFORMATION . . . . . . . . . . . . . . . . . . 57
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 58
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS . . . . . . . . . 59
The Fund has its own investment objective and policies,
which are described in the Prospectus under the captions
"Investment Objective and Policies" and "Risk Factors and
Investment Techniques." Additional information regarding the
characteristics and risks associated with the Fund's investment
techniques is set forth below.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities.
Securities guaranteed by the U.S. Government include: (1) direct
obligations of the U.S. Treasury (such as Treasury bills, notes,
and bonds) and (2) Federal agency obligations guaranteed as to
principal and interest by the U.S. Treasury (such as GNMA
certificates, which are mortgage-backed securities). When such
securities are held to maturity, the payment of principal and
interest is unconditionally guaranteed by the U.S. Government,
and thus they are of the highest possible credit quality. U.S.
Government securities that are not held to maturity are subject
to variations in market value due to fluctuations in interest
rates.
Mortgage-backed securities are securities representing part
ownership of a pool of mortgage loans. For example, GNMA
certificates are such securities in which the timely payment of
principal and interest is guaranteed by the full faith and credit
of the U.S. Government. Although the mortgage loans in the pool
will have maturities of up to 30 years, the actual average life
of the loans typically will be substantially less because the
mortgages will be subject to principal amortization and may be
prepaid prior to maturity. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of
falling interest rates, the rate of prepayment tends to increase,
thereby shortening the actual average life of the security.
Conversely, rising interest rates tend to decrease the rate of
prepayments, thereby lengthening the actual average life of the
security (and increasing the security's price volatility).
Accordingly, it is not possible to predict accurately the average
life of a particular pool. Reinvestment of prepayment may occur
at higher or lower rates than the original yield on the
certificates. Due to the prepayment feature and the need to
reinvest prepayments of principal at current rates, mortgage-
backed securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of
declining interest rates. Such securities may appreciate or
decline in market value during periods of declining or rising
interest rates, respectively.
Securities issued by U.S. Government instrumentalities and
certain federal agencies are neither direct obligations of nor
guaranteed by the U.S. Treasury; however, they involve Federal
sponsorship in one way or another. Some are backed by specific
types of collateral, some are supported by the issuer's right to
borrow from the Treasury, some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the
issuer, others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and
instrumentalities include, but are not limited to, Federal Land
Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Banks, Federal National Mortgage Association, Federal Home
Loan Mortgage Association, and Student Loan Marketing
Association.
DEPOSITORY RECEIPTS
American Depository Receipts ("ADRs"), Global Depository
Receipts ("GDRs"), American Depository Shares ("ADSs"), and
Global Depository Shares ("GDSs") are depository instruments, the
issuance of which is typically administered by a U.S. or foreign
bank or trust company. These instruments evidence ownership of
underlying securities issued by a U.S. or foreign corporation.
Unsponsored programs are organized independently and without the
cooperation of the issuer of the underlying securities. As a
result, available information concerning the issuer may not be as
current as for sponsored depository instruments and their prices
may be more volatile than if they were sponsored by the issuers
of the underlying securities.
FOREIGN SECURITIES
Investors should recognize that investing in foreign
securities involves certain special considerations, including
those set forth below and in the Fund's Prospectus under
"Investing In International Bond Markets" and "Special Risk
Considerations," which are not typically associated with
investing in United States securities and which may affect the
Fund's performance favorably or unfavorably.
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. The
inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund due to
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 each Fund's portfolio
transactions. Further, 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.
FOREIGN CURRENCIES
Investment in foreign securities usually will involve
currencies of foreign countries. Moreover, the Fund may
temporarily hold funds in bank deposits in foreign currencies
during the completion of investment programs and may purchase
forward foreign currency contracts. Because of these factors,
the value of the assets of the Fund as measured in U.S. dollars
may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations, and the
Fund may incur costs in connection with conversions between
various currencies. Although the Fund's custodian values the
Fund's assets daily in terms of U.S. dollars, the Fund does not
intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund will 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 the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer. The Fund will 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 the Fund normally will be invested in both U.S. and
foreign securities markets, changes in the Fund's share price may
have a low correlation with movements in the U.S. markets. The
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 the Fund's investment
performance. U.S. and foreign securities markets do not always
move in step with each other, and the total returns from
different markets may vary significantly.
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.
The Fund will hold cash or liquid securities in a segregated
account with its custodian in an amount equal (on a daily marked-
to-market basis) to the amount of the commitments under these
contracts. At the maturity of a forward contract, the Fund may
either accept or make delivery of the currency specified in the
contract, or, prior to maturity, enter into a closing purchase
transaction involving the purchase or sale of an offsetting
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.
DEBT SECURITIES, IN GENERAL
Investment in debt securities involves both interest rate
and credit risk. Generally, the value of debt instruments rises
and falls inversely with fluctuations in interest rates. As
interest rates decline, the value of debt securities generally
increases. Conversely, rising interest rates tend to cause the
value of debt securities to decrease. Bonds with longer
maturities generally are more volatile than bonds with shorter
maturities. The market value of debt securities also varies
according to the relative financial condition of the issuer. In
general, lower-quality bonds offer higher yields due to the
increased risk that the issuer will be unable to meet its
obligations on interest or principal payments at the time called
for by the debt instrument.
LOW-RATED DEBT SECURITIES
The Fund may invest in corporate debt securities rated Ba or
lower by Moody's, or BB or lower by S&P. The Fund will not,
however, invest in securities that, at the time of investment,
are rated lower than C by either Moody's or S&P. Securities
rated lower than Baa or BBB (and comparable unrated securities)
are commonly referred to as "high yield" or "junk" bonds and are
considered to be predominantly speculative with respect to the
issuer's continuing ability to meet principal and interest
payments. The lower the ratings of corporate debt securities,
the more their risks render them like equity securities. (See
Appendix A for a more complete description of the ratings
assigned by Moody's and S&P and their respective
characteristics.)
While IMI may refer to ratings issued by established credit
rating agencies, it is not IMI's policy to rely exclusively on
such ratings, but rather to supplement such ratings with its own
independent and ongoing review of credit quality. The Fund's
achievement of its investment objective may, to the extent of its
investment in low-rated debt securities, 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 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 low-rated debt securities 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 low-rated debt
securities, and cause large fluctuations in the daily net asset
value of the Fund's shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of low-rated debt securities,
especially in a thinly traded market. When secondary markets for
high yield securities become relatively less liquid, it may be
more difficult to value the securities, requiring additional
research and elements of judgment. Prices for low-rated debt
securities 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).
WHEN-ISSUED PURCHASES AND FIRM COMMITMENT AGREEMENTS
When the Fund purchases new issues of securities on a when-
issued basis, the Fund's custodian will establish a segregated
account for the Fund consisting of cash or liquid securities
equal to the amount of the commitment. If the value of
securities in the account should decline, additional cash or
securities will be placed in the account so that the market value
of the account will equal the amount of such commitments by the
Fund on a daily 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.
The Fund may also enter into firm commitment agreements for
the purchase of securities at an agreed-upon price on a specified
future date. During the time that the Fund is obligated to
purchase such securities, it will maintain in a segregated
account with its custodian cash or liquid securities of an
aggregate value sufficient to make payment for the securities.
ZERO COUPON BONDS
The Fund may purchase zero coupon bonds in accordance with
its 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. The Fund, if it holds
zero coupon bonds in its portfolio, however, 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.
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, 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 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. 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 of the Fund to the extent that qualified
institutional buyers become for a time uninterested in purchasing
these restricted securities.
OPTIONS TRANSACTIONS
OPTIONS, IN GENERAL. The Fund may engage in transactions
in options on securities and stock indices in accordance with the
Fund's stated investment objective and policies. The Fund may
also purchase put options on securities and may purchase and sell
(write) put and call options on stock indices. Options on
securities and stock indices purchased or written by the Fund
will be limited to options traded on national securities
exchanges, boards of trade or similar entities, or in the OTC
markets.
A call option is a short-term contract (having a duration of
less than one year) pursuant to which the purchaser, in return
for the premium paid, has the right to buy the security
underlying the option at the specified exercise price at any time
during the term of the option. The writer of the call option,
who receives the premium, has the obligation, upon exercise of
the option, to deliver the underlying security against payment of
the exercise price. A put option is a similar contract pursuant
to which the purchaser, in return for the premium paid, has the
right to sell the security underlying the option at the specified
exercise price at any time during the term of the option. The
writer of the put option, who receives the premium, has the
obligation, upon exercise of the option, to buy the underlying
security at the exercise price. The premium paid by the
purchaser of an option will reflect, among other things, the
relationship of the exercise price to the market price and
volatility of the underlying security, the time remaining to
expiration of the option, supply and demand, and interest rates.
If the writer of an option wishes to terminate the
obligation, the writer may effect a "closing purchase
transaction." This is accomplished by buying an option of the
same series as the option previously written. The effect of the
purchase is that the writer's position will be 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.
The Fund will realize a gain (or a loss) on a closing
purchase transaction with respect to a call or a put previously
written by the Fund if the premium, plus commission costs, paid
by the Fund to purchase the call or the put is less (or greater)
than the premium, less commission costs, received by the Fund on
the sale of the call or the put. A gain also will be realized if
a call or a put that the Fund has written lapses unexercised,
because the Fund would retain the premium. Any such gains (or
losses) are considered short-term capital gains (or losses) for
Federal income tax purposes. Net short-term capital gains, when
distributed by the Fund, are taxable as ordinary income. See
"Taxation."
The Fund will realize a gain (or a loss) on a closing sale
transaction with respect to a call or a put previously purchased
by the Fund if the premium, less commission costs, received by
the Fund on the sale of the call or the put is greater (or less)
than the premium, plus commission costs, paid by the Fund to
purchase the call or the put. If a put or a call expires
unexercised, it will become worthless on the expiration date, and
the Fund will realize a loss in the amount of the premium paid,
plus commission costs. Any such gain or loss will be long-term
or short-term gain or loss, depending upon the Fund's holding
period for the option.
Exchange-traded options generally have standardized terms
and are issued by a regulated clearing organization (such as the
Options Clearing Corporation), which, in effect, guarantees the
completion of every exchange-traded option transaction. In
contrast, the terms of OTC options are negotiated by the Fund and
its counterparty (usually a securities dealer or a financial
institution) with no clearing organization guarantee. When the
Fund purchases an OTC option, it relies on the party from whom it
has purchased the option (the "counterparty") to make delivery of
the instrument underlying the option. If the counterparty fails
to do so, the Fund will lose any premium paid for the option, as
well as any expected benefit of the transaction. Accordingly,
IMI will assess the creditworthiness of each counterparty to
determine the likelihood that the terms of the OTC option will be
satisfied.
WRITING OPTIONS ON INDIVIDUAL SECURITIES. The Fund may
write (sell) covered call options on the Fund's securities in an
attempt to realize a greater current return than would be
realized on the securities alone. The Fund may also write
covered call options to hedge a possible stock or bond market
decline (only to the extent of the premium paid to the Fund for
the options). In view of the investment objectives of the Fund,
the Fund generally would write call options only in circumstances
where the investment adviser to the Fund does not anticipate
significant appreciation of the underlying security in the near
future or has otherwise determined to dispose of the security.
The Fund may write covered call options as described in the
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 the Fund receives premium income from
these activities, any appreciation realized on an underlying
security will be limited by the terms of the call option. The
Fund may purchase call options on individual securities only to
effect a "closing purchase transaction."
As the writer of a call option, the Fund receives a premium
for undertaking the obligation to sell the underlying security at
a fixed price during the option period, if the option is
exercised. So long as the Fund remains obligated as a writer of
a call option, it forgoes the opportunity to profit from
increases in the market price of the underlying security above
the exercise price of the option, except insofar as the premium
represents such a profit (and retains the risk of loss should the
value of the underlying security decline).
PURCHASING OPTIONS ON INDIVIDUAL SECURITIES. The Fund may
purchase a put option on an underlying security owned by the Fund
as a defensive technique in order to protect against an
anticipated decline in the value of the security. The Fund, as
the holder of the put option, may sell the underlying security at
the exercise price regardless of any decline in its market price.
In order for a put option to be profitable, the market price of
the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs that
the Fund must pay. These costs will reduce any profit the Fund
might have realized had it sold the underlying security instead
of buying the put option. The premium paid for the put option
would reduce any capital gain otherwise available for
distribution when the security is eventually sold. The purchase
of put options will not be used by the Fund for leverage
purposes.
The Fund may also purchase a put option on an underlying
security that it owns and at the same time write a call option on
the same security with the same exercise price and expiration
date. Depending on whether the underlying security appreciates
or depreciates in value, the Fund would sell the underlying
security for the exercise price either upon exercise of the call
option written by it or by exercising the put option held by it.
The Fund would enter into such transactions in order to profit
from the difference between the premium received by the Fund for
the writing of the call option and the premium paid by the Fund
for the purchase of the put option, thereby increasing the Fund's
current return. The Fund may write (sell) put options on
individual securities only to effect a "closing sale
transaction."
PURCHASING AND WRITING OPTIONS ON SECURITIES INDICES. The
Fund may purchase and sell (write) put and call options on
securities indices. An index assigns relative values to the
securities included in the index and the index fluctuates with
changes in the market values of the securities so included.
Options on indices are similar to options on individual
securities, except that, rather than giving the purchaser the
right to take delivery of an individual security at a specified
price, they give the purchaser the right to receive cash. The
amount of cash is equal to the difference between the closing
price of the index and the exercise price of the option,
expressed in dollars, times a specified multiple (the
"multiplier"). The writer of the option is obligated, in return
for the premium received, to make delivery of this amount.
The multiplier for an index option performs a function
similar to the unit of trading for a stock option. It determines
the total dollar value per contract of each point in the
difference between the exercise price of an option and the
current level of the underlying index. A multiplier of 100 means
that a one-point difference will yield $100. Options on
different indices have different multipliers.
When the Fund writes a call or put option on a stock index,
the option is "covered", in the case of a call, or "secured", in
the case of a put, if the Fund maintains in a segregated account
with the Custodian cash or liquid securities equal to the
contract value. A call option is also covered if the Fund holds
a call on the same index as the call written where the exercise
price of the call held is (i) equal to or less than the exercise
price of the call written or (ii) greater than the exercise price
of the call written, provided that the Fund maintains in a
segregated account with the Custodian the difference in cash or
liquid securities. A put option is also "secured" if the Fund
holds a put on the same index as the put written where the
exercise price of the put held is (i) equal to or greater than
the exercise price of the put written or (ii) less than the
exercise price of the put written, provided that the Fund
maintains in a segregated account with the Custodian the
difference in cash or liquid securities.
RISKS OF OPTIONS TRANSACTIONS. The purchase and writing of
options involves certain risks. During the option period, the
covered call writer has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the
underlying securities above the exercise price, but, as long as
its obligation as a writer continues, has retained the risk of
loss should the price of the underlying security decline. The
writer of an option has no control over the time when it may be
required to fulfill its obligation as a writer of the option.
Once an option writer has received an exercise notice, it cannot
effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver the underlying
securities (or cash in the case of an index option) at the
exercise price. If a put or call option purchased by the Fund is
not sold when it has remaining value, and if the market price of
the underlying security (or index), in the case of a put, remains
equal to or greater than the exercise price or, in the case of a
call, remains less than or equal to the exercise price, the Fund
will lose its entire investment in the option. Also, where a put
or call option on a particular security (or index) is purchased
to hedge against price movements in a related security (or
securities), the price of the put or call option may move more or
less than the price of the related security (or securities). In
this regard, there are differences between the securities and
options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve
its objective.
There can be no assurance that a liquid market will exist
when the Fund seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed
on the options markets, the Fund may be unable to close out a
position. Finally, trading could be interrupted, for example,
because of supply and demand imbalances arising from a lack of
either buyers or sellers, or the options exchange could suspend
trading after the price has risen or fallen more than the maximum
amount specified by the exchange. Closing transactions can be
made for OTC options only by negotiating directly with the
counterparty or by a transaction in the secondary market, if any
such market exists. There is no assurance that the Fund will be
able to close out an OTC option position at a favorable price
prior to its expiration. In the event of insolvency of the
counterparty, the Fund might be unable to close out an OTC option
position at any time prior to its expiration. Although the Fund
may be able to offset to some extent any adverse effects of being
unable to liquidate an option position, the Fund may experience
losses in some cases as a result of such inability.
The Fund 's options activities also may have an impact upon
the level of its portfolio turnover and brokerage commissions.
See "Portfolio Turnover."
The Fund 's success in using options techniques depends,
among other things, on IMI's ability to predict accurately the
direction and volatility of price movements in the options and
securities markets, and to select the proper type, time and
duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
GENERAL. The Fund may enter into futures contracts and
options on futures contracts for hedging purposes. A futures
contract provides for the future sale by one party and purchase
by another party of a specified quantity of a commodity at a
specified price and time. When a purchase or sale of a futures
contract is made by 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 of offsetting
purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an
offsetting purchase price is less than the original sale price,
the Fund generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price,
the Fund generally realizes a capital gain, or if it is less, the
Fund generally realizes a capital loss. The transaction costs
must also be included in these calculations.
When purchasing a futures contract, the Fund will maintain
with its Custodian (and mark-to-market on a daily basis) cash,
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 in a segregated account (and mark-to-market on a
daily basis) cash or liquid securities that, when added to the
amounts deposited with an FCM as margin, are equal to the market
value of the instruments underlying the contract. Alternatively,
the Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to
that of the index on which the futures contract is based), or by
holding a call option permitting the Fund to purchase the same
futures contract at a price no higher than the price of the
contract written by 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, the Fund
will maintain with its custodian in a segregated account (and
mark-to-market on a daily basis) cash or liquid securities that,
when added to the amounts deposited with an FCM as margin, 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 that 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 highly liquid
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 particular 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 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 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 the Fund 's ability to act upon
economic events occurring in foreign markets during non business
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
SECURITIES INDEX FUTURES CONTRACTS
The Fund may enter into securities index futures contracts
as an efficient means of regulating the Fund's exposure to the
equity markets. An index futures contract is a contract to buy
or sell units of an index at a specified future date at a price
agreed upon when the contract is made. Entering into a contract
to buy units of an index is commonly referred to as purchasing a
contract or holding a long position in the index. Entering into
a contract to sell units of an index is commonly referred to as
selling a contract or holding a short position. The value of a
unit is the current value of the stock index. For example, the
S&P 500 Index is composed of 500 selected common stocks, most of
which are listed on the New York Stock Exchange (the "Exchange").
The S&P 500 Index assigns relative weightings to the 500 common
stocks included in the Index, and the Index fluctuates with
changes in the market values of the shares of those common
stocks. In the case of the S&P 500 Index, contracts are to buy
or sell 500 units. Thus, if the value of the S&P 500 Index were
$150, one contract would be worth $75,000 (500 units x $150).
The index futures contract specifies that no delivery of the
actual securities making up the index will take place. Instead,
settlement in cash must occur upon the termination of the
contract, with the settlement being the difference between the
contract price and the actual level of the stock index at the
expiration of the contract. For example, if the Fund enters into
a futures contract to buy 500 units of the S&P 500 Index at a
specified future date at a contract price of $150 and the S&P 500
Index is at $154 on that future date, the Fund will gain $2,000
(500 units x gain of $4). If the Fund enters into a futures
contract to sell 500 units of the stock index at a specified
future date at a contract price of $150 and the S&P 500 Index is
at $154 on that future date, the Fund will lose $2,000 (500 units
x loss of $4).
RISKS OF SECURITIES INDEX FUTURES. The Fund 's success in
using hedging techniques depends, among other things, on IMI's
ability to predict correctly the direction and volatility of
price movements in the futures and options markets as well as in
the securities markets and to select the proper type, time and
duration of hedges. The skills necessary for successful use of
hedges are different from those used in the selection of
individual stocks.
The Fund 's ability to hedge effectively all or a portion
of its securities through transactions in index futures (and
therefore the extent of its gain or loss on such transactions)
depends on the degree to which price movements in the underlying
index correlate with price movements in the Fund's securities.
Inasmuch as such securities will not duplicate the components of
an index, the correlation probably will not be perfect.
Consequently, the Fund will bear the risk that the prices of the
securities being hedged will not move in the same amount as the
hedging instrument. This risk will increase as the composition
of the Fund 's portfolio diverges from the composition of the
hedging instrument.
Although the Fund intends to establish positions in these
instruments only when there appears to be an active market, there
is no assurance that a liquid market will exist at a time when
the Fund seeks to close a particular option or futures position.
Trading could be interrupted, for example, because of supply and
demand imbalances arising from a lack of either buyers or
sellers. In addition, the futures exchanges may suspend trading
after the price has risen or fallen more than the maximum amount
specified by the exchange. In some cases, the Fund may
experience losses as a result of its inability to close out a
position, and it may have to liquidate other investments to meet
its cash needs.
Although some index futures contracts call for making or
taking delivery of the underlying securities, generally these
obligations are closed out prior to delivery by offsetting
purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). If an
offsetting purchase price is less than the original sale price,
the Fund generally realizes a capital gain, or if it is more,
the Fund generally realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price,
the Fund generally realizes a capital gain, or if it is less, the
Fund generally realizes a capital loss. The transaction costs
must also be included in these calculations.
The Fund will only enter into index futures contracts or
futures options that are standardized and traded on a U.S. or
foreign exchange or board of trade, or similar entity, or quoted
on an automated quotation system. The Fund will use futures
contracts and related options only for "bona fide hedging"
purposes, as such term is defined in applicable regulations of
the CFTC.
When purchasing an index futures contract, the Fund will
maintain with its custodian (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, the Fund
may "cover" its position by purchasing a put option on the same
futures contract with a strike price as high as or higher than
the price of the contract held by the Fund .
When selling an index futures contract, the Fund will
maintain with its custodian (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).
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 the Fund to do so. A combined transaction will usually
contain elements of risk that are present in each of its
component transactions. Although combined transactions are
normally entered into based on IMI's judgment that the combined
strategies will reduce risk or otherwise more effectively achieve
the desired portfolio management goal, it is possible that the
combination will instead increase such risks or hinder
achievement of the management objective.
The requirements for qualification as a regulated investment
company also may limit the extent to which the Fund may enter
into futures, options or forward contracts. See "Taxation."
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 with respect to the
Fund without the approval of a majority of the outstanding voting
shares of the Fund. Under these restrictions, the Fund may not:
(i) 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 and related
options;
(ii) Make investments in securities for the purpose of
exercising control over or management of the issuer;
(iii) 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;
(iv) 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;
(v) 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;
(vi) Borrow money, except as a temporary measure for
extraordinary or emergency purposes or except in
connection with reverse repurchase agreements
provided that the Fund maintains net asset coverage
of at least 300% for all borrowings;
(vii) 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;
(viii) 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;
(ix) Act as an underwriter of securities;
(x) Make short sales of securities or maintain a short
position; or
(xii) 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 and mineral
leases (other than securities of companies that
invest in or sponsor such programs);
(iii) purchase or retain securities of any company if, to
the knowledge of the Trust, officers and Trustees of
the Trust and officers and directors of the Manager,
Mackenzie Investment Management Inc. ("MIMI") or
Mackenzie Financial Corporation ("MFC") who
individually own more than 1/2 of 1% of the
securities of that company together own beneficially
more than 5% of such securities;
(iv) 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;
(v) invest more than 10% of its net assets taken at
market value at the time of the investment in
"illiquid securities" and the Fund may not invest
more than 5% of its total assets in restricted
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 the Fund has
written, securities for which market quotations are
not readily available, or other securities which
legally or in the Manager'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;
(vi) purchase securities of other investment companies,
except in connection with a merger, consolidation 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 (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 Fund only at the time a transaction is entered into.
Accordingly, if a percentage limitation is adhered to at the time
of investment, a later increase or decrease in the percentage
which results from circumstances not involving any affirmative
action by the Fund, such as a change in market conditions or a
change in the Fund's asset level or other circumstances beyond
the Fund's control, will not be considered a violation.
ADDITIONAL RIGHTS AND PRIVILEGES
The Trust offers and (except as noted below) bears the cost
of providing to investors the following rights and privileges.
The Trust reserves the right to amend or terminate any one or
more of these rights and privileges. Notice of amendments to or
terminations of rights and privileges will be provided to
shareholders in accordance with applicable law.
Certain of the rights and privileges described below refer
to funds other than the Fund whose shares are distributed by Ivy
Mackenzie Distributors, Inc. ("IMDI"). These funds are: Ivy
Asia Pacific Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy China
Region Fund, Ivy Emerging Growth Fund, Ivy Global Fund, Ivy
Global Natural Resources Fund, Ivy Global Science & Technology
Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund II, Ivy International Fund, Ivy International
Small Companies Fund, Ivy Latin America Strategy Fund, Ivy Money
Market Fund, Ivy New Century Fund and Ivy Pan-Europe Fund (the
other seventeen series of the Trust)(collectively, with the Fund,
the "Ivy funds"). Shareholders should obtain a current
prospectus for these funds before exercising any right or
privilege that may relate to them.
As of September 5, 1997, shares of the four funds that
comprise Mackenzie Series Trust (a separately registered
investment company formerly in the Ivy Mackenzie group of funds)
are no longer available for purchase or exchange.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a shareholder
to have specified amounts automatically drawn each month from his
or her bank for investment in Fund shares, is available for all
classes of shares, except Class I. The minimum initial and
subsequent investment pursuant to this plan is $250 per month
(except in the case of a tax qualified retirement plan for which
the minimum initial and subsequent investment is $25 per month).
A shareholder may terminate the Automatic Investment Method at
any time upon delivery to Ivy Mackenzie Services Corp. ("IMSC")
of telephone instructions or written notice from the shareholder.
See "Automatic Investment Method" in the Prospectus. To begin
the plan, complete Sections 6A and 7B of the Account Application.
EXCHANGE OF SHARES
As described in the Prospectus, Advisor Class shareholders
of the Fund have an exchange privilege other Ivy funds (except
Ivy International Fund). Before effecting an exchange,
shareholders should obtain and read the currently effective
prospectus for the Ivy fund into which the exchange is to be
made.
The minimum amount of Advisor Class shares that may be
exchanged into an Ivy fund in which shares are not already held
is $10,000. No exchange out of the Fund (other than by a
complete exchange of all Fund shares) may be made if it would
reduce the shareholder's interest in the Advisor Class shares of
the Fund to less than $10,000. Exchanges are available only in
states where the exchange can legally be made.
Each exchange will be made on the basis of the relative net
asset values per share of the Ivy funds involved in the exchange
next computed following receipt by IMSC of telephone instructions
or a properly executed request. Exchanges, whether written or
telephonic, must be received by IMSC by the close of regular
trading on the Exchange (normally 4:00 p.m., eastern time) to
receive the price computed on the day of receipt. Exchange
requests received after that time will receive the price next
determined following receipt of the request. The exchange
privilege may be modified or terminated at any time, upon at
least 60 days' notice to the extent required by applicable law.
See "Redemptions."
An exchange of shares between any of the Ivy funds will
result in a taxable gain or loss. Generally, this will be a
capital gain or loss (long-term or short-term, depending on the
holding period of the shares) in the amount of the difference
between the net asset value of the shares surrendered and the
shareholder's tax basis for those shares. However, in certain
circumstances, shareholders will be ineligible to take sales
charges into account in computing taxable gain or loss on an
exchange. See "Taxation."
With limited exceptions, gain realized by a tax-deferred
retirement plan will not be taxable to the plan and will not be
taxed to the participant until distribution. Each investor
should consult his or her tax adviser regarding the tax
consequences of an exchange transaction.
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 Ivy funds in accordance with
the terms of the applicable plan and the exchange privilege
available to all shareholders. Initial and subsequent purchase
payments in connection with tax-deferred retirement plans must be
at least $25 per participant.
The following fees will be charged to individual shareholder
accounts as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per account
For shareholders whose retirement accounts are diversified
across several Ivy funds, the annual maintenance fee will be
limited to not more than $20.
The following discussion describes the tax treatment of
certain tax-deferred retirement plans under current Federal
income tax law. State income tax consequences may vary. An
individual considering the establishment of a retirement plan
should consult with an attorney and/or an accountant with respect
to the terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of the Trust may be
used as a funding medium for an Individual Retirement Account
("IRA"). Eligible individuals may establish an IRA by adopting a
model custodial account available from IMSC, who may impose a
charge for establishing the account. Individuals should consult
their tax advisers before investing IRA assets in the Fund (which
primarily distributes exempt-interest dividends).
An individual who has not reached age 70-1/2 and who
receives compensation or earned income is eligible to contribute
to an IRA, whether or not he or she is an active participant in a
retirement plan. An individual who receives a distribution from
another IRA, a qualified retirement plan, a qualified annuity
plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible
to establish an IRA by rolling over the distribution either
directly or within 60 days after its receipt. Tax advice should
be obtained in connection with planning a rollover contribution
to an IRA.
In general, an eligible individual may contribute up to the
lesser of $2,000 or 100% of his or her compensation or earned
income to an IRA each year. If a husband and wife are both
employed, and both are under age 70-1/2, each may set up his or
her own IRA within these limits. If both earn at least $2,000
per year, the maximum potential contribution is $4,000 per year
for both. For years after 1996, the result is similar even if
one spouse has no earned income; if the joint earned income of
the spouses is at least $4,000, a contribution of up to $2,000
may be made to each spouse's IRA. For years before 1997, however,
if one spouse has (or elects to be treated as having) no earned
income for IRA purposes for a year, the working spouse may
contribute up to the lesser of $2,250 or 100% of his or her
compensation or earned income for the year to IRAs for both
spouses, provided that no more than $2,000 is contributed to the
IRA of one spouse. Rollover contributions are not subject to
these limits.
An individual may deduct his or her annual contributions to
an IRA in computing his or her Federal income tax within the
limits described above, provided he or she (or his or her spouse,
if they file a joint Federal income tax return) is not an active
participant in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan,
403(b) plan, simplified employee pension, or governmental plan.
If he or she (or his or her spouse) is an active participant, a
full deduction is only available if he or she has adjusted gross
income that is less than a specified level ($40,000 for married
couples filing a joint return, $25,000 for single individuals,
and $0 for a married individual filing a separate return). The
deduction is phased out ratably for active participants with
adjusted gross income between certain levels ($40,000 and $50,000
for married individuals filing a joint return, $25,000 and
$35,000 for single individuals, and $0 and $10,000 for married
individuals filing separate returns). Individuals who are active
participants with income above the specified phase-out level may
not deduct their IRA contributions. Rollover contributions are
not includible in income for Federal income tax purposes and
therefore are not deductible from it.
Generally, earnings on an IRA are not subject to current
Federal income tax until distributed. Distributions attributable
to tax-deductible contributions and to IRA earnings are taxed as
ordinary income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches age 59-1/2
are subject to a nondeductible penalty tax equal to 10% of the
taxable amount of the distribution. The 10% penalty tax does not
apply to amounts withdrawn from an IRA after the individual
reaches age 59-1/2, becomes disabled or dies, or if withdrawn in
the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated benefi-
ciary, if any, or rolled over into another IRA, or, for years
after 1996, amounts withdrawn and used to pay for deductible
medical expenses and amounts withdrawn by certain unemployed
individuals not in excess of amounts paid for certain health
insurance premiums. Distributions must begin to be withdrawn not
later than April 1 of the calendar year following the calendar
year in which the individual reaches age 70-1/2. Failure to take
certain minimum required distributions will result in the
imposition of a 50% non-deductible penalty tax. Extremely large
distributions in any one year (other than 1997, 1998 or 1999)
from an IRA (or from an IRA and other retirement plans) may also
result in a penalty tax.
QUALIFIED PLANS: For those self-employed individuals who
wish to purchase shares of one or more of the Ivy funds through a
qualified retirement plan, a Custodial Agreement and a Retirement
Plan are available from IMSC. The Retirement Plan may be adopted
as a profit sharing plan or a money purchase pension plan. A
profit sharing plan permits an annual contribution to be made in
an amount determined each year by the self-employed individual
within certain limits prescribed by law. A money purchase
pension plan requires annual contributions at the level specified
in the Custodial Agreement. There is no set-up fee for qualified
plans and the annual maintenance fee is $20.00 per account.
In general, if a self-employed individual has any common law
employees, employees who have met certain minimum age and service
requirements must be covered by the Retirement Plan. A self-
employed individual generally must contribute the same percentage
of income for common law employees as for himself or herself.
A self-employed individual may contribute up to the lesser
of $30,000 or 25% of compensation or earned income to a money
purchase pension plan or to a combination profit sharing and
money purchase pension plan arrangement each year on behalf of
each participant. To be deductible, total contributions to a
profit sharing plan generally may not exceed 15% of the total
compensation or earned income of all participants in the plan,
and total contributions to a combination money purchase-profit
sharing arrangement generally may not exceed 25% of the total
compensation or earned income of all participants. The amount of
compensation or earned income of any one participant that may be
included in computing the deduction is limited (generally to
$150,000 for benefits accruing in plan years beginning after
1993, with annual inflation adjustments). A self-employed
individual's contributions to a retirement plan on his or her own
behalf must be deducted in computing his or her earned income.
Corporate employers may also adopt the Custodial Agreement
and Retirement Plan for the benefit of their eligible employees.
Similar contribution and deduction rules apply to corporate
employers.
Distributions from the Retirement Plan generally are made
after a participant's separation from service. A 10% penalty tax
generally applies to distributions to an individual before he or
she reaches age 59-1/2, unless the individual (1) has reached age
55 and separated from service; (2) dies; (3) becomes disabled;
(4) uses the withdrawal to pay tax-deductible medical expenses;
(5) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(6) rolls over the distribution.
The Fund's transfer agent will arrange for Investors Bank &
Trust to furnish custodial services to the employer and any
participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(b)(7) ACCOUNT"): Section 403(b)(7) of the
Internal Revenue Code of 1986, as amended (the "Code"), permits
public school systems and certain charitable organizations to use
mutual fund shares held in a custodial account to fund deferred
compensation arrangements with their employees. A custodial
account agreement is available for those employers whose
employees wish to purchase shares of the Trust in conjunction
with such an arrangement. The special application for a
403(b)(7) Account is available from IMSC.
Distributions from the 403(b)(7) Account may be made only
following death, disability, separation from service, attainment
of age 59-1/2, or incurring a financial hardship. A 10% penalty
tax generally applies to distributions to an individual before he
or she reaches age 59-1/2, unless the individual (1) has reached
age 55 and separated from service; (2) dies or becomes disabled;
(3) uses the withdrawal to pay tax-deductible medical expenses;
(4) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(5) rolls over the distribution. There is no set-up fee for
403(b)(7) Accounts and the annual maintenance fee is $20.00 per
account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAs: An employer may
deduct contributions to a SEP up to the lesser of $30,000 or 15%
of compensation. SEP accounts generally are subject to all rules
applicable to IRA accounts, except the deduction limits, and are
subject to certain employee participation requirements. No new
salary reduction SEPs ("SARSEPs") may be established after 1996,
but existing SARSEPs may continue to be maintained, and non-
salary reduction SEPs may continue to be established as well as
maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a
SIMPLE 401(k) for years after 1996. An employee can make pre-tax
salary reduction contributions to a SIMPLE Plan, up to $6,000 a
year. Subject to certain limits, the employer will either match a
portion of employee contributions, or will make a contribution
equal to 2% of each employee's compensation without regard to the
amount the employee contributes. An employer cannot maintain a
SIMPLE Plan for its employees if any contributions or benefits
are credited to those employees under any other qualified
retirement plan maintained by the employer.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a Systematic Withdrawal Plan (a
"Withdrawal Plan"), by telephone instructions or by delivery to
IMSC of a written election to have his or her shares withdrawn
periodically (minimum distribution amount -- $50), accompanied by
a surrender to IMSC of all share certificates then outstanding in
such shareholder's name, properly endorsed by the shareholder.
To be eligible to elect a Withdrawal Plan, a shareholder must
continually maintain an account balance of at least $10,000 in
his or her account. Additional investments made by investors
participating in a Withdrawal Plan must equal at least $250 each
while the Withdrawal Plan is in effect. A Withdrawal Plan may
not be established if the investor is currently participating in
the Automatic Investment Method. A Withdrawal Plan may involve
the depletion of a shareholder's principal, depending on the
amount withdrawn.
A redemption under a Withdrawal Plan is a taxable event.
Shareholders contemplating participating in a Withdrawal Plan
should consult their tax advisers.
An investor may terminate his or her participation in the
Withdrawal Plan at any time by delivering written notice to IMSC.
If all shares held by the investor are liquidated at any time,
participation in the Withdrawal Plan will terminate
automatically. The Trust or IMSC may terminate the Withdrawal
Plan option at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares of the Fund may be purchased in connection with
investment programs established by employee or other groups using
systematic payroll deductions or other systematic payment
arrangements. The Trust does not itself organize, offer or
administer any such programs. However, it may, depending upon
the size of the program, waive the minimum initial and additional
investment requirements for purchases by individuals in
conjunction with programs organized and offered by others.
Unless shares of the Fund are purchased in conjunction with IRAs
(see "How to Buy Shares" in the Prospectus), such group
systematic investment programs are not entitled to special tax
benefits under the Code. The Trust reserves the right to refuse
purchases at any time or suspend the offering of shares in
connection with group systematic investment programs, and to
restrict the offering of shareholder privileges, such as check
writing, simplified redemptions and other optional privileges, as
described in the Prospectus, to shareholders using group
systematic investment programs.
With respect to each shareholder account established on or
after September 15, 1972 under a group systematic investment
program, the Trust and IMI each currently charge a maintenance
fee of $3.00 (or portion thereof) for each twelve-month period
(or portion thereof) that the account is maintained. The Trust
may collect such fee (and any fees due to IMI) through a
deduction from distributions to the shareholders involved or by
causing on the date the fee is assessed a redemption in each such
shareholder account sufficient to pay the fee. The Trust
reserves the right to change these fees from time to time without
advance notice.
BROKERAGE ALLOCATION
Subject to the overall supervision of the President and the
Board, IMI places orders for the purchase and sale of the Fund's
portfolio securities. All portfolio transactions are effected at
the best price and execution obtainable. Purchases and sales of
debt securities are usually principal transactions, and therefore
brokerage commissions are usually not required to be paid by the
Fund for such purchases and sales (although the price paid
generally includes undisclosed compensation to the dealer). The
prices paid to underwriters of newly-issued securities usually
include a concession paid by the issuer to the underwriter, and
purchases of after-market securities from dealers normally
reflect the spread between the bid and asked prices. In
connection with OTC transactions, IMI attempts to deal directly
with the principal market makers, except in those circumstances
where it believes that a better price and execution are available
elsewhere.
IMI selects broker-dealers to execute transactions and
evaluates the reasonableness of commissions on the basis of
quality, quantity, and the nature of the firms' professional
services. Commissions to be charged and the rendering of
investment services, including statistical, research, and
counseling services by brokerage firms, are factors to be
considered in the placing of brokerage business. The types of
research services provided by brokers may include general
economic and industry data, and information on securities of
specific companies. Research services furnished by brokers
through whom the Trust effects securities transactions may be
used by IMI in servicing all of its accounts. In addition, not
all of these services may be used by in connection with the
services it provides the Fund or the Trust. IMI may consider
sales of shares of the Fund as a factor in the selection of
broker-dealers and may select broker-dealers who provide it with
research services. IMI will not, however, execute brokerage
transactions other than at the best price and execution.
As of January 1, 1998, the Fund has not commenced operations
and thus has not paid any brokerage commissions.
The Fund may, under some circumstances, accept securities in
lieu of cash as payment for Fund shares. The Fund will accept
securities only to increase its holdings in a portfolio security
or to take a new portfolio position in a security that IMI deems
to be a desirable investment for the Fund. While no minimum has
been established, it is expected that the Fund will not accept
securities having an aggregate value of less than $1 million.
The Trust may reject in whole or in part any or all offers to pay
for Fund shares with securities and may discontinue accepting
securities as payment for Fund shares at any time without notice.
The Trust will value accepted securities in the manner and at the
same time provided for valuing portfolio securities of the Fund,
and Fund shares will be sold for net asset value determined at
the same time the accepted securities are valued. The Trust will
only accept securities delivered in proper form and will not
accept securities subject to legal restrictions on transfer.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their
business addresses and principal occupations during the past five
years are:
POSITION
WITH THE BUSINESS AFFILIATIONS
NAME, ADDRESS, AGE TRUST AND PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman, Dynamics
60 Concord Street Research Corp. (instruments
Wilmington, MA 01887 and controls); Director,
Age: 73 Burr-Brown Corp.
(operational amplifiers);
Director, Metritage
Incorporated (level
measuring instruments).
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: 73 Chairman and President,
Broyhill Investments, Inc.
(1983-present); Chairman,
Broyhill Timber Resources
(1983-present); Management
of a personal portfolio of
fixed-income and equity
investments (1983-present);
Director of The Mackenzie
Funds Inc. (1988-1995).
Stanley Channick Trustee President and Chief
11 Bala Avenue Investment Officer, The
Bala Cynwyd, PA 19004 Whitestone Corporation
Age: 73 (insurance agency);
Chairman, Scott Management
Company (administrative
services for insurance
companies); President, The
Channick Group (consultants
to insurance companies and
national trade
associations); 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: 76 Vice Chairman, East
Tennessee Public
Communications Corp. (WSJK-
TV) (1984-present);
Director of The Mackenzie
Funds Inc. (1987-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of
Lyman Laboratory Physics, Harvard
of Physics University (1974-present).
Harvard University
Cambridge, MA 02138
Age: 71
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: 50 President, Director and
[*Deemed to be an Chairman of Ivy Management,
"interested person" Inc. (1992-present);
of the Trust, as Chairman and Director of
defined under the Ivy Mackenzie Investor
1940 Act.] Services Corp. (1993-
present); Director and
President of Ivy Mackenzie
Distributors, Inc. (1993-
1994); Chairman and
Director of Ivy Mackenzie
Distributors, Inc. (1994-
present); Director and
President of The Mackenzie
Funds Inc. (1987-1995).
Joseph G. Rosenthal Trustee Chartered Accountant
110 Jardin Drive (1958-present); Director of
Unit #12 The Mackenzie Funds Inc.
Concord, Ontario Canada (1987-1995).
L4K 2T7
Age: 62
Richard N. Silverman Trustee Director, Newton-Wellesley
18 Bonnybrook Road Hospital; Director, Beth
Waban, MA 02168 Israel Hospital; Director,
Age: 72 Boston Ballet; Director,
Boston Children's Museum;
Director, Brimmer and May
School.
J. Brendan Swan Trustee President, Airspray
4701 North Federal Hwy. International, Inc.;
Suite 465 Joint Managing Director,
Pompano Beach, FL 33064 Airspray International
Age: 66 B.V. (an environmentally
sensitive packaging
company); Director,
Polyglass Ltd.; Director,
The Mackenzie Funds Inc.
(1992-1995).
Keith J. Carlson Trustee Senior Vice President,
700 South Federal Hwy. and Mackenzie Investment
Suite 300 President Management Inc. (1994-
Boca Raton, FL 33432 present); Senior Vice
Age: 40 President, Secretary and
[*Deemed to be an Treasurer of Mackenzie
"interested person" Investment Management Inc.
of the Trust, as (1985-1994); Senior Vice
defined under the President and Director of
1940 Act.] Ivy Management, Inc. (1994-
present); Senior Vice
President, Treasurer and
Director of Ivy Management,
Inc. (1992-1994); Vice
President of The Mackenzie
Funds Inc. (1987-1995);
Senior Vice President and
Director, Ivy Mackenzie
Services Corp. (1993-1996);
President and Director of
Ivy Mackenzie Services
Corp. (1993-1996);
President, Chief Executive
Officer and Director of Ivy
Mackenzie Distributors,
Inc. (1994-present);
Executive Vice President
and Director of Ivy
Mackenzie Distributors,
Inc. (1993-1994).
C. William Ferris Secretary/ Senior Vice President,
700 South Federal Hwy. Treasurer Chief Financial Officer and
Suite 300 Secretary/Treasurer,
Boca Raton, FL 33432 Mackenzie Investment
Age: 52 Management Inc. (1995-
present); Senior Vice
President, Finance and
Administration/Compliance
Officer of Mackenzie
Investment Management Inc.
(1989-1994); Senior Vice
President, Secretary/
Treasurer and Clerk of Ivy
Management, Inc. (1994-
present); Vice President,
Finance/Administration and
Compliance Officer of Ivy
Management, Inc. (1992-
1994); Senior Vice
President, Secretary/
Treasurer and Director, Ivy
Mackenzie Distributors,
Inc. (1994-present);
Secretary/ Treasurer and
Director of Ivy Mackenzie
Distributors, Inc. (1993-
1994); Secretary/Treasurer
and Director of Ivy
Mackenzie Services Corp.
(1993-1996); President and
Director of Ivy Mackenzie
Services Corp. (1996-
present); Secretary/
Treasurer of The Mackenzie
Funds Inc. (1993-1995).
James W. Broadfoot Vice Executive Vice President,
700 South Federal Hwy. President Ivy Management, Inc.(1996-
Suite 300 present); Senior Vice
Boca Raton, FL 33432 President, Ivy Management,
Age:54 Inc.(1992-1996); Director
and Senior Vice President,
Mackenzie Investment
Management Inc. (1995-
present); Senior Vice
President,Mackenzie
Investment Management Inc.
(1990-1995);
Author/Consultant (1987-
1990).
As of October 31, 1997, the Fund had not yet commenced
operations. Accordingly, the Officers and Trustees of the Trust
as a group owned no Fund shares.
PERSONNEL INVESTMENTS BY EMPLOYEES OF IMI
Employees of IMI are permitted to make personal securities
transactions, subject to the requirements and restrictions set
forth in IMI's Code of Ethics. The Code of Ethics is designed to
identify and address certain conflicts of interest between
personal investment activities and the interests of investment
advisory clients such as the Fund. Among other things, the Code
of Ethics, which generally complies with standards recommended by
the Investment Company Institute's Advisory Group on Personal
Investing, prohibits certain types of transactions absent prior
approval, applies to portfolio managers, traders, research
analysts and others involved in the investment advisory process,
and imposes time periods during which personal transactions may
not be made in certain securities, and requires the submission of
duplicate broker confirmations and monthly reporting of
securities transactions. Exceptions to these and other
provisions of the Code of Ethics may be granted in particular
circumstances after review by appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1996)
PENSION TOTAL
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. $7,419 N/A N/A $10,000
Anderegg, Jr.
(Trustee)
Paul H. $7,419 N/A N/A $10,000
Broyhill
(Trustee)
Keith J.
Carlson[**] $0 N/A N/A $0
(Trustee and
President)
Stanley $4,949 N/A N/A $10,000
Channick[*]
(Trustee)
Frank W. $7,419 N/A N/A $10,000
DeFriece, Jr.
(Trustee)
Roy J. $4,949 N/A N/A $10,000
Glauber[*]
(Trustee)
Michael G. $0 N/A N/A $0
Landry
(Trustee and
Chairman)
Joseph G. $7,419 N/A N/A $10,000
Rosenthal
(Trustee)
Richard N. $10,000 N/A N/A $10,000
Silverman
(Trustee)
J. Brendan $7,419 N/A N/A $10,000
Swan
(Trustee)
C. William $0 N/A N/A $0
Ferris
(Secretary/Treasurer)
[*] Appointed as a Trustee of the Trust at a meeting of the
Board of Trustees held on February 10, 1996.
[**] Appointed as a Trustee of the Trust on December 7, 1996.
As of January 1, 1998, the Officers and Trustees of the
Trust as a group owned no Advisor Class shares of any of the
Funds.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
IMI provides business management and investment advisory
services to the Fund pursuant to a Business Management and
Investment Advisory Agreement with the Trust (the "Agreement"),
which was approved on September 17, 1994, with respect to the
Fund by the Board, including a majority of the Trustees who are
neither "interested persons" (as defined in the 1940 Act) of the
Trust nor have any direct or indirect financial interest in the
operation of the distribution plan (see "Distribution Services")
or in any related agreement (the "Independent Trustees"). IMI is
a wholly owned subsidiary of MIMI. MIMI, a Delaware corporation,
has approximately 10% of its outstanding common stock listed for
trading on the TSE. MIMI is a subsidiary of Mackenzie Financial
Corporation ("MFC"), 150 Bloor Street West, Toronto, Ontario,
Canada, a public corporation organized under the laws of Ontario
whose shares are listed for trading on The Toronto Stock
Exchange. MFC is registered in Ontario as a mutual fund dealer
and advises Ivy Canada Fund and Ivy Global Natural Resources
Fund. IMI currently acts as manager to Ivy Canada Fund and Ivy
Global Natural Resources Fund. IMI also acts as manager and
investment adviser to the following additional investment
companies registered under the 1940 Act: Ivy Asia Pacific Fund,
Ivy Bond Fund, Ivy China Region Fund, Ivy Emerging Growth Fund,
Ivy Global Fund, Ivy Global Science & Technology Fund, Ivy Growth
Fund, Ivy Growth with Income Fund, Ivy International Fund II, Ivy
International Fund, Ivy International Small Companies Fund, Ivy
Latin America Strategy Fund, Ivy Money Market Fund, Ivy New
Century Fund and Ivy Pan-Europe Fund.
The Agreement obligates IMI to make investments for the
accounts of the Fund in accordance with its best judgment and
within the investment objectives and restrictions set forth in
the Prospectus, the 1940 Act and the provisions of the Code
relating to regulated investment companies, subject to policy
decisions adopted by the Board. IMI also determines the
securities to be purchased or sold by the Fund and places orders
with brokers or dealers who deal in such securities.
Under the Agreement, IMI also provides certain business
management services. IMI is obligated to (1) coordinate with the
Fund's Custodian and monitor the services it provides to the
Fund; (2) coordinate with and monitor any other third parties
furnishing services to the Fund; (3) provide the Fund with
necessary office space, telephones and other communications
facilities as are adequate for the Fund's needs; (4) provide the
services of individuals competent to perform administrative and
clerical functions that are not performed by employees or other
agents engaged by the Fund or by IMI acting in some other
capacity pursuant to a separate agreement or arrangements with
the Fund; (5) maintain or supervise the maintenance by third
parties of such books and records of the Trust as may be required
by applicable Federal or state law; (6) authorize and permit
IMI's directors, officers and employees who may be elected or
appointed as trustees or officers of the Trust to serve in such
capacities; and (7) take such other action with respect to the
Trust, after approval by the Trust as may be required by
applicable law, including without limitation the rules and
regulations of the Securities and Exchange Commission (the "SEC")
and of state securities commissions and other regulatory
agencies.
For providing business management and investment advisory
services, the Fund pays IMI a monthly fee at an annual rate of
0.75% of the Fund's average daily net assets. Advisory fee
information is not yet available for the Fund, which had not
commenced operations as of the date of this SAI.
Under the Agreement, the Trust pays the following expenses:
(1) the fees and expenses of the Trust's Independent Trustees;
(2) the salaries and expenses of any of the Trust's officers or
employees who are not affiliated with IMI; (3) interest expenses;
(4) taxes and governmental fees, including any original issue
taxes or transfer taxes applicable to the sale or delivery of
shares or certificates therefor; (5) brokerage commissions and
other expenses incurred in acquiring or disposing of portfolio
securities; (6) the expenses of registering and qualifying shares
for sale with the SEC and with various state securities
commissions; (7) accounting and legal costs; (8) insurance
premiums; (9) fees and expenses of the Trust's Custodian and
Transfer Agent and any related services; (10) expenses of
obtaining quotations of portfolio securities and of pricing
shares; (11) expenses of maintaining the Trust's legal existence
and of shareholders' meetings; (12) expenses of preparation and
distribution to existing shareholders of periodic reports, proxy
materials and prospectuses; and (13) fees and expenses of
membership in industry organizations.
IMI currently limits the Fund's total operating expenses
(excluding Rule 12b-1 fees, other class-specific expenses,
interest, taxes, brokerage commissions, litigation and
indemnification expenses, and other extraordinary expenses) to an
annual rate of 1.50% of the Fund's average net assets, which may
lower the Fund's expenses and increase its yield. The Fund's
expense limitation may be terminated or revised at any time, at
which time its expenses may increase and its yield may be
reduced.
The initial term of the Agreement between IMI and the Fund
commenced on September 17, 1994, will run for a period of two
years from the date of. The Agreement will continue in effect
with respect to the Fund from year to year only so long as such
continuance is specifically approved at least annually (i) by the
vote of a majority of the Independent Trustees and (ii) either
(a) by the vote of a majority of the outstanding voting securi-
ties (as defined in the 1940 Act) of the Fund or (b) by the vote
of a majority of the entire Board. If the question of
continuance of the Agreement (or adoption of any new agreement)
is presented to shareholders, continuance (or adoption) shall be
effected only if approved by the affirmative vote of a majority
of the outstanding voting securities of the Fund. See
"Capitalization and Voting Rights."
The Agreement may be terminated with respect to the Fund at
any time, without payment of any penalty, by the vote of a
majority of the Board or by a vote of a majority of the
outstanding voting securities of the Fund on 60 days' written
notice to IMI, or by IMI on 60 days' written notice to the Trust.
The Agreement shall terminate automatically in the event of its
assignment.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI, serves as the
exclusive distributor of the Fund's shares pursuant to an Amended
and Restated Distribution Agreement with the Trust dated October
23, 1991, as amended from time to time (the "Distribution
Agreement"). The Distribution Agreement was last approved by the
Board on August 25, 1996. IMDI distributes shares of the Fund
through broker-dealers who are members of the National
Association of Securities Dealers, Inc. and who have executed
dealer agreements with IMDI. IMDI distributes shares of the Fund
on a continuous basis, but reserves the right to suspend or
discontinue distribution on that basis. IMDI is not obligated to
sell any specific amount of Fund shares.
Under the Distribution Agreement, the Fund bears, among
other expenses, the expenses of registering and qualifying its
shares for sale under federal and state securities laws and
preparing and distributing to existing shareholders periodic
reports, proxy materials and prospectuses. Since, as of the date
of this SAI, the Fund has not commenced operations, no payments
had been made in connection with the sale of Fund shares as of
the date of this SAI.
The Distribution Agreement will continue in effect for
successive one-year periods, provided that such continuance is
specifically approved at least annually by the vote of a majority
of the Independent Trustees, cast in person at a meeting called
for that purpose, and by the vote of either a majority of the
entire Board or a majority of the outstanding voting securities
of the Fund. The Distribution Agreement may be terminated with
respect to the Fund at any time, without payment of any penalty,
by IMDI on 60 days' written notice to the Fund or by the Fund by
vote of either a majority of the outstanding voting securities of
the Fund or a majority of the Independent Trustees on 60 days'
written notice to IMDI. The Distribution Agreement shall
terminate automatically in the event of its assignment.
RULE 18F-3 PLAN. On February 23, 1995, the SEC adopted Rule
18f-3 under the 1940 Act, which permits a registered open-end
investment company to issue multiple classes of shares in
accordance with a written plan approved by the investment
company's board of directors/trustees and filed with the SEC. At
a meeting held on December 1-2, 1995, the Board adopted a multi-
class plan (the "Rule 18f-3 plan") on behalf of thirteen series
of the Trust, and at a meeting held on June 7, 1996, the Board
adopted the Rule 18f-3 plan on behalf of the Ivy Asia Pacific
Fund, Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund and Ivy International Small Companies Fund. At a
meeting held on February 8, 1997, the Board adopted the Rule 18f-
3 plan on behalf of Ivy Pan-Europe 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 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.
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown
Brothers Harriman & Co. ("Brown Brothers" or the "Custodian"), a
private bank and member of the principal securities exchanges,
located at 40 Water Street, Boston, Massachusetts 02109,
maintains custody of the assets of the Fund held in the United
States. Rules adopted under the 1940 Act permit the Trust to
maintain its foreign securities and cash in the custody of
certain eligible foreign banks and securities depositories.
Pursuant to those rules, Brown Brothers has entered into
subcustodial agreements for the holding of the Fund's foreign
securities. With respect to the Fund, Brown Brothers may
receive, as partial payment for its services, a portion of the
Trust's brokerage business, subject to its ability to provide
best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to the Fund Accounting Services Agreement with the
Trust, MIMI provides certain accounting and pricing services for
the Fund. As compensation for these services, the Fund pays MIMI
a monthly fee plus out-of-pocket expenses as incurred. The
monthly fee is based upon the net assets of the Fund at the
preceding month end at the following rates: $1,250 when net
assets are $10 million and under; $2,500 when net assets are over
$10 million to $40 million; $5,000 when net assets are over $40
million to $75 million; and $6,500 when net assets are over $75
million.
Since the Fund will not have commenced operations until
_______, 1997, no payments had been made with respect to the
provision of these services for the Fund as of the date of this
SAI.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Pursuant to a Transfer Agency and Shareholder Service
Agreement with the Trust, IMSC, a wholly owned subsidiary of
MIMI, is the transfer agent for the Fund. For these services,
the Fund pays a monthly fee at an annual rate of $20.00 per open
Advisor Class account. In addition, the Fund pays a monthly fee
at an annual rate of $4.48 per account that is closed plus
certain out-of-pocket expenses. Certain broker-dealers that
maintain shareholder accounts with the Fund through an omnibus
account provide transfer agent and other shareholder-related
services that would otherwise be provided by IMSC if the
individual accounts that comprise the omnibus account were opened
by their beneficial owners directly. IMSC pays such broker-
dealers a per account fee for each open account within the
omnibus account, or a fixed rate fee (e.g., .10%), based on the
average daily net asset value of the omnibus account (or a
combination thereof).
Since the Fund will not have commenced operations as of the
date of this SAI, no payments had been made with respect to the
provision of these services for the Fund as of the date of this
SAI.
ADMINISTRATOR
Pursuant to an Administrative Services Agreement with the
Trust, MIMI provides certain administrative services to the Fund.
As compensation for these services, the Fund pays MIMI a monthly
fee at the annual rate of .10% of the average daily net asset
value of its Advisor Class shares.
AUDITORS
[______________], independent certified public accountants,
has been selected as auditors for the Trust. The audit services
performed by [___________] include audits of the annual financial
statements of each of the funds of the Trust. Other services
provided principally relate to filings with the SEC and the
preparation of the Fund's tax returns.
CAPITALIZATION AND VOTING RIGHTS
The capitalization of the Trust consists of an unlimited
number of shares of beneficial interest (no par value per share).
When issued, shares of each class of the Fund are fully paid,
non-assessable, redeemable and fully transferable. No class of
shares of the Fund has preemptive rights or subscription rights.
The Amended and Restated Declaration of Trust permits the
Board to create separate series or portfolios and to divide any
series or portfolio into one or more classes. The Board has
authorized eighteen series, each of which represents a fund. The
Board has further authorized the issuance of Classes A, B, C, and
the Advisor Class for the Fund, Ivy Asia Pacific Fund, Ivy Bond
Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Emerging Growth
Fund, Ivy Global Fund, Ivy Global Natural Resources Fund, Ivy
Global Science & Technology Fund, Ivy Growth Fund, Ivy Growth
with Income Fund, Ivy International Fund II, Ivy International
Fund, Ivy International Small Companies Fund, Ivy Latin America
Strategy Fund, Ivy Money Market Fund, Ivy New Century Fund and
Ivy Pan-Europe Fund, as well as Class I for International Fund
II, Ivy Bond Fund, Ivy Global Science & Technology Fund, Ivy
International Fund and Ivy International Small Companies Fund,
and Class D for Ivy Growth with Income Fund. [FN][The Class D
shares of Ivy Growth with Income Fund were initially issued as
"Ivy Growth with Income Fund -- Class C" to shareholders of
Mackenzie Growth & Income Fund, a former series of the Company,
in connection with the reorganization between that Fund and Ivy
Growth with Income Fund and not offered for sale to the public.
On February 29, 1996, the Board resolved by written consent to
establish a new class of shares designated as "Class C" for all
Ivy Fund portfolios and to redesignate the shares of beneficial
interest of "Ivy Growth with Income Fund--Class C" as shares of
beneficial interest of "Ivy Growth with Income Fund--Class D,"
which establishment and redesignation, respectively, became
effective on April 30, 1996. The voting, dividend, liquidation
and other rights, preferences, powers, restrictions, limitations,
qualifications, terms and conditions of the Class D shares of Ivy
Growth with Income Fund, as set forth in Ivy Fund's Declaration
of Trust, as amended from time to time, will not be changed by
this redesignation.]
Shareholders have the right to vote for the election of
Board members and on any and all matters on which they may be
entitled to vote by law or by the provisions of the Trust's By-
Laws. The Trust is not required to hold a regular annual meeting
of shareholders, and it does not intend to do so. Shares of each
class of the Fund entitle their holders to one vote per share
(with proportionate voting for fractional shares). Shareholders
of the Fund are entitled to vote alone on matters that only
affect the Fund. All classes of shares of the Fund will vote
together, except with respect to the separate distribution plans
for the Fund's Class A, Class B and Class C shares, or when a
class vote is required by the 1940 Act. On matters relating to
all funds of the Trust, but affecting the funds differently,
separate votes by the shareholders of each fund are required.
Approval of an investment advisory agreement and a change in
fundamental policies would be regarded as matters requiring
separate voting by the shareholders of each fund of the Trust.
If the Board determines that a matter does not affect the
interests of a Fund, then the shareholders of that fund will not
be entitled to vote on that matter. Matters that affect the
Trust in general, such as ratification of the selection of
independent public accountants, will be voted upon collectively
by the shareholders of all funds of the Trust.
As used in this SAI and the Prospectus, the phrase "majority
vote of the outstanding shares" of a fund means the vote of the
lesser of: (1) 67% of the shares of that fund (or of the Trust)
present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy; or (2) more
than 50% of the outstanding shares of the fund (or of the Trust).
With respect to the submission to shareholder vote of a
matter requiring separate voting by a fund, the matter shall have
been effectively acted upon with respect to that fund if a
majority of the outstanding voting securities of that fund votes
for the approval of the matter, notwithstanding that: (1) the
matter has not been approved by a majority of the outstanding
voting securities of any other fund of the Trust; or (2) the
matter has not been approved by a majority of the outstanding
voting securities of the Trust.
The Amended and Restated Declaration of Trust provides that
the holders of not less than two-thirds of the outstanding shares
of the Trust may remove a person serving as trustee either by
declaration in writing or at a meeting called for such purpose.
The Board is required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if
requested in writing to do so by the holders of not less than 10%
of the outstanding shares of the Trust. Shareholders will be
assisted in communicating with other shareholders in connection
with the removal of a Trustee as if Section 16(c) of the 1940 Act
were applicable.
The Trust's shares do not have cumulative voting rights and
accordingly the holders of more than 50% of the outstanding
shares could elect the entire Board, in which case the holders of
the remaining shares would not be able to elect any Trustees.
Under Massachusetts law, the Trust's shareholders could,
under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Amended and Restated
Declaration of Trust disclaims liability of the shareholders,
Trustees or officers of the Trust for acts or obligations of the
Trust, which are binding only on the assets and property of the
Trust, and requires that notice of the disclaimer be given in
each contract or obligation entered into or executed by the Trust
or its Trustees. The Amended and Restated Declaration of Trust
provides for indemnification out of Fund property for all loss
and expense of any shareholder of the Fund held personally liable
for the obligations of the Fund. The risk of a shareholder of
the Trust incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations and, thus, should be
considered remote. No series of the Trust is liable for the
obligations of any other series of the Trust.
NET ASSET VALUE
The share price, or value, for the separate classes of
shares of the Fund is called the net asset value per share. The
net asset value per share of the Fund is computed by dividing the
value of the assets of the Fund, less its liabilities, by the
number of shares of the Fund outstanding. For purposes of
determining the aggregate net assets of the Fund, cash and
receivables will be valued at their realizable amounts. A
security listed or traded on a recognized stock exchange or
NASDAQ is valued at its last sale price on the principal exchange
on which the security is traded. The value of a foreign security
is determined in its national currency as of the normal close of
trading on the foreign exchange on which it is traded or as of
the close of regular trading on the Exchange, if that is earlier,
and that value is then converted into its U.S. dollar equivalent
at the foreign exchange rate in effect at noon, eastern time, on
the day the value of the foreign security is determined. If no
sale is reported at that time, the average between the current
bid and asked price is used. All other securities for which OTC
market quotations are readily available are valued at the average
between the current bid and asked price. Interest will be
recorded as accrued. Securities and other assets for which
market prices are not readily available are valued at fair value
as determined by IMI and approved in good faith by the Board.
Money market instruments of the Fund are valued at amortized
cost, which approximates money market value.
The Fund's liabilities are allocated between its classes.
The total of such liabilities allocated to a class plus that
class's distribution fee and any other expenses specially
allocated to that class are then deducted from the class's
proportionate interest in the Fund's assets, and the resulting
amount for each class is divided by the number of shares of that
class outstanding to produce the net asset value per share.
Portfolio securities are valued and the net asset value per
share is determined as of the close of regular trading on the
Exchange (normally 4:00 p.m., eastern time), every Monday through
Friday (exclusive of national business holidays). The Trust's
offices will be closed, and net asset value will not be
calculated, on the following national business holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
On those days when either or both of the Fund's Custodian or the
Exchange close early as a result of that day being a partial
holiday or otherwise, the Trust reserves the right to advance the
time on such day by which purchase and redemption requests must
be received.
When the Fund writes an option, an amount equal to the
premium received by the Fund is included in the Fund's Statement
of Assets and Liabilities as an asset and as an equivalent
liability. The amount of the liability will be subsequently
marked-to-market daily to reflect the current market value of the
option written. The current market value of a written option is
the last sale on the principal exchange on which such option is
traded or, in the absence of a sale, the last offering price.
The premium paid by the Fund for the purchase of a call or a
put option will be deducted from its assets and an equal amount
will be included in the asset section of the Fund's Statement of
Assets and Liabilities as an investment and subsequently adjusted
to the current market value of the option. For example, if the
current market value of the option exceeds the premium paid, the
excess would be unrealized appreciation and, conversely, if the
premium exceeds the current market value, such excess would be
unrealized depreciation. The current market value of a purchased
option will be the last sale price on the principal exchange on
which the option is traded or, in the absence of a sale, the last
bid price. If the Fund exercises a call option which it has
purchased, the cost of the security which the Fund purchased upon
exercise will be increased by the premium originally paid.
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 Fund shares will be suspended during any period
when the determination of its net asset value is suspended
pursuant to rules or orders of the SEC and may be suspended by
the Board whenever in its judgment it is in the best interest of
the Fund to do so.
PORTFOLIO TURNOVER
The Fund purchases securities that are believed by IMI to
have above average potential for capital appreciation. Common
stocks are disposed of in situations where it is believed that
potential for such appreciation has lessened or that other common
stocks have a greater potential. Therefore, the Fund may
purchase and sell securities without regard to the length of time
the security is to be, or has been, held. A change in securities
held by the Fund is known as "portfolio turnover" and may involve
the payment by the Fund of dealer markup or underwriting
commission and other transaction costs on the sale of securities,
as well as on the reinvestment of the proceeds in other
securities. The Fund's portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities
for the most recently completed fiscal year by the monthly
average of the value of the portfolio securities owned by the
Fund during that year. For purposes of determining the Fund's
portfolio turnover rate, all securities whose maturities at the
time of acquisition were one year or less are excluded.
REDEMPTIONS
Shares of the Fund are redeemed at their net asset value
next determined after a proper redemption request has been
received by IMSC.
Unless a shareholder requests that the proceeds of any
redemption be wired to his or her bank account, payment for
shares tendered for redemption is made by check within seven days
after tender in proper form, except that the Trust reserves the
right to suspend the right of redemption or to postpone the date
of payment upon redemption beyond seven days, (i) for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which trading on the Exchange is
restricted, (ii) for any period during which an emergency exists
as determined by the SEC as a result of which disposal of
securities owned by the Fund is not reasonably practicable or it
is not reasonably practicable for the Fund to fairly determine
the value of its net assets, or (iii) for such other periods as
the SEC may by order permit for the protection of shareholders of
the Fund.
Under unusual circumstances, when the Board deems it in the
best interest of the Fund's shareholders, the Fund may make
payment for shares repurchased or redeemed in whole or in part in
securities of the Fund taken at current values. If any such
redemption in kind is to be made, the Fund intends to make an
election pursuant to Rule 18f-1 under the 1940 Act. This will
require the Fund to redeem with cash at a shareholder's election
in any case where the redemption involves less than $250,000 (or
1% of the Fund's net asset value at the beginning of each 90-day
period during which such redemptions are in effect, if that
amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs
in converting such securities to cash.
The Trust may redeem those Advisor Class accounts of
shareholders who have maintained an investment of less than
$10,000 in the Fund for a period of more than 12 months. All
Advisor Class accounts below that minimum will be redeemed
simultaneously when MIMI deems it advisable. The $10,000 balance
will be determined by actual dollar amounts invested by the
shareholder, unaffected by market fluctuations. The Trust will
notify any such shareholder by certified mail of its intention to
redeem such account, and the shareholder shall have 60 days from
the date of such letter to invest such additional sums as shall
raise the value of such account above that minimum. Should the
shareholder fail to forward such sum within 60 days of the date
of the Trust's letter of notification, the Trust will redeem the
shares held in such account and transmit the redemption in value
thereof to the shareholder. However, those shareholders who are
investing pursuant to the Automatic Investment Method will not be
redeemed automatically unless they have ceased making payments
pursuant to the plan for a period of at least six consecutive
months, and these shareholders will be given six-months' notice
by the Trust before such redemption. Shareholders in a qualified
retirement, pension or profit sharing plan who wish to avoid tax
consequences must "rollover" any sum so redeemed into another
qualified plan within 60 days. The Board may change the minimum
account size.
If a shareholder has given authorization for telephonic
redemption privilege, shares can be redeemed and proceeds sent by
Federal wire to a single previously designated bank account.
Delivery of the proceeds of a wire redemption request of $250,000
or more may be delayed by the Fund for up to seven days if deemed
appropriate under then-current market conditions. The Trust
reserves the right to change this minimum or to terminate the
telephonic redemption privilege without prior notice. The Trust
cannot be responsible for the efficiency of the Federal wire
system of the shareholder's dealer of record or bank. The
shareholder is responsible for any charges by the shareholder's
bank.
The Fund employs reasonable procedures that require personal
identification prior to acting on redemption or exchange
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such instructions,
the Fund may be liable for any losses due to unauthorized or
fraudulent telephone instructions.
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) for taxable years
beginning before 1998, derive in each taxable year less than 30%
of its gross income from the sale or other disposition of certain
assets held less than three months, namely: (i) stock or
securities; (ii) options, futures, or forward contracts (other
than those on foreign currencies); or (iii) foreign currencies
(or options, futures, or forward contracts on foreign currencies)
that are not directly related to the Fund's principal business of
investing in stock or securities (or options and futures with
respect to stock or securities) (the "30% Limitation"); and (c)
diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the Fund's
assets is represented by cash, U.S. Government securities, the
securities of other regulated investment companies and other
securities, with such other securities limited, in respect of any
one issuer, to an amount not greater than 5% of the value of the
Fund's total assets and 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities of any one issuer
(other than U.S. Government securities and the securities of
other regulated investment companies).
As a regulated investment company, the Fund generally will
not be subject to U.S. Federal income tax on its income and gains
that it distributes to shareholders, if at least 90% of its
investment company taxable income (which includes, among other
items, dividends, interest and the excess of any short-term
capital gains over long-term capital losses) for the taxable year
is distributed. The Fund intends to distribute all such income.
Amounts not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a
nondeductible 4% excise tax at the Fund level. To avoid the tax,
the Fund must distribute during each calendar year, (1) at least
98% of its ordinary income (not taking into account any capital
gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending
on October 31 of the calendar year, and (3) all ordinary income
and capital gains for previous years that were not distributed
during such years. To avoid application of the excise tax, the
Fund intends to make distributions in accordance with the
calendar year distribution requirements. A distribution will be
treated as paid on December 31 of the current calendar year if it
is declared by the Fund in October, November or December of the
year with a record date in such a month and paid by the Fund
during January of the following year. Such distributions will be
taxable to shareholders in the calendar year the distributions
are declared, rather than the calendar year in which the
distributions are received.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS
The taxation of equity options and OTC options on debt
securities is governed by Code section 1234. Pursuant to Code
section 1234, the premium received by the Fund for selling a put
or call option is not included in income at the time of receipt.
If the option expires, the premium is short-term capital gain to
the Fund. If the Fund enters into a closing transaction, the
difference between the amount paid to close out its position and
the premium received is short-term capital gain or loss. If a
call option written by the Fund is exercised, thereby requiring
the Fund to sell the underlying security, the premium will
increase the amount realized upon the sale of such security and
any resulting gain or loss will be a capital gain or loss, and
will be long-term or short-term depending upon the holding period
of the security. With respect to a put or call option that is
purchased by the Fund, if the option is sold, any resulting gain
or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If
the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the
option. If the option is exercised, the cost of the option, in
the case of a call option, is added to the basis of the purchased
security and, in the case of a put option, reduces the amount
realized on the underlying security in determining gain or loss.
Some of the options, futures and foreign currency forward
contracts in which the Fund may invest may be "section 1256
contracts." Gains (or losses) on these contracts generally are
considered to be 60% long-term and 40% short-term capital gains
or losses; however foreign currency gains or losses arising from
certain section 1256 contracts are ordinary in character. Also,
section 1256 contracts held by the Fund at the end of each
taxable year (and on certain other dates prescribed in the Code)
are "marked-to-market" with the result that unrealized gains or
losses are treated as though they were realized.
The transactions in options, futures and forward contracts
undertaken by the Fund may result in "straddles" for Federal
income tax purposes. The straddle rules may affect the character
of gains or losses realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may
be deferred under the straddle rules, rather than being taken
into account in calculating the taxable income for the taxable
year in which such losses are realized. Because only a few
regulations implementing the straddle rules have been
promulgated, the consequences of such transactions to the Fund
are not entirely clear. The straddle rules may increase the
amount of short-term capital gain realized by the Fund, which is
taxed as ordinary income when distributed to shareholders.
The Fund may make one or more of the elections available
under the Code which are applicable to straddles. If the Fund
makes any of the elections, the amount, character and timing of
the recognition of gains or losses from the affected straddle
positions will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to shareholders
as ordinary income or long-term capital gain, may be increased or
decreased substantially as compared to a fund that did not engage
in such transactions.
Notwithstanding any of the foregoing, a Fund may recognize
gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if the Fund enters into a short
sale, offsetting notional principal contract, futures or forward
contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial
positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and
short sales) in stock, partnership interests, certain actively
traded trust instruments and certain debt instruments.
Constructive sale treatment of appreciated financial positions
does not apply to certain transactions closed in the 90-day
period ending with the 30th day after the close of a Fund's
taxable year, if certain conditions are met.
The 30% Limitation and the diversification requirements
applicable to the Fund's assets may limit the extent to which the
Fund will be able to engage in transactions in options, futures
and forward contracts.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
Gains or losses attributable to fluctuations in exchange
rates which occur between the time the Fund accrues receivables
or liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt
securities denominated in a foreign currency and certain options,
futures and forward contracts, gains or losses attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. These
gains and losses, referred to under the Code as "section 988"
gains or losses, increase or decrease the amount of the Fund's
investment company taxable income available to be distributed to
its shareholders as ordinary income. If section 988 losses
exceed other investment company taxable income during a taxable
year, the Fund would not be able to make any ordinary dividend
distributions, or distributions made before the losses were
realized would be recharacterized as a return of capital to
shareholders, rather than as an ordinary dividend, reducing each
shareholder's basis in his or her Fund shares.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in shares of foreign corporations which
may be classified under the Code as passive foreign investment
companies ("PFICs"). In general, a foreign corporation is
classified as a PFIC if at least one-half of its assets
constitute investment-type assets, or 75% or more of its gross
income is investment-type income. If the Fund receives a so-
called "excess distribution" with respect to PFIC stock, the Fund
itself may be subject to a tax on a portion of the excess
distribution, whether or not the corresponding income is
distributed by the Fund to shareholders. In general, under the
PFIC rules, an excess distribution is treated as having been
realized ratably over the period during which the Fund held the
PFIC shares. The Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated
to prior Fund taxable years and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable
years. Certain distributions from a PFIC as well as gain from
the sale of PFIC shares are treated as excess distributions.
Excess distributions are characterized as ordinary income even
though, absent application of the PFIC rules, certain excess
distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment
with respect to PFIC shares. A Fund may elect to mark to market
its PFIC shares, resulting in the shares being treated as sold at
fair market value on the last business day of each taxable year.
Any resulting gain would be reported as ordinary income; any
resulting loss and any loss from an actual disposition of the
shares would be reported as ordinary loss to the extent of any
net gains reported in prior years. Under another election that
currently is available in some circumstances, the Fund generally
would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC in a given year.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by the Fund may be treated as debt securities that are
issued originally at a discount. Generally, the amount of the
original issue discount ("OID") is treated as interest income and
is included in income over the term of the debt security, even
though payment of that amount is not received until a later time,
usually when the debt security matures.
If the Fund invests in certain high yield original issue
discount obligations issued by corporations, a portion of the
original issue discount accruing on the obligation may be
eligible for the deduction for dividends received by
corporations. In such event, dividends of investment company
taxable income received from the Fund by its corporate
shareholders, to the extent attributable to such portion of
accrued original issue discount, may be eligible for this
deduction for dividends received by corporations if so designated
by the Fund in a written notice to shareholders.
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by the Fund in the secondary market may be treated as
having market discount. Generally, gain recognized on the
disposition of, and any partial payment of principal on, a debt
security having market discount is treated as ordinary income to
the extent the gain, or principal payment, does not exceed the
"accrued market discount" on such debt security. In addition,
the deduction of any interest expenses attributable to debt
securities having market discount may be deferred. Market
discount generally accrues in equal daily installments. The Fund
may make one or more of the elections applicable to debt
securities having market discount, which could affect the
character and timing of recognition of income.
Some debt securities (with a fixed maturity date of one year
or less from the date of issuance) that may be acquired by the
Fund may be treated as having acquisition discount, or OID in the
case of certain types of debt securities. Generally, the Fund
will be required to include the acquisition discount, or OID, in
income over the term of the debt security, even though payment of
that amount is not received until a later time, usually when the
debt security matures. The Fund may make one or more of the
elections applicable to debt securities having acquisition
discount, or OID, which could affect the character and timing of
recognition of income.
The Fund generally will be required to distribute dividends
to shareholders representing discount on debt securities that is
currently includible in income, even though cash representing
such income may not have been received by the Fund. Cash to pay
such dividends may be obtained from sales proceeds of securities
held by the Fund.
DISTRIBUTIONS
Distributions of investment company taxable income are
taxable to a U.S. shareholder as ordinary income, whether paid in
cash or shares. Dividends paid by the Fund to a corporate
shareholder, to the extent such dividends are attributable to
dividends received from U.S. corporations by the Fund, may
qualify for the dividends received deduction. However, the
revised alternative minimum tax applicable to corporations may
reduce the value of the dividends received deduction.
Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any,
designated by the Fund as capital gain dividends, are taxable as
long-term capital gains, whether paid in cash or in shares,
regardless of how long the shareholder has held the Fund's shares
and are not eligible for the dividends received deduction.
Shareholders receiving distributions in the form of newly issued
shares will have a cost basis in each share received equal to the
net asset value of a share of the Fund on the distribution date.
A distribution of an amount in excess of the Fund's current and
accumulated earnings and profits will be treated by a shareholder
as a return of capital which is applied against and reduces the
shareholder's basis in his or her shares. To the extent that the
amount of any such distribution exceeds the shareholder's basis
in his or her shares, the excess will be treated by the
shareholder as gain from a sale or exchange of the shares.
Shareholders will be notified annually as to the U.S. Federal tax
status of distributions and shareholders receiving distributions
in the form of newly issued shares will receive a report as to
the net asset value of the shares received.
If the net asset value of shares is reduced below a
shareholder's cost as a result of a distribution by the Fund,
such distribution generally will be taxable even though it
represents a return of invested capital. Shareholders should be
careful to consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at this
time may reflect the amount of the forthcoming distribution.
Those purchasing just prior to a distribution will receive a
distribution which generally will be taxable to them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of his or her shares, a
shareholder will realize a taxable gain or loss depending upon
his or her basis in the shares. Such gain or loss will be
treated as capital gain or loss if the shares are capital assets
in the shareholder's hands and, if so, may be eligible for
reduced federal tax rates, depending upon the shareholder's
holding period for the shares. Any loss realized on a redemption
sale or exchange will be disallowed to the extent the shares
disposed of are replaced (including through reinvestment of
dividends) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a
case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss. Any loss realized by a shareholder
on the sale of Fund shares held by the shareholder for six-months
or less will be treated for tax purposes as a long-term capital
loss to the extent of any distributions of capital gain dividends
received or treated as having been received by the shareholder
with respect to such shares.
In some cases, shareholders will not be permitted to take
all or portion of their sales loads into account for purposes of
determining the amount of gain or loss realized on the
disposition of their shares. This prohibition generally applies
where (1) the shareholder incurs a sales load in acquiring the
shares of the Fund, (2) the shares are disposed of before the
91st day after the date on which they were acquired, and (3) the
shareholder subsequently acquires shares in the Fund or another
regulated investment company and the otherwise applicable sales
charge is reduced under a "reinvestment right" received upon the
initial purchase of Fund shares. The term "reinvestment right"
means any right to acquire shares of one or more regulated
investment companies without the payment of a sales load or with
the payment of a reduced sales charge. Sales charges affected by
this rule are treated as if they were incurred with respect to
the shares acquired under the reinvestment right. This provision
may be applied to successive acquisitions of fund shares.
FOREIGN WITHHOLDING TAXES
Income received by the Fund from sources within a foreign
country may be subject to withholding and other taxes imposed by
that country.
If more than 50% of the value of the Fund's total assets at
the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible and may elect to "pass-
through" to the Fund's shareholders the amount of foreign income
and similar taxes paid by the Fund. Pursuant to this election, a
shareholder will be required to include in gross income (in
addition to taxable dividends actually received) his or her pro
rata share of the foreign income and similar taxes paid by the
Fund, and will be entitled either to deduct his or her pro rata
share of foreign income and similar taxes in computing his or her
taxable income or to use it as a foreign tax credit against his
or her U.S. Federal income taxes, subject to limitations. No
deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions. Foreign taxes generally may not be
deducted by a shareholder that is an individual in computing the
alternative minimum tax. Each shareholder will be notified
within 60 days after the close of the Fund's taxable year whether
the foreign taxes paid by the Fund will "pass-through" for that
year and, if so, such notification will designate (1) the
shareholder's portion of the foreign taxes paid to each such
country and (2) the portion of the dividend which represents
income derived from sources within each such country.
Generally, except in the case of certain electing individual
taxpayers who have limited creditable foreign taxes and no
foreign source income other than passive investment-type income,
a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or
her total foreign source taxable income. For this purpose, if
the Fund makes the election described in the preceding paragraph,
the source of the Fund's income flows through to its
shareholders. With respect to the Fund, gains from the sale of
securities generally will be treated as derived from U.S. sources
and section 988 gains will be treated as ordinary income derived
from U.S. sources. The limitation on the foreign tax credit is
applied separately to foreign source passive income, including
foreign source passive income received from the Fund. In
addition, the foreign tax credit may offset only 90% of the
revised alternative minimum tax imposed on corporations and
individuals. Furthermore, the foreign tax credit is eliminated
with respect to foreign taxes withheld on dividends if the
dividend-paying shares of the shares of the Fund are held by the
Fund or the shareholder, as the case may be, for less than 16
days (46 days in the case of preferred shares) during the 30-day
period (90-day period for preferred shares) beginning 15 days (45
days for preferred shares) before the shares become ex-dividend.
The foregoing is only a general description of the foreign
tax credit under current law. Because application of the credit
depends on the particular circumstances of each shareholder,
shareholders are advised to consult their own tax advisers.
BACKUP WITHHOLDING
The Fund will be required to report to the Internal Revenue
Service ("IRS") all taxable distributions, as well as gross
proceeds from the redemption of the Fund's shares, except in the
case of certain exempt shareholders. All such distributions and
proceeds will be subject to withholding of Federal income tax at
a rate of 31% ("backup withholding") in the case of non-exempt
shareholders if (1) the shareholder fails to furnish the Fund
with and to certify the shareholder's correct taxpayer
identification number or social security number, (2) the IRS
notifies the shareholder or the Fund that the shareholder has
failed to report properly certain interest and dividend income to
the IRS and to respond to notices to that effect, or (3) when
required to do so, the shareholder fails to certify that he or
she is not subject to backup withholding. If the withholding
provisions are applicable, any such distributions or proceeds,
whether reinvested in additional shares or taken in cash, will be
reduced by the amounts required to be withheld.
Distributions may also be subject to additional state, local
and foreign taxes depending on each shareholder's particular
situation. Non-U.S. shareholders may be subject to U.S. tax
rules that differ significantly from those summarized above.
This discussion does not purport to deal with all of the tax
consequences applicable to the Fund or shareholders.
Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an
investment in the Fund.
PERFORMANCE INFORMATION
Comparisons of the Fund's performance may be made with respect to
various unmanaged indices (including the TSE 300, S&P 100, S&P
500, Dow Jones Industrial Average and Major Market Index) which
assume reinvestment of dividends, but do not reflect deductions
for administrative and management costs. The Fund also may be
compared to Lipper's Analytical Reports, reports produced by a
widely used independent research firm that ranks mutual funds by
overall performance, investment objectives and assets, or to
Wiesenberger Reports. Lipper Analytical Services does not
include sales charges in computing performance. Further
information on comparisons is contained in the Prospectus.
Performance rankings will be based on historical information and
are not intended to indicate future performance.
In addition, the Trust may, from time to time, include the
average annual total return and the cumulative total return of
shares of the Fund in advertisements, promotional literature or
reports to shareholders or prospective investors.
AVERAGE ANNUAL TOTAL RETURN. Quotations of standardized
average annual total return ("Standardized Return") for a
specific class of shares of the Fund will be expressed in terms
of the average annual compounded rate of return that would cause
a hypothetical investment in that class of the Fund made on the
first day of a designated period to equal the ending redeemable
value ("ERV") of such hypothetical investment on the last day of
the designated period, according to the following formula:
P(1 + T){superscript n} = ERV
Where: P = a hypothetical initial payment of $1,000 to
purchase shares of a specific Class
T = the average annual total return of shares of
that Class
n = the number of years
ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
period.
For purposes of the above computation for the Fund, it is
assumed that all dividends and capital gains distributions made
by the Fund are reinvested at net asset value in additional
Advisor Class shares during the designated period. 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%.
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").
In determining the average annual total return for a
specific Class of shares of the Fund, recurring fees, if any,
that are charged to all shareholder accounts are taken into
consideration. For any account fees that vary with the size of
the account of the Fund, the account fee used for purposes of the
following computations is assumed to be the fee that would be
charged to the mean account size of the Fund.
Since the Fund will not have commenced operations as of the
date of this SAI, no performance information is available for the
Fund as of the date of this SAI.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION. The
foregoing computation methods are prescribed for advertising and
other communications subject to SEC Rule 482. Communications not
subject to this rule may contain a number of different measures
of performance, computation methods and assumptions, including
but not limited to: historical total returns; results of actual
or hypothetical investments; changes in dividends, distributions
or share values; or any graphic illustration of such data. These
data may cover any period of the Trust's existence and may or may
not include the impact of sales charges, taxes or other factors.
Performance quotations for the Fund will vary from time to
time depending on market conditions, the composition of the
Fund's portfolio and operating expenses of the Fund. These
factors and possible differences in the methods used in
calculating performance quotations should be considered when
comparing performance information regarding the Fund's shares
with information published for other investment companies and
other investment vehicles. Performance quotations should also be
considered relative to changes in the value of the Fund's shares
and the risks associated with the Fund's investment objectives
and policies. At any time in the future, performance quotations
may be higher or lower than past performance quotations and there
can be no assurance that any historical performance quotation
will continue in the future.
The Fund may also cite endorsements or use for comparison
their performance rankings and listings reported in such
newspapers or business or consumer publications as, among others:
AAII Journal, Barron's, Boston Business Journal, Boston Globe,
Boston Herald, Business Week, Consumer's Digest, Consumer Guide
Publications, Changing Times, Financial Planning, Financial
World, Forbes, Fortune, Growth Fund Guide, Houston Post,
Institutional Investor, International Fund Monitor, Investor's
Daily, Los Angeles Times, Medical Economics, Miami Herald, Money
Mutual Fund Forecaster, Mutual Fund Letter, Mutual Fund Source
Book, Mutual Fund Values, National Underwriter Nelson's Directory
of Investment Managers, New York Times, Newsweek, No Load Fund
Investor, No Load Fund* X, Oakland Tribune, Pension World,
Pensions and Investment Age, Personal Investor, Rugg and Steele,
Time, U.S. News and World Report, USA Today, The Wall Street
Journal, and Washington Post.
FINANCIAL STATEMENTS
As of January 1, 1998 the Fund has not commenced operations,
and therefore has not issued historical financial statements.
After the Fund commences operations, it will issue an Annual
Report to shareholders for each fiscal year ended December 31 and
a Semi-Annual Report to shareholders for each period June 30.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P") AND
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994 Issue (Moody's
Investors Service, New York, 1994), and "Standard & Poor's
Municipal Ratings Handbook," October 1994 Issue (McGraw Hill, New
York, 1994).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's are judged
by Moody's to be of the best quality, carrying the smallest
degree of investment risk. Interest payments are protected by a
large or exceptionally stable margin and principal is secure.
Bonds rated Aa are judged by Moody's to be of high quality by all
standards. Aa bonds are rated lower than Aaa bonds because
margins of protection may not be as large as those of Aaa bonds,
or fluctuations of protective elements may be of greater
amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger than those applicable to
Aaa securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are considered as upper
medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Bonds rated Baa by Moody's are considered medium-grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other terms
of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest. Bonds which are
rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the highest
commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by management of obligations which may be present
or may arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the
relative strengths of these factors. The designation of Prime-1
indicates the highest quality repayment capacity of the rated
issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt rating is a
current assessment of the creditworthiness of an obligor with
respect to a specific obligation. The ratings are based on
current information furnished by the issuer or obtained by S&P
from other sources it considers reliable. The ratings described
below may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA by S&P is considered by S&P to be the highest
grade obligation. Capacity to pay interest and repay principal
is extremely strong. Debt rated AA is judged by S&P to have a
very strong capacity to pay interest and repay principal and
differs from the highest rated issues only in small degree. Debt
rated A by S&P has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Debt rated BBB by S&P is regarded by S&P as having an
adequate capacity to pay interest and repay principal. Although
such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating. Debt rated B has a greater vulnerability to default
but currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used
for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating. Debt rated CCC has a currently
identifiable vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an actual or
implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt
service payments are continued.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
having an original maturity of no more than 365 days.
Commercial paper rated A by S&P has the following
characteristics: (i) liquidity ratios are adequate to meet cash
requirements; (ii) long-term senior debt rating should be A or
better, although in some cases BBB credits may be allowed if
other factors outweigh the BBB; (iii) the issuer should have
access to at least one additional channel of borrowing; (iv)
basic earnings and cash flow should have an upward trend with
allowances made for unusual circumstances; and (v) typically the
issuer's industry should be well established and the issuer
should have a strong position within its industry and the
reliability and quality of management should be unquestioned.
Issues rated A are further referred to by use of numbers 1, 2 and
3 to denote relative strength within this highest classification.
For example, the A-1 designation indicates that the degree of
safety regarding timely payment of debt is strong.
Issues rated B are regarded as having only speculative
capacity for timely payment. The C rating is assigned to short-
term debt obligations with a doubtful capacity for payment.
PART C. OTHER INFORMATION
Item 24: Financial Statements and Exhibits
(a) Financial Statements:
Incorporated by reference in Part B:
(1) June 30, 1997 Semi-Annual Report to Shareholders
of Ivy Asia Pacific Fund (Unaudited):
- Portfolio of Investments at June 30, 1997
- Statement of Assets and Liabilities as of
June 30, 1997
- Statement of Operations for the Six Months
Ended June 30, 1997
- Statement of Changes in Net Assets for the
Six Months Ended June 30, 1997
- Financial Highlights
- Notes to Financial Statements
(2) Statement of Assets and Liabilities as of December
10, 1996 and Related Notes of Ivy Asia Pacific
Fund:
- Report of Independent Accountants
(3) June 30, 1997 Semi-Annual Report to Shareholders
of Ivy Canada Fund (Unaudited):
- Portfolio of Investments at June 30, 1997
- Statement of Assets and Liabilities as of
June 30, 1997
- Statement of Operations for the Six Months
Ended June 30, 1997
- Statement of Changes in Net Assets
- Financial Highlights
- Notes to Financial Statements
(4) December 31, 1996 Annual Report to Shareholders of
Ivy Canada Fund:
- Portfolio of Investments at December 31, 1996
- Statement of Assets and Liabilities as of
December 31, 1996
- Statement of Operations for the Year ended
December 31, 1996
- Statement of Changes in Net Assets for the
Year ended December 31, 1996 and 1995
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
(5) June 30, 1997 Semi-Annual Report to Shareholders
of Ivy China Region Fund (Unaudited):
- Portfolio of Investments at June 30, 1997
- Statement of Assets and Liabilities as of
June 30, 1997
- Statement of Operations for the Six Months
Ended June 30, 1997
- Statement of Changes in Net Assets
- Financial Highlights
- Notes to Financial Statements
(6) December 31, 1996 Annual Report to Shareholders of
Ivy China Region Fund:
- Portfolio of Investments at December 31, 1996
- Statement of Assets and Liabilities as of
December 31, 1996
- Statement of Operations for the Year ended
December 31, 1996
- Statement of Changes in Net Assets for the
Year ended December 31, 1996 and 1995
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
(7) June 30, 1997 Semi-Annual Report to Shareholders
of Ivy Global Fund (Unaudited):
- Portfolio of Investments at June 30, 1997
- Statement of Assets and Liabilities as of
June 30, 1997
- Statement of Operations for the Six Months
Ended June 30, 1997
- Statement of Changes in Net Assets
- Financial Highlights
- Notes to Financial Statements
(8) December 31, 1996 Annual Report to Shareholders of
Ivy Global Fund:
- Portfolio of Investments at December 31, 1996
- Statement of Assets and Liabilities as of
December 31, 1996
- Statement of Operations for the Year ended
December 31, 1996
- Statement of Changes in Net Assets for the
Year ended December 31, 1996 and 1995
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
(9) June 30, 1997 Semi-Annual Report to Shareholders
of Ivy Global Natural Resources Fund (Unaudited):
- Portfolio of Investments at June 30, 1997
- Statement of Assets and Liabilities as of
June 30, 1997
- Statement of Operations for the Six Months
Ended June 30, 1997
- Statement of Changes in Net Assets for the
Six Months Ended June 30, 1997
- Financial Highlights
- Notes to Financial Statements
(10) Statement of Assets and Liabilities as of December
10, 1996 and Related Notes of Ivy Global Natural
Resources Fund:
- Report of Independent Accountants
(11) June 30, 1997 Semi-Annual Report to Shareholders
of Ivy Global Science & Technology Fund
(Unaudited):
- Portfolio of Investments at June 30, 1997
- Statement of Assets and Liabilities as of
June 30, 1997
- Statement of Operations for the Six Months
Ended June 30, 1997
- Statement of Changes in Net Assets
- Financial Highlights
- Notes to Financial Statements
(12) December 31, 1996 Annual Report to Shareholders of
Ivy Global Science & Technology Fund:
- Portfolio of Investments at December 31, 1996
- Statement of Assets and Liabilities as of
December 31, 1996
- Statement of Operations for the period from
July 22, 1996 (commencement of operations) to
December 31, 1996
- Statement of Changes in Net Assets for the
period from July 22, 1996 (commencement of
operations) to December 31, 1996
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
(13) April 28, 1997 Statement of Assets and Liabilities
for Ivy International Fund II:
- Statement of Assets and Liabilities as of
September 30, 1997
- Statement of Operations for the Period from
May 13, 1997 (commencement of operations) to
September 30, 1997
- Statement of Changes in Net Assets for the
Period from May 13, 1997 (commencement of
operations) to September 30, 1997
- Notes to Financial Statements
(14) June 30, 1997 Semi-Annual Report to
Shareholders of Ivy International Fund II
(Unaudited):
- Portfolio of Investments at June 30, 1997
- Statement of Assets and Liabilities as of
June 30, 1997
- Statement of Operations for the Period From
May 13, 1997 (Commencement) to June 30, 1997
- Statement of Changes in Net Assets for Period
From May 13, 1997 (Commencement) to June 30,
1997
- Financial Highlights
- Notes to Financial Statements
(15) June 30, 1997 Semi-Annual Report to Shareholders
of Ivy International Small Companies
Fund(Unaudited):
- Portfolio of Investments at June 30, 1997
- Statement of Assets and Liabilities as of
June 30, 1997
- Statement of Operations for the Six Months
Ended June 30, 1997
- Statement of Changes in Net Assets for the
Six Months Ended June 30, 1997
- Financial Highlights
- Notes to Financial Statements
(16) Statement of Assets and Liabilities as of December
10, 1996 and Related Notes of Ivy International
Small Companies Fund:
- Report of Independent Accountants
(17) June 30, 1997 Semi-Annual Report to Shareholders
of Ivy Latin America Strategy Fund (Unaudited):
- Portfolio of Investments at June 30, 1997
- Statement of Assets and Liabilities as of
June 30, 1997
- Statement of Operations for the Six Months
Ended June 30, 1997
- Statement of Changes in Net Assets
- Financial Highlights
- Notes to Financial Statements
(18) December 31, 1996 Annual Report to Shareholders of
Ivy Latin America Strategy Fund:
- Portfolio of Investments at December 31, 1996
- Statement of Assets and Liabilities as of
December 31, 1996
- Statement of Operations for the Year ended
December 31, 1996
- Statement of Changes in Net Assets for the
Year ended December 31, 1996 and 1995
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
(19) June 30, 1997 Semi-Annual Report to Shareholders
of Ivy New Century Fund (Unaudited):
- Portfolio of Investments at June 30, 1997
- Statement of Assets and Liabilities as of
June 30, 1997
- Statement of Operations for the Six Months
Ended June 30, 1997
- Statement of Changes in Net Assets
- Financial Highlights
- Notes to Financial Statements
(20) December 31, 1996 Annual Report to Shareholders of
Ivy New Century Fund:
- Portfolio of Investments at December 31, 1996
- Statement of Assets and Liabilities as of
December 31, 1996
- Statement of Operations for the Year ended
December 31, 1996
- Statement of Changes in Net Assets for the
Year ended December 31, 1996 and 1995
- Financial Highlights
- Notes to Financial Statements
- Report of Independent Accountants
(21) June 30, 1997 Semi-Annual Report to Shareholders
of Ivy Pan-Europe Fund (Unaudited):
- Portfolio of Investments at June 30, 1997
- Statement of Assets and Liabilities as of
June 30, 1997
- Statement of Operations for the Period From
May 13, 1997 (Commencement) to June 30, 1997
- Statement of Changes in Net Assets for Period
From May 13, 1997 (Commencement) to June 30,
1997
- Financial Highlights
- Notes to Financial Statements
(22) April 28, 1997 Statement of Assets and Liabilities
for Ivy Pan-Europe Fund:
- Statement of Assets and Liabilities as of
September 30, 1997
- Statement of Operations for the Period from
May 13, 1997 (commencement of operations) to
September 30, 1997
- Statement of Changes in Net Assets for the
Period from May 13, 1997 (commencement of
operations) to September 30, 1997
- Notes to Financial Statements
(b) Exhibits:
1. (a) Amended and Restated Declaration of Trust
dated December 10, 1992, filed with Post-
Effective Amendment No. 71 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(b) Amendment to Amended and Restated Declaration
of Trust, filed with Post-Effective Amendment
No. 73 to Registration Statement No. 2-17613
and incorporated by reference herein.
(c) Amendment to Amended and Restated Declaration
of Trust, filed with Post-Effective Amendment
No. 74 to Registration Statement No. 2-17613
and incorporated by reference herein.
(d) Establishment and Designation of Additional
Series (Ivy Emerging Growth Fund), filed with
Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(e) Redesignation of Shares (Ivy Growth with
Income Fund--Class A) and Establishment and
Designation of Additional Class (Ivy Growth
with Income Fund--Class C), filed with Post-
Effective Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(f) Redesignation of Shares (Ivy Emerging Growth
Fund--Class A, Ivy Growth Fund--Class A and
Ivy International Fund--Class A), filed with
Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(g) Establishment and Designation of Additional
Series (Ivy China Region Fund), filed with
Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(h) Establishment and Designation of Additional
Class (Ivy China Region Fund--Class B, Ivy
Emerging Growth Fund--Class B, Ivy Growth
Fund--Class B, Ivy Growth with Income Fund--
Class B and Ivy International Fund--Class B),
filed with Post-Effective Amendment No. 74
for Registration Statement No. 2-17613 and
incorporated by reference herein.
(i) Establishment and Designation of Additional
Class (Ivy International Fund--Class I),
filed with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(j) Establishment and Designation of Series and
Classes (Ivy Latin American Strategy Fund--
Class A and Class B, Ivy New Century Fund--
Class A and Class B), filed with Post-
Effective Amendment No. 75 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(k) Establishment and Designation of Series and
Classes (Ivy International Bond Fund--Class A
and Class B), filed with Post-Effective
Amendment No. 76 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(l) Establishment and Designation of Series and
Classes (Ivy Bond Fund, Ivy Canada Fund, Ivy
Global Fund, Ivy Short-Term U.S. Government
Securities Fund (now known as Ivy Short-Term
Bond Fund) -- Class A and Class B), filed
with Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(m) Redesignation of Ivy Short-Term U.S.
Government Securities Fund as Ivy Short-Term
Bond Fund, filed with Post-Effective
Amendment No. 81 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(n) Redesignation of Shares (Ivy Money Market
Fund--Class A and Ivy Money Market Fund--
Class B), filed with Post-Effective Amendment
No. 84 to Registration Statement No. 2-17613
and incorporated by reference herein.
(o) Form of Establishment and Designation of
Additional Class (Ivy Bond Fund--Class C; Ivy
Canada Fund--Class C; Ivy China Region Fund--
Class C; Ivy Emerging Growth Fund--Class C;
Ivy Global Fund--Class C; Ivy Growth Fund--
Class C; Ivy Growth with Income Fund--Class
C; Ivy International Fund--Class C; Ivy Latin
America Strategy Fund--Class C; Ivy
International Bond Fund--Class C; Ivy Money
Market Fund--Class C; Ivy New Century Fund--
Class C), filed with Post-Effective Amendment
No. 84 to Registration Statement No. 2-17613
and incorporated by reference herein.
(p) Establishment and Designation of Series and
Classes (Ivy Global Science & Technology
Fund--Class A, Class B, Class C and Class I),
filed with Post-Effective Amendment No. 86 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(q) Establishment and designation of Series and
Classes (Ivy Global Natural Resources Fund--
Class A, Class B and Class C; Ivy Asia
Pacific Fund--Class A, Class B and Class C;
Ivy International Small Companies Fund--Class
A, Class B, Class C and Class I), filed with
Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(r) Establishment and designation of Series and
Classes (Ivy Pan-Europe Fund--Class A, Class
B and Class C), filed with Post-Effective
Amendment No. 92 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(s) Establishment and designation of Series and
Classes (Ivy International Fund II--Class A,
Class B, Class C and Class I), filed with
Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(t) Form of Establishment and Designation of
Additional Class (Ivy Asia Pacific Fund--
Advisor Class; Ivy Bond Fund--Advisor Class;
Ivy Canada Fund--Advisor Class; Ivy China
Region Fund--Advisor Class; Ivy Emerging
Growth Fund--Advisor Class; Ivy Global Fund--
Advisor Class; Ivy Global Natural Resources
Fund--Advisor Class; Ivy Global Science &
Technology Fund--Advisor Class; Ivy Growth
Fund--Advisor Class; Ivy Growth with Income
Fund--Advisor Class; Ivy International Bond
Fund--Advisor Class; Ivy International Fund
II--Advisor Class; Ivy International Small
Companies Fund--Advisor Class; Ivy Latin
America Strategy Fund--Advisor Class; Ivy New
Century Fund--Advisor Class; Ivy Pan-Europe
Fund--Advisor Class), filed with this Post-
Effective Amendment No. 96 to Registration
Statement No. 2-17613.
2. By-Laws, as amended and, filed with Post-Effective
Amendment No. 48 to Registration Statement No. 2-
17613 and incorporated by reference herein.
3. Not Applicable
4. (a) Specimen Securities for Ivy Growth Fund, Ivy
Growth with Income Fund, Ivy International
Fund and Ivy Money Market Fund, filed with
Post-Effective Amendment No. 49 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Specimen Security for Ivy Emerging Growth
Fund, filed with Post-Effective Amendment No.
70 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(c) Specimen Security for Ivy China Region Fund,
filed with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(d) Specimen Security for Ivy Latin American
Strategy Fund, filed with Post-Effective
Amendment No. 75 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(e) Specimen Security for Ivy New Century Fund,
filed with Post-Effective Amendment No. 75 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(f) Specimen Security for Ivy International Bond
Fund, filed with Post-Effective Amendment No.
76 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(g) Specimen Securities for Ivy Bond Fund, Ivy
Canada Fund, Ivy Global Fund, and Ivy Short-
Term U.S. Government Securities Fund, filed
with Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
5. (a) Master Business Management and Investment
Advisory Agreement between Ivy Fund and Ivy
Management, Inc. and Supplements for Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund and Ivy Money Market Fund,
filed with Post-Effective Amendment No. 68 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Subadvisory Contract by and among Ivy Fund,
Ivy Management, Inc. and Boston Overseas
Investors, Inc., filed with Post-Effective
Amendment No. 68 to Registration Statement
No. 2-17613 and incorporated by the reference
herein.
(c) Assignment Agreement relating to Subadvisory
Contract, filed with Post-Effective Amendment
No. 74 to Registration Statement No. 2-17613
and incorporated by reference herein.
(d) Business Management and Investment Advisory
Agreement Supplement for Ivy Emerging Growth
Fund, filed with Post-Effective Amendment No.
74 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(e) Business Management and Investment Advisory
Agreement Supplement for Ivy China Region
Fund, filed with Post-Effective Amendment No.
71 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(f) Form of Business Management and Investment
Advisory Supplement for Ivy Latin America
Strategy Fund, filed with Post-Effective
Amendment No. 75 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(g) Form of Business Management and Investment
Advisory Agreement Supplement for Ivy New
Century Fund, filed with Post-Effective
Amendment No. 75 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(h) Form of Business Management and Investment
Advisory Agreement Supplement for Ivy
International Bond Fund, filed with Post-
Effective Amendment No. 76 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(i) Business Management and Investment Advisory
Agreement Supplement for Ivy Bond Fund, Ivy
Global Fund and Ivy Short-Term U.S.
Government Securities Fund, filed with Post-
Effective Amendment No. 81 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(j) Master Business Management Agreement between
Ivy Fund and Ivy Management, Inc., filed with
Post-Effective Amendment No. 81 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(k) Form of Supplement to Master Business
Agreement between Ivy Fund and Ivy
Management, Inc. (Ivy Canada Fund), filed
with Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(l) Form of Investment Advisory Agreement between
Ivy Fund and Mackenzie Financial Corporation,
filed with Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(m) Form of Supplement to Master Business
Management and Investment Advisory Agreement
between Ivy Fund and Ivy Management, Inc.
(Ivy Global Science & Technology Fund), filed
with Post-Effective Amendment No. 86 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(n) Form of Supplement to Master Business
Management and Investment Advisory Agreement
between Ivy Fund and Ivy Management, Inc.
(Ivy Asia Pacific Fund and Ivy International
Small Companies Fund), filed with Post-
Effective Amendment No. 89 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(o) Form of Supplement to Master Business
Management Agreement between Ivy Fund and Ivy
Management, Inc. (Ivy Global Natural
Resources Fund), filed with Post-Effective
Amendment No. 89 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(p) Form of Supplement to Investment Advisory
Agreement between Ivy Fund and Mackenzie
Financial Corporation (Ivy Global Natural
Resources Fund), filed with Post-Effective
Amendment No. 89 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(q) Form of Supplement to Master Business
Management and Investment Advisory Agreement
between Ivy Fund and Ivy Management, Inc.
(Ivy Pan-Europe Fund), filed with Post-
Effective Amendment No. 94 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(r) Form of Supplement to Master Business
Management and Investment Advisory Agreement
between Ivy Fund and Ivy Management, Inc.
(Ivy International Fund II), filed with Post-
Effective Amendment No. 94 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
6. (a) Dealer Agreement, as amended and, filed with
Post-Effective Amendment No. 70 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Amended and Restated Distribution Agreement,
filed with Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(c) Addendum to Amended and Restated Distribution
Agreement, filed with Post-Effective
Amendment No. 73 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(d) Addendum to Amended and Restated Distribution
Agreement (Ivy Money Market Fund--Class A and
Class B), filed with Post-Effective Amendment
No. 84 to Registration Statement No. 2-17613
and incorporated by reference herein.
(e) Form of Addendum to Amended and Restated
Distribution Agreement (Class C), filed with
Post-Effective Amendment No. 84 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(f) Form of Addendum to Amended and Restated
Distribution Agreement (Ivy Global Science &
Technology Fund--Class A, Class B, Class C
and Class I), filed with Post-Effective
Amendment No. 86 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(g) Form of Addendum to Amended and Restated
Distribution Agreement (Ivy Global Natural
Resources Fund--Class A, Class B and Class C;
Ivy Asia Pacific Fund--Class A, Class B and
Class C; Ivy International Small Companies
Fund--Class A, Class B, Class C, and Class
I), filed with Post-Effective Amendment No.
89 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(h) Form of Addendum to Amended and Restated
Distribution Agreement (Ivy Pan-Europe Fund--
Class A, Class B and Class C), filed with
Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(i) Form of Addendum to Amended and Restated
Distribution Agreement (Ivy International
Fund II--Class A, Class B, Class C and Class
I), filed with Post-Effective Amendment No.
94 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(j) Form of Addendum to Amended and Restated
Distribution Agreement (Advisor Class), filed
with this Post-Effective Amendment No. 96 to
Registration Statement No. 2-17613.
7. Not Applicable
8. Custodian Agreement between Ivy Fund and Brown
Brothers Harriman & Co., filed with Post-Effective
Amendment No. 74 to Registration No. 2-17613 and
incorporated by reference herein.
9. (a) Master Administrative Services Agreement
between Ivy Fund and Mackenzie Investment
Management Inc. and Supplements for Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund and Ivy Money Market Fund,
filed with Post-Effective Amendment No. 68 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Addendum to Administrative Services Agreement
Supplement for Ivy International Fund, filed
with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(c) Administrative Services Agreement Supplement
for Ivy Emerging Growth Fund, filed with
Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(d) Administrative Services Agreement Supplement
for Ivy China Region Fund, filed with Post-
Effective Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(e) Administrative Services Agreement Supplement
for Class I Shares of Ivy International Fund,
filed with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(f) Master Fund Accounting Services Agreement
between Ivy Fund and Mackenzie Investment
Management Inc. and Supplements for Ivy
Growth Fund, Ivy Emerging Growth Fund and Ivy
Money Market Fund, filed with Post-Effective
Amendment No. 73 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(g) Fund Accounting Services Agreement Supplement
for Ivy Growth with Income Fund, filed with
Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(h) Fund Accounting Services Agreement Supplement
for Ivy China Region Fund, filed with Post-
Effective Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(i) Transfer Agency and Shareholder Services
Agreement between Ivy Fund and Ivy
Management, Inc., filed with Post-Effective
Amendment No. 71 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(j) Addendum to Transfer Agency and Shareholder
Services Agreement, filed with Post-Effective
Amendment No. 73 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(k) Assignment Agreement relating to Transfer
Agency and Shareholder Services Agreement,
filed with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(l) Form of Administrative Services Agreement
Supplement for Ivy Latin America Strategy
Fund, filed with Post-Effective Amendment No.
75 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(m) Form of Administrative Services Agreement
Supplement for Ivy New Century Fund, filed
with Post-Effective Amendment No. 75 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(n) Form of Fund Accounting Services Agreement
Supplement for Ivy Latin America Strategy
Fund, filed with Post-Effective Amendment No.
75 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(o) Form of Fund Accounting Services Agreement
Supplement for Ivy New Century Fund, filed
with Post-Effective Amendment No. 75 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(p) Form of Administrative Services Agreement
Supplement for Ivy International Bond Fund,
filed with Post-Effective Amendment No. 76 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(q) Form of Fund Accounting Services Agreement
Supplement for International Bond Fund,
filed with Post-Effective Amendment No. 76 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(r) Addendum to Transfer Agency and Shareholder
Services Agreement, filed with Post-Effective
Amendment No. 76 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(s) Addendum to Transfer Agency and Shareholder
Services Agreement, filed with Post-Effective
Amendment No. 77 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(t) Administrative Services Agreement Supplement
for Ivy Bond Fund, Ivy Global Fund and Ivy
Short-Term U.S. Government Securities Fund,
filed with Post-Effective Amendment No. 81 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(u) Fund Accounting Services Agreement Supplement
for Ivy Bond Fund, Ivy Global Fund and Ivy
Short-Term U.S. Government Securities Fund,
filed with Post-Effective Amendment No. 81 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(v) Form of Administrative Services Agreement
Supplement (Class C) for Ivy Bond Fund, Ivy
Canada Fund, Ivy China Region Fund, Ivy
Emerging Growth Fund, Ivy Global Fund, Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund, Ivy International Bond
Fund, Ivy Latin America Strategy Fund, Ivy
Money Market Fund and Ivy New Century Fund,
filed with Post-Effective Amendment No. 84 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(w) Form of Addendum to Transfer Agency and
Shareholder Services Agreement (Class C),
filed with Post-Effective Amendment No. 84 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(x) Form of Administrative Services Agreement
Supplement for Ivy Global Science &
Technology Fund, filed with Post-Effective
Amendment No. 86 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(y) Form of Fund Accounting Services Agreement
Supplement for Ivy Global Science &
Technology Fund, filed with Post-Effective
Amendment No. 86 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(z) Form of Addendum to Transfer Agency and
Shareholder Services Agreement for Ivy Global
Science & Technology Fund, filed with Post-
Effective Amendment No. 86 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(aa) Form of Administrative Services Agreement
Supplement for Ivy Global Natural Resources
Fund, Ivy Asia Pacific Fund and Ivy
International Small Companies Fund, filed
with Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(bb) Form of Fund Accounting Services Agreement
Supplement for Ivy Global Natural Resources
Fund, Ivy Asia Pacific Fund and Ivy
International Small Companies Fund, filed
with Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(cc) Form of Addendum to Transfer Agency and
Shareholder Services Agreement for Ivy Global
Natural Resources Fund, Ivy Asia Pacific Fund
and Ivy International Small Companies Fund,
filed with Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(dd) Form of Administrative Services Agreement
Supplement for Ivy Pan-Europe Fund, filed
with Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(ee) Form of Fund Accounting Services Agreement
Supplement for Ivy Pan-Europe Fund, filed
with Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(ff) Form of Addendum to Transfer Agency and
Shareholder Services Agreement for Ivy Pan-
Europe Fund, filed with Post-Effective
Amendment No. 94 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(gg) Form of Administrative Services Agreement
Supplement for Ivy International Fund II,
filed with Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(hh) Form of Fund Accounting Services Agreement
Supplement for Ivy International Fund II,
filed with Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(ii) Form of Addendum to Transfer Agency and
Shareholder Services Agreement for Ivy
International Fund II, filed with Post-
Effective Amendment No. 94 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(jj) Form of Administrative Services Agreement
Supplement (Advisor Class) for Ivy Asia
Pacific Fund, Ivy Bond Fund, Ivy Canada Fund,
Ivy China Region Fund, Ivy Emerging Growth
Fund, Ivy Global Fund, Ivy Global Natural
Resources Fund, Ivy Global Science &
Technology Fund, Ivy Growth Fund, Ivy Growth
with Income Fund, Ivy International Bond
Fund, Ivy International Fund II, Ivy
International Small Companies Fund, Ivy Latin
America Strategy Fund, Ivy New Century Fund
and Ivy Pan-Europe Fund, filed with this
Post-Effective Amendment No. 96 to
Registration Statement No. 2-17613.
(kk) Form of Addendum to Transfer Agency and
Shareholder Services Agreement (Advisor
Class), filed with this Post-Effective
Amendment No. 96 to Registration Statement
No. 2-17613.
10. Opinion and Consent of Dechert Price & Rhoads,
filed herewith.
11. (a) Consents of Coopers & Lybrand L.L.P., filed
herewith.
(b) Reports of Coopers & Lybrand L.L.P., filed
herewith.
12. Not applicable.
13. Not applicable
14. Not applicable
15. (a) Amended and Restated Distribution Plan for
Class A shares of Ivy China Region Fund, Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund and Ivy Emerging Growth
Fund, filed with Post-Effective Amendment No.
73 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Distribution Plan for Class B shares of Ivy
China Region Fund, Ivy Growth Fund, Ivy
Growth with Income Fund, Ivy International
Fund and Ivy Emerging Growth Fund, filed with
Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(c) Distribution Plan for Class C Shares of Ivy
Growth with Income Fund, filed with Post-
Effective Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(d) Form of Rule 12b-1 Related Agreement, filed
with Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(e) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A
Shares, filed with Post-Effective Amendment
No. 76 to Registration Statement No. 2-17613
and incorporated by reference herein.
(f) Supplement to Distribution Plan for Ivy Fund
Class B Shares, filed with Post-Effective
Amendment No. 76 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(g) Supplement to Master Amended and Restated
Distribution Plan for Ivy Fund Class A
Shares, filed with Post-Effective Amendment
No. 77 to Registration Statement No. 2-17613
and incorporated by reference herein.
(h) Supplement to Distribution Plan for Ivy Fund
Class B Shares, filed with Post-Effective
Amendment No. 77 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(i) Form of Supplement to Distribution Plan for
Ivy Growth with Income Fund Class C Shares
(Redesignation as Class D Shares), filed with
Post-Effective Amendment No. 84 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(j) Form of Distribution Plan for Class C shares
of Ivy Bond Fund, Ivy Canada Fund, Ivy China
Region Fund, Ivy Emerging Growth Fund, Ivy
Global Fund, Ivy Growth Fund, Ivy Growth with
Income Fund, Ivy International Fund, Ivy
International Bond Fund, Ivy Latin America
Strategy Fund and Ivy New Century Fund, filed
with Post-Effective Amendment No. 85 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(k) Form of Supplement to Master Amended and
Restated Distribution Plan for Ivy Fund Class
A Shares (Ivy Global Science & Technology
Fund), filed with Post-Effective Amendment
No. 87 to Registration Statement No. 2-17613
and incorporated by reference herein.
(l) Form of Supplement to Distribution Plan for
Ivy Fund Class B Shares (Ivy Global Science &
Technology Fund), filed with Post-Effective
Amendment No. 87 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(m) Form of Supplement to Distribution Plan for
Ivy Fund Class C Shares (Ivy Global Science &
Technology Fund), filed with Post-Effective
Amendment No. 87 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(n) Form of Supplement to Master Amended and
Restated Distribution Plan for Ivy Fund Class
A Shares (Ivy Global Natural Resources Fund,
Ivy Asia Pacific Fund and Ivy International
Small Companies Fund), filed with Post-
Effective Amendment No. 89 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(o) Form of Supplement to Distribution Plan for
Ivy Fund Class B Shares (Ivy Global Natural
Resources Fund, Ivy Asia Pacific Fund and Ivy
International Small Companies Fund), filed
with Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(p) Form of Supplement to Distribution Plan for
Ivy Fund Class C Shares (Ivy Global Natural
Resources Fund, Ivy Asia Pacific Fund and Ivy
International Small Companies Fund), filed
with Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(q) Form of Supplement to Master Amended and
Restated Distribution Plan for Ivy Fund Class
A Shares (Ivy Pan-Europe Fund), filed with
Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(r) Form of Supplement to Distribution Plan for
Ivy Fund Class B Shares (Ivy Pan-Europe
Fund), filed with Post-Effective Amendment
No. 94 to Registration Statement No. 2-17613
and incorporated by reference herein.
(s) Form of Supplement to Distribution Plan for
Ivy Fund Class C Shares (Ivy Pan-Europe
Fund), filed with Post-Effective Amendment
No. 94 to Registration Statement No. 2-17613
and incorporated by reference herein.
(t) Form of Supplement to Master Amended and
Restated Distribution Plan for Ivy Fund Class
A Shares (Ivy International Fund II), filed
with Post-Effective Amendment No. 94 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(u) Form of Supplement to Distribution Plan for
Ivy Fund Class B Shares (Ivy International
Fund II), filed with Post-Effective Amendment
No. 94 to Registration Statement No. 2-17613
and incorporated by reference herein.
(v) Form of Supplement to Distribution Plan for
Ivy Fund Class C Shares (Ivy International
Fund II), filed with Post-Effective Amendment
No. 94 to Registration Statement No. 2-17613
and incorporated by reference herein.
16. Schedule of Computation of Standardized
Performance Quotations, filed with Post-Effective
Amendment No. 71 to Registration Statement No. 2-
17613 and incorporated by reference herein.
17. Financial Data Schedules, filed with this Post-
Effective Amendment No. 96 to Registration
Statement No. 2-17613.
18. (a) Plan adopted pursuant to Rule 18f-3 under the
Investment Company Act of 1940, filed with
Post-Effective Amendment No. 83 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 85 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(c) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 87 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(d) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 89 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(e) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 92 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(f) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 94 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(g) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with this Post-
Effective Amendment No. 96 to Registration
Statement No. 2-17613.
25. Not applicable
26. Number of Holders of Securities
Fund: Date Class Record Holders
Ivy Asia Pacific 9/30/97 Class A 54
Fund Class B 27
Class C 8
Advisor Class 0
Ivy Bond Fund 9/30/97 Class A 4,593
Class B 398
Class C 73
Class I 0
Advisor Class 0
Ivy Canada Fund 9/30/97 Class A 1,866
Class B 160
Class C 23
Advisor Class 0
Ivy China Region 9/30/97 Class A 2,113
Class B 1,173
Class C 78
Advisor Class 0
Ivy Emerging 9/30/97 Class A 5,786
Growth Fund Class B 3,830
Class C 416
Advisor Class 0
Ivy Global Fund 9/30/97 Class A 1,556
Class B 847
Class C 38
Advisor Class 0
Ivy Global Natural 9/30/97 Class A 266
Resources Fund Class B 165
Class C 12
Advisor Class 0
Ivy Global Science 9/30/97 Class A 810
& Technology Fund Class B 684
Class C 346
Class I 0
Ivy Growth Fund 9/30/97 Class A 28,329
Class B 308
Class C 12
Advisor Class 0
Ivy Growth with 9/30/97 Class A 6,006
Income Fund Class B 1,207
Class C 22
Class D 0
Advisor Class 0
Ivy International 9/30/97 Class A 29,237
Fund Class B 21,844
Class C 3,651
Class I 409
Advisor Class 0
Ivy International 9/30/97 Class A 786
Fund II Class B 1,391
Class C 429
Class I 0
Ivy International 9/30/97 Class A 0
Bond Fund Class B 0
Class C 0
Advisor Class 0
Ivy International 9/30/97 Class A 113
Small Companies Fund Class B 73
Class C 31
Class I 0
Advisor Class 0
Ivy Latin America 9/30/97 Class A 430
Strategy Fund Class B 245
Class C 20
Advisor Class 0
Ivy Money Market 9/30/97 Class A 2,319
Fund Class B 128
Class C 12
Ivy New Century 9/30/97 Class A 1,084
Fund Class B 838
Class C 245
Advisor Class 0
Ivy Pan-Europe 9/30/97 Class A 5
Fund Class B 2
Class C 0
Advisor Class 0
27. Indemnification
A policy of insurance covering Ivy Management Inc. and the
Registrant will insure the Registrant's trustees and officers and
others against liability arising by reason of an actual or
alleged breach of duty, neglect, error, misstatement, misleading
statement, omission or other negligent act.
Reference is made to Article VIII of the Registrant's Amended and
Restated Declaration of Trust, dated December 10, 1992, filed
with Post-Effective Amendment No. 71 to Registration Statement
No. 2-17613 and incorporated by reference herein.
28. Business and Other Connections of Investment Adviser
Information Regarding Adviser and Subadviser Under Advisory
Arrangements. Reference is made to the Form ADV of each of Ivy
Management, Inc., the adviser to the Trust, Mackenzie Financial
Corporation, the adviser to Ivy Canada Fund, and Northern Cross
Investments Limited (the successor to Boston Overseas Investors,
Inc.), the subadviser to Ivy International Fund.
The list required by this Item 28 of officers and directors of
Ivy Management, Inc. and Northern Cross Investments Limited,
together with information as to any other business profession,
vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years, is incorporated
by reference to Schedules A and D of each firm's respective Form
ADV.
29. Principal Underwriters
(a)Ivy Mackenzie Distribution, Inc. ("IMDI"), formerly Mackenzie
Ivy Funds Distribution, Inc., Via Mizner Financial Plaza, 700
South Federal Highway, Suite 300, Boca Raton, Florida 33432,
Registrant's distributor, is a subsidiary of Mackenzie Investment
Management Inc. ("MIMI"), Via Mizner Financial Plaza, 700 South
Federal Highway, Suite 300, Boca Raton, Florida 33432. IMDI also
serves as the distributor for Mackenzie Series Trust. IMDI is
the successor to MIMI's distribution activities.
(b) The information required by this Item 29 regarding each
director, officer or partner of IMDI is incorporated by
reference to Schedule A of Form BD filed by IMDI
pursuant to the Securities Exchange Act of 1934.
(c) Not applicable
30. Location of Accounts and Records
The information required by this item is incorporated by
reference to Item 7 of Part II of Post-Effective Amendment
No. 46 to Registration Statement No. 2-17613.
31. Not applicable
32. Undertakings
(a) Not applicable
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's
latest annual report to shareholders, upon request and
without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this Post-Effective Amendment No. 96 to its Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, and
Commonwealth of Massachusetts, on the 31st day of October, 1997.
IVY FUND
By: Keith J. Carlson*
President
*By: JOSEPH R. FLEMING
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment No. 96 to the Registration
Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
MICHAEL G. LANDRY* Trustee and 10/31/97
Chairman (Chief
Executive Officer)
JOHN S. ANDEREGG, JR.* Trustee 10/31/97
PAUL H. BROYHILL* Trustee 10/31/97
STANLEY CHANNICK* Trustee 10/31/97
FRANK W. DEFRIECE, JR.* Trustee 10/31/97
ROY J. GLAUBER* Trustee 10/31/97
KEITH J. CARLSON** Trustee and 10/31/97
President
JOSEPH G. ROSENTHAL* Trustee 10/31/97
RICHARD N. SILVERMAN* Trustee 10/31/97
J. BRENDAN SWAN* Trustee 10/31/97
C. WILLIAM FERRIS* Treasurer (Chief 10/31/97
Financial Officer)
*By: JOSEPH R. FLEMING
Attorney-in-fact
* Executed pursuant to powers of attorney filed with
Post-Effective Amendments Nos. 69, 73, 74, 84 and 89 to
Registration Statement No. 2-17613.
EXHIBIT INDEX
1(t) Form of Establishment and Designation of Additional
Class (Ivy Asia Pacific Fund--Advisor Class; Ivy Bond
Fund--Advisor Class; Ivy Canada Fund--Advisor Class;
Ivy China Region Fund--Advisor Class; Ivy Emerging
Growth Fund--Advisor Class; Ivy Global Fund--Advisor
Class; Ivy Global Natural Resources Fund--Advisor
Class; Ivy Global Science & Technology Fund--Advisor
Class; Ivy Growth Fund--Advisor Class; Ivy Growth with
Income Fund--Advisor Class; Ivy International Bond
Fund--Advisor Class; Ivy International Fund II--Advisor
Class; Ivy International Small Companies Fund--Advisor
Class; Ivy Latin America Strategy Fund--Advisor Class;
Ivy New Century Fund--Advisor Class; Ivy Pan-Europe
Fund--Advisor Class)
6(j) Form of Addendum to Amended and Restated Distribution
Agreement (Advisor Class)
9(jj) Form of Administrative Services Agreement Supplement
(Advisor Class) for Ivy Asia Pacific Fund, Ivy Bond
Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy
Emerging Growth Fund, Ivy Global Fund, Ivy Global
Natural Resources Fund, Ivy Global Science & Technology
Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
International Bond Fund, Ivy International Fund II, Ivy
International Small Companies Fund, Ivy Latin America
Strategy Fund, Ivy New Century Fund and Ivy Pan-Europe
Fund
9(kk) Form of Addendum to Transfer Agency and Shareholder
Services Agreement (Advisor Class)
10 Opinion and Consent of Dechert Price & Rhoads
11(a) Consents of Coopers & Lybrand L.L.P.
11(b) Reports of Coopers & Lybrand L.L.P.
17 Financial Data Schedules
18(g) Form of Amended and Restated Plan adopted pursuant to
Rule 18f-3 under the Investment Company Act of 1940
EXHIBIT 1(t)
IVY FUND
IVY ASIA PACIFIC FUND
IVY BOND FUND
IVY CANADA FUND
IVY CHINA REGION FUND
IVY EMERGING GROWTH FUND
IVY GLOBAL FUND
IVY GLOBAL NATURAL RESOURCES FUND
IVY GLOBAL SCIENCE & TECHNOLOGY FUND
IVY GROWTH FUND
IVY GROWTH WITH INCOME FUND
IVY INTERNATIONAL BOND FUND
IVY INTERNATIONAL FUND II
IVY LATIN AMERICA STRATEGY FUND
IVY MONEY MARKET FUND
IVY NEW CENTURY FUND
IVY PAN-EUROPE FUND
Establishment and Designation of Additional
Class of Shares of Beneficial Interest,
No Par Value Per Share
I, Michael G. Landry, being a duly elected, qualified and
acting Trustee of Ivy Fund (the "Trust"), a business trust
organized under the laws of the Commonwealth of Massachusetts, DO
HEREBY CERTIFY that, at a meeting held on December ___, 1997, the
Trustees of the Trust (the "Trustees"), pursuant to Article III
and Article IV of the Agreement and Declaration of Trust of the
Trust dated December 21, 1983, as amended and restated December
10, 1992 (the "Declaration of Trust"), duly approved, adopted and
consented to the following resolutions as actions of the Trustees
of the Trust:
WHEREAS, (a) Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy
Canada Fund, Ivy China Region Fund, Ivy Emerging Growth
Fund, Ivy Global Fund, Ivy Global Natural Resources Fund,
Ivy Global Science & Technology Fun, Ivy Growth Fund, Ivy
Growth with Income Fund, Ivy International Bond Fund, Ivy
International Small Companies Fund, Ivy Latin America
Strategy Fund, Ivy New Century Fund and Ivy Pan-Europe Fund
(each, a "Fund," and collectively, the "Funds") currently
have an unlimited number of authorized and unissued shares
of beneficial interest designated as "Class A," "Class B"
and "Class C," respectively, (b) Ivy Bond Fund, Ivy Global
Science & Technology Fund and Ivy International Small
Companies Fund currently have an unlimited number of
authorized and unissued shares of beneficial interest
designated as "Class I," and (c) Ivy Growth with Income Fund
currently has a limited number of authorized shares of
beneficial interest designated as "Class D"; and
WHEREAS, the Trustees have decided to divide the shares of
beneficial interest of each Fund into an additional class,
no par value per share;
NOW, THEREFORE, IT IS HEREBY:
RESOLVED, that the shares of beneficial interest of each
Fund, other than Ivy International Fund, are hereby divided
into one additional class, no par value per share, to be
designated as the "Advisor Class," of which there shall
hereby be designated an unlimited number of authorized and
unissued shares of beneficial interest (the "Advisor Class
Shares");
FURTHER RESOLVED, that each Advisor Class Share of a Fund
shall be redeemable, shall represent a pro rata beneficial
interest in the assets attributable to the Advisor Class,
and shall be entitled to receive its pro rata share of net
assets attributable to the Advisor Class upon liquidation of
the Fund, all as provided in or not inconsistent with the
Declaration of Trust. Each Advisor Class Share shall have
the voting, dividend, liquidation and other rights,
preferences, powers, restrictions, limitations,
qualifications, terms and conditions as each other share of
the Trust, as set forth in the Declaration of Trust;
FURTHER RESOLVED, that each Advisor Class Share of a Fund
shall be entitled to one vote (or fraction thereof in the
case of a fractional share) on matters on which such shares
shall be entitled to vote. Shareholders of each Fund shall
vote together on any matter, except to the extent otherwise
required by the 1940 Act or when the Trustees have
determined that the matter affects only the interest of
shareholders of one or more classes, in which case only the
shareholders of that class (or classes) shall be entitled to
vote thereon. Any matter shall be deemed to have been
effectively acted upon with respect to each Fund if acted
upon in accordance with Rule 18f-2 under the 1940 Act (or
any successor rule) and the Declaration of Trust;
FURTHER RESOLVED, that liabilities, expenses, costs, charges
or reserves that should be properly allocated to a
particular class of shares of a Fund may, in accordance with
a plan previously adopted by the Trustees pursuant to Rule
18f-3 under the 1940 Act (the "Rule 18f-3 Plan"), or such
similar rule under or provision or interpretation of the
1940 Act, be charged to and borne solely by that class, and
the expenses so borne by a class may be appropriately
reflected and cause differences in the net asset value
attributable to, and the dividend, redemption and
liquidation rights of, the shares of the affected class, the
other classes of that Fund, and the other Funds;
FURTHER RESOLVED, that the Trustees (including any successor
Trustee) shall have the right at any time and from time to
time to reallocate assets, liabilities and expenses or to
change the designation of any class now or hereafter
created, or to otherwise change the special and relative
rights of any such class, provided that such change shall
not adversely affect the rights of shareholders of that
class; and
FURTHER RESOLVED, that the preceding resolutions shall
constitute an Amendment to the Declaration of Trust,
effective as of the date that the Registration Statement
pertaining to the Advisor Class shares is filed with the
Securities and Exchange Commission pursuant to Rule 485(a)
under the Securities Act of 1933.
IN WITNESS WHEREOF, I have signed this Amendment this _____
day of _______________, 1997.
__________________________
Michael G. Landry, as Trustee
The above signature is the true and correct signature of
Michael G. Landry, Trustee of the Trust.
__________________________
C. William Ferris,
Secretary/Treasurer
Mackenzie Investment Management
Inc.
EXHIBIT 6(j)
IVY FUND
ADDENDUM TO AMENDED AND RESTATED
DISTRIBUTION AGREEMENT
Ivy Asia Pacific Fund
Ivy Bond Fund
Ivy Canada Fund
Ivy China Region Fund
Ivy Emerging Growth Fund
Ivy Global Fund
Ivy Global Natural Resources Fund
Ivy Global Science & Technology Fund
Ivy Growth Fund
Ivy Growth with Income Fund
Ivy International Bond Fund
Ivy International Fund II
Ivy International Small Companies Fund
Ivy Latin America Strategy Fund
Ivy New Century Fund
Ivy Pan-Europe Fund
ADVISOR CLASS SHARES
AGREEMENT made as of the ____ day of December, 1997, by and
between Ivy Fund (the "Trust") and Ivy Mackenzie Distributors,
Inc. ("IMDI").
WHEREAS, the Trust is registered as an open-end investment
company under the Investment Company Act of 1940, as amended, and
consists of one or more separate investment portfolios, as may be
designated from time to time; and
WHEREAS, IMDI serves as the Trust's distributor pursuant to
an Amended and Restated Distribution Agreement dated October 23,
1993 (the "Agreement"); and
WHEREAS, the Trustees of the Trust, at a meeting held on
December ___, 1997, duly approved an amendment to the Agreement
to include the Advisor Class shares of Ivy Asia Pacific Fund, Ivy
Bond Fund, Ivy Canada Fund, Ivy China Region Fund, Ivy Emerging
Growth Fund, Ivy Global Fund, Ivy Global Natural Resources Fund,
Ivy Global Science & Technology Fund, Ivy Growth Fund, Ivy Growth
with Income Fund, Ivy International Bond Fund, Ivy International
Fund II, Ivy International Small Companies Fund, Ivy Latin
America Strategy Fund, Ivy New Century Fund and Ivy Pan-Europe
Fund (the "Funds"); and
WHEREAS, the Advisor Class shares of the Funds were
established and designated by the Board of Trustees of the Trust
by written consent dated as of _______________, 1997.
NOW THEREFORE, the Trust and IMDI hereby agree as follows:
Effective as of the date that the
Registration Statement pertaining to the
Advisor Class shares of the Funds is filed
with the Securities and Exchange Commission
pursuant to Rule 485(a) under the Securities
Act of 1933, the Agreement shall relate in
all respects to the Advisor Class shares of
the Funds, in addition to the classes of
shares of the Funds and any other series of
the Trust specifically identified in
Paragraph 1 of the Agreement and any other
Addenda thereto.
IN WITNESS WHEREOF, the Trust and IMDI have adopted this
Addendum as of the date first set forth above.
IVY FUND
By: _________________________
Keith J. Carlson, President
IVY MACKENZIE DISTRIBUTORS, INC.
By: _________________________
Keith J. Carlson, President
EXHIBIT 9(jj)
IVY FUND
ADMINISTRATIVE SERVICES AGREEMENT SUPPLEMENT
Ivy Asia Pacific Fund
Ivy Bond Fund
Ivy Canada Fund
Ivy China Region Fund
Ivy Emerging Growth Fund
Ivy Global Fund
Ivy Global Natural Resources Fund
Ivy Global Science & Technology Fund
Ivy Growth Fund
Ivy Growth with Income Fund
Ivy International Bond Fund
Ivy International Fund II
Ivy International Small Companies Fund
Ivy Latin America Strategy Fund
Ivy New Century Fund
Ivy Pan-Europe Fund
ADVISOR CLASS SHARES
AGREEMENT made as of the ____ day of _________, 1997, by and
between Ivy Fund (the "Trust") and Mackenzie Investment
Management Inc. ("MIMI").
WHEREAS, the Trust is an open-end investment company
organized as a Massachusetts business trust, and consists of such
separate investment portfolios as have been or may be established
and designated by the Trustees of the Trust from time to time;
WHEREAS, a separate class of shares of the Trust is offered
to investors with respect to each investment portfolio;
WHEREAS, the Trust has adopted a Master Administrative
Services Agreement (the "Master Agreement") dated September 1,
1992, pursuant to which the Trust has appointed MIMI to provide
the administrative services specified in the Master Agreement;
and
WHEREAS, Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada
Fund, Ivy China Region Fund, Ivy Emerging Growth Fund, Ivy Global
Fund, Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy Growth Fund, Ivy Growth with Income Fund,
Ivy International Bond Fund, Ivy International Fund II, Ivy
International Small Companies Fund, Ivy Latin America Strategy
Fund, Ivy New Century Fund and Ivy Pan-Europe Fund (each, a
"Fund," and collectively, the "Funds") are separate investment
portfolios of the Trust.
NOW, THEREFORE, the Trustees of the Trust hereby take the
following actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Trust
hereby adopts the Master Agreement with respect to the Advisor
Class of each Fund, and MIMI hereby acknowledges that the Master
Agreement shall pertain to the Advisor Class of each Fund, the
terms and conditions of such Master Agreement being incorporated
herein by reference.
2. As provided in the Master Agreement and subject to
further conditions as set forth therein, the Advisor Class of
each Fund shall pay to MIMI a monthly fee on the first business
day of each month based upon the average daily value (as
determined on each business day at the time set forth in each
Fund's Prospectus for determining net asset value per share) of
the net assets of the Fund attributable to the Advisor Class
during the preceding month at the annual rate of 0.10%.
3. This Supplement and the Master Agreement (together, the
"Agreement") shall become effective with respect to the Advisor
Class of each Fund as of the date that the Registration Statement
pertaining to the Advisor Class shares, filed with the Securities
and Exchange Commission on or about October 31, 1997 pursuant to
Rule 485(a) under the Securities Act of 1933, first becomes
effective, and unless sooner terminated as hereinafter provided,
the Agreement shall remain in effect for a period of two years
from that date. Thereafter, the Agreement shall continue in
effect with respect to the Advisor Class of each Fund from year
to year, provided such continuance with respect to the Advisor
Class of each Fund is approved at least annually by the Trust's
Board of Trustees, including the vote or written consent of a
majority of the Trust's Independent Trustees. This Agreement may
be terminated with respect to the Advisor Class of a Fund at any
time, without payment of any penalty, by MIMI upon at least sixty
(60) days' prior written notice to the Fund, or by the Fund upon
at least sixty (60) days' written notice to MIMI; provided, that
in case of termination by a Fund, such action shall have been
authorized by the Trust's Board of Trustees, including the vote
or written consent of a majority of the Trust's Independent
Trustees.
IN WITNESS WHEREOF, the Trust and MIMI have adopted this
Addendum as of the date first set forth above.
IVY FUND
By: ___________________________________
Keith J. Carlson, President
MACKENZIE INVESTMENT MANAGEMENT INC.
By: ___________________________________
Michael G. Landry, President
EXHIBIT 9(kk)
ADDENDUM TO TRANSFER AGENCY AND SHAREHOLDER SERVICES AGREEMENT
IVY FUND
The Transfer Agency and Shareholder Services Agreement, made
as of the 1st day of January, 1992 between Ivy Fund and Ivy
Management, Inc. ("IMI"), the duties of IMI thereunder of which
were assigned on October 1, 1993 to Ivy Mackenzie Services Corp.
("IMSC")(formerly "Mackenzie Ivy Investor Services Corp."), is
hereby revised as set forth below in this Addendum.
Schedule A of the Agreement is revised in its entirety to read as
follows:
SCHEDULE A
IVY FEES:
The transfer agency and shareholder service fees are based
on an annual per account fee. These fees are payable on a
monthly basis at the rate of 1/12 of the annual fee and are
charged with respect to all open accounts.
A. PER ACCOUNT FEES
Classes Class Advisor
Fund Name A, B, C I Class
Ivy Asia Pacific Fund $20.00 N/A $20.00
Ivy Bond Fund 20.75 10.25 20.75
Ivy Canada Fund 20.00 N/A 20.00
Ivy China Region Fund 20.00 N/A 20.00
Ivy Pan-Europe Fund 20.00 N/A 20.00
Ivy Emerging Growth Fund 20.00 N/A 20.00
Ivy Global Fund 20.00 N/A 20.00
Ivy Global Natural Resources Fund 20.00 N/A 20.00
Ivy Global Science & Technology Fund 20.00 10.25 20.00
Ivy Growth Fund 20.00 N/A 20.00
Ivy Growth with Income Fund 20.00 N/A 20.00
Ivy International Fund 20.00 10.25 N/A
Ivy International Bond Fund 20.00 N/A 20.00
Ivy International Small Companies Fund 20.00 10.25 20.00
Ivy International Fund II 20.00 10.25 20.00
Ivy Latin America Strategy Fund 20.00 N/A 20.00
Ivy Money Market Fund 22.00 N/A N/A
Ivy New Century Fund 20.00 N/A 20.00
In addition, in accordance with an agreement between IMSC
and The Shareholder Services Group, each Fund will pay a fee of
$4.48 for each account that is closed, which fee may be increased
from time to time in accordance with the terms of that agreement.
B. SPECIAL SERVICES
Fees for activities of a non-recurring nature, such as
preparation of special reports, portfolio consolidations, or
reorganization, and extraordinary shipments will be subject to
negotiation.
This Addendum shall take effect as of the date that the
Registration Statement pertaining to the Funds' Advisor Class of
shares, filed with the Securities and Exchange Commission on or
about October 31, 1997 pursuant to Rule 485(a)(2) under the
Securities Act of 1933, first becomes effective.
IN WITNESS WHEREOF, the parties hereto have caused this
Addendum to be executed on this ____ day of ____________, 1997.
IVY FUND
By: ___________________________________
Keith J. Carlson, President
IVY MACKENZIE SERVICES CORP.
By: ___________________________________
C. William Ferris, President
EXHIBIT 10
DECHERT PRICE & RHOADS
TEN POST OFFICE SQUARE -- SOUTH
SUITE 1230
BOSTON, MASSACHUSETTS 02109-4603
October 31, 1997
Ivy Fund
Via Mizner Financial Plaza
700 South Federal Highway
Suite 300
Boca Raton, Florida 33432
Dear Sirs:
As counsel for Ivy Fund (the "Trust"), we are familiar with
the registration of the Trust under the Investment Company Act of
1940, as amended (the "1940 Act")(File No. 811-1028), and the
prospectuses contained in Post-Effective Amendment No. 96 to the
Trust's registration statement relating to the shares of
beneficial interest of Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy
Canada Fund, Ivy China Region Fund, Ivy Emerging Growth Fund, Ivy
Global Fund, Ivy Global Natural Resources Fund, Ivy Global
Science & Technology Fund, Ivy Growth Fund, Ivy Growth With
Income Fund, Ivy International Fund II, Ivy International Bond
Fund, Ivy International Small Companies Fund, Ivy Latin America
Strategy Fund, Ivy New Century Fund and Ivy Pan-Europe Fund (the
"Shares") being filed under the Securities Act of 1933, as
amended (File No. 2-17613) ("Post-Effective Amendment No. 96").
We have also examined such other records of the Trust,
agreements, documents and instruments as we deemed appropriate.
Based upon the foregoing, it is our opinion that the Shares
have been duly authorized and, when issued and sold at the public
offering price contemplated by the Prospectuses for the Funds and
delivered by the Trust against receipt of the net asset value of
the Shares, will be issued as fully paid and nonassessable shares
of the Trust.
We consent to the filing of this opinion on behalf of the
Trust with the Securities and Exchange Commission in connection
with the filing of Post-Effective Amendment No. 96.
Very truly yours,
DECHERT PRICE & RHOADS
EXHIBIT 11(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Ivy Fund
We hereby consent to the inclusion in Item 24 of Part C of Post-
Effective Amendment No. 96 to the Registration Statement on Form
N-1A (File No. 2-17613, hereafter the "Registration Statement")
of Ivy Fund of our reports dated May 1, 1997, on our audits of
the Statements of Assets and Liabilities as of April 28, 1997 of
Ivy International Fund II and Ivy Pan-Europe Fund appearing in
the Registration Statement. We also consent to the reference to
our Firm under the caption "The Funds' Financial Highlights" in
the Funds' Prospectus and "Auditors" in the Funds' Statement of
Additional Information.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
October 31, 1997<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Ivy Fund
We hereby consent to the inclusion in Item 24 of Part C and the
incorporation by reference in Post-Effective Amendment No. 96 to
the Registration Statement on Form N-1A (File No. 2-17613,
hereafter the "Registration Statement") of Ivy Fund of our
reports dated February 14, 1997, on our audits of the financial
statements and financial highlights of Ivy Bond Fund, Ivy Canada
Fund, Ivy China Region Fund, Ivy Emerging Growth Fund, Ivy Global
Fund, Ivy Global Science and Technology Fund, Ivy Growth Fund,
Ivy Growth with Income Fund, Ivy International Fund, Ivy Latin
America Strategy Fund and Ivy New Century Fund appearing in the
December 31, 1996 Annual Reports to Shareholders of the Funds,
which annual reports are incorporated by reference in the
Registration Statement. We also consent to the reference to our
Firm under the caption "The Funds' Financial Highlights" in the
Funds' Prospectuses and "Auditors" in the Funds' Statements of
Additional Information.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
October 31, 1997<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Ivy Fund
We hereby consent to the inclusion in Item 24 of Part C of Post-
Effective Amendment No. 96 to the Registration Statement on Form
N-1A (File No. 2-17613, hereafter the "Registration Statement")
of Ivy Fund of our reports dated December 11, 1996, on our audits
of the Statements of Assets and Liabilities as of December 10,
1996 of Ivy Asia Pacific Fund, Ivy Global Natural Resources Fund,
and Ivy International Small Companies Fund, which Statements of
Assets and Liabilities are incorporated by reference in the
Registration Statement. We also consent to the reference to our
Firm under the caption "The Funds' Financial Highlights" in the
Funds' Prospectus and "Auditors" in the Funds' Statement of
Additional Information.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
October 31, 1997
EXHIBIT 11(b)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Ivy Asia Pacific Fund (the Fund)
We have audited the accompanying Statement of Assets and
Liabilities of the Fund as of December 10, 1996. This financial
statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statement referred to above
presents fairly, in all material respects, the financial position
of the Fund as of December 10, 1996, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
December 11, 1996<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Bond Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1996, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Fund as of December 31, 1996, the
results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
Fort Lauderdale, Florida
February 14, 1997<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Canada Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1996, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with
the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Fund as of December 31, 1996, the
results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy China Region Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1996, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Fund as of December 31, 1996, the
results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Emerging Growth Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1996, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Fund as of December 31, 1996, the
results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
Fort Lauderdale, Florida
February 14, 1997<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Global Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1996, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Fund as of December 31, 1996, the
results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Ivy Global Natural Resources Fund (the Fund)
We have audited the accompanying Statement of Assets and
Liabilities of the Fund as of December 10, 1996. This financial
statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statement referred to above present
fairly, in all material respects, the financial position of the
Fund as of December 10, 1996, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
December 11, 1996<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Global Science & Technology Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1996, and the related statements
of operations, the statement of changes in net assets and the
financial highlights for the period July 22, 1996 (commencement)
to December 31, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Fund as of December 31, 1996, the
results of its operations, the changes in its net assets and the
financial highlights for the period July 22, 1996 (commencement)
to December 31, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Growth Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1996, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Fund as of December 31, 1996, the
results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
Fort Lauderdale, Florida
February 14, 1997<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Growth with Income Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1996, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with
the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Fund as of December 31, 1996, the
results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
Fort Lauderdale, Florida
February 14, 1997<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Ivy International Fund II (the Fund)
We have audited the accompanying Statement of Assets and
Liabilities of the Fund as of April 28, 1997. This financial
statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statement referred to above
presents fairly, in all material respects, the financial position
of the Fund as of April 28, 1997, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
May 1, 1997<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Ivy International Small Companies Fund (the Fund)
We have audited the accompanying Statement of Assets and
Liabilities of the Fund as of December 10, 1996. This financial
statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statement referred to above
presents fairly, in all material respects, the financial position
of the Fund as of December 10, 1996, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
December 11, 1996<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Latin America Strategy Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1996, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with
the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Fund as of December 31, 1996, the
results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy New Century Fund (the Fund)
We have audited the accompanying statement of assets and
liabilities of the Fund, including the schedule of portfolio
investments, as of December 31, 1996, and the related statement
of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Fund as of December 31, 1996, the
results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 14, 1997<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Ivy Pan-Europe Fund (the Fund)
We have audited the accompanying Statement of Assets and
Liabilities of the Fund as of April 28, 1997. This financial
statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statement referred to above present
fairly, in all material respects, the financial position of the
Fund as of April 28, 1997, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
May 1, 1997
EXHIBIT 18(g)
IVY FUND
PLAN PURSUANT TO RULE 18F-3
UNDER THE
INVESTMENT COMPANY ACT OF 1940
(As Amended and Restated on December ___, 1997)
I. INTRODUCTION
In accordance with Rule 18f-3 under the Investment Company
Act of 1940, as amended (the "1940 Act"), this Plan describes the
multi-class structure that will apply to certain series of Ivy
Fund (each, a "Fund" and collectively, the "Funds"), including
the separate class arrangements for the service and distribution
of shares, the method for allocating the expenses and income of
each Fund among its classes, and any related exchange privileges
and conversion features that apply to the different classes.
II. THE MULTI-CLASS STRUCTURE
Each of the following Funds is authorized to issue four
classes of shares identified as Class A, Class B, Class C and an
Advisor Class: Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada
Fund, Ivy China Region Fund, Ivy Emerging Growth Fund, Ivy Global
Fund, Ivy Global Natural Resources Fund, Ivy Global Science &
Technology Fund, Ivy Growth Fund, Ivy Growth with Income Fund,
Ivy International Fund[FN][Ivy International Fund does not have
an Advisor Class], Ivy International Bond Fund, Ivy International
Small Companies Fund, Ivy International Fund II, Ivy Latin
America Strategy Fund, Ivy Money Market Fund[FN1][The separation
of Ivy Money Market Fund shares into three separate classes has
been authorized as a means of enabling the Funds' transfer agent
to track the contingent deferred sales charge period that applies
to Class B and Class C shares of other Ivy or Mackenzie Funds
that are being exchanged for shares of Ivy Money Market Fund. In
all other relevant respects, the three classes of Ivy Money
Market Fund shares are identical (i.e., having the same
arrangement for shareholder services and the distribution of
securities), and are not subject to any sales load other than in
connection with the redemption of Class B or Class C shares of
that have been acquired pursuant to an exchange from another Ivy
or Mackenzie Fund. (See Section III.D.)], Ivy New Century Fund
and Ivy Pan-Europe Fund. Ivy Bond Fund, Ivy Global Science &
Technology Fund, Ivy International Fund, Ivy International Fund
II and Ivy International Small Companies Fund are also authorized
to issue an additional class of shares identified as Class I.
Shares of each class of a Fund represent an equal pro rata
interest in the underlying assets of that Fund, and generally
have identical voting, dividend, liquidation, and other rights,
preferences, powers, restrictions, limitations, qualifications
and terms and conditions, except that: (a) each class shall have
a different designation; (b) each class shall bear certain class-
specific expenses, as described more fully in Section III.C.2.,
below; (c) each class shall have exclusive voting rights on any
matter submitted to shareholders that relates solely to its
arrangement; and (d) each class shall have separate voting rights
on any matter submitted to shareholders in which the interests of
one class differ from the interests of any other class. Each
class of shares shall also have the distinct features described
in Section III, below.
III. CLASS ARRANGEMENTS
A. FRONT-END SALES CHARGES AND CONTINGENT DEFERRED SALES
CHARGES
Class A shares shall be offered at net asset value plus a
front-end sales charge. The front-end sales charge shall be in
such amount as is disclosed in each Fund's current prospectus and
shall be subject to reductions for larger purchases and such
waivers or reductions as are determined or approved by the Board
of Trustees. Class A shares generally will not be subject to a
contingent deferred sales charge (a "CDSC"), although a CDSC may
be imposed in certain limited cases as disclosed in each Fund's
current prospectus or prospectus supplement.
Class B and Class C shares shall be offered at net asset
value without the imposition of a front-end sales charge. A CDSC
in such amount as is described in each Fund's current prospectus
or prospectus supplement shall be imposed on Class B and Class C
shares, subject to such waivers or reductions as are determined
or approved by the Board of Trustees.
Advisor Class and Class I shares are not subject to a front-
end sales charge or a CDSC.
B. RULE 12B-1 PLANS
Each Fund (other than Ivy Money Market Fund) has adopted a
service and distribution plan pursuant to Rule 12b-1 under the
1940 Act (a "12b-1 plan") under which it pays to Ivy Mackenzie
Distributors, Inc. (the "Distributor") an annual fee based on the
average daily net assets value of the Fund's outstanding Class A,
Class B and Class C shares, respectively.[FN2][Advisor Class and
Class I shares are not subject to Rule 12b-1 service or
distribution fees.] The maximum fees currently charged to each
Fund under its 12b-1 plan are set forth in the table below, and
are expressed as a percentage of the Fund's average daily net
assets.[FN3][Fees for services in connection with the Rule 12b-1
plans will be consistent with any applicable restriction imposed
by the National Association of Securities Dealers, Inc.]
The services that the Distributor provides in connection
with each Rule 12b-1 plan for which service fees[FN4][Each Fund
pays the Distributor at the annual rate of up to 0.25% of the
average daily net asset value attributable to its Class A, Class
B and Class C shares, respectively. Ivy Canada Fund pays an
additional service-related fee of 0.15% of the average daily net
asset value attributable to its Class A shares. In addition,
each Fund (other than Ivy Canada Fund) pays the Distributor a fee
for other distribution services at the annual rate of 0.75% of
the Fund's average daily net assets attributable to its Class B
and Class C shares. Ivy Canada Fund pays the Distributor an
additional amount for other distribution services at the annual
rate of 0.60% of average daily net assets attributable to its
Class B and Class C shares.] are paid include, among other
things, advising clients or customers regarding the purchase,
sale or retention of a Fund's Class A, Class B or Class C shares,
answering routine inquiries concerning the Fund, assisting
shareholders in changing options or enrolling in specific plans
and providing shareholders with information regarding the Fund
and related developments.
The other distribution services provided by the Distributor
in connection with each Fund's Rule 12b-1 plan include any
activities primarily intended to result in the sale of the Fund's
Class B and Class C shares. For such distribution services, the
Distributor is paid for, among other things, compensation to
broker-dealers and other entities that have entered into
agreements with the Distributor; bonuses and other incentives
paid to broker-dealers or such other entities; compensation to
and expenses of employees of the Distributor who engage in or
support distribution of a Fund's Class B or Class C shares;
telephone expenses; interest expense (only to the extent not
prohibited by a regulation or order of the SEC); printing of
prospectuses and reports for other than existing shareholders;
and preparation, printing and distribution of sales literature
and advertising materials.<PAGE>
RULE 12b-1 FEES
CLASS B AND
CLASS A CLASS A CLASS C SHARES
SHARES SHARES (SERVICE AND
(SERVICE (DISTRIBUTION DISTRIBUTION
FUND NAME FEE) FEES) FEES)
Ivy Asia Pacific Fund 0.25% 0.00% 1.00%
Ivy Bond Fund 0.25% 0.00% 1.00%
Ivy Canada Fund 0.25% 0.15% 1.00%
Ivy China Region Fund 0.25% 0.00% 1.00%
Ivy Emerging Growth
Fund 0.25% 0.00% 1.00%
Ivy Global Fund 0.25% 0.00% 1.00%
Ivy Global Natural
Resources Fund 0.25% 0.00% 1.00%
Ivy Global Science &
Technology Fund 0.25% 0.00% 1.00%
Ivy Growth Fund 0.25% 0.00% 1.00%
Ivy Growth with Income
Fund 0.25% 0.00% 1.00%
Ivy International Bond
Fund 0.25% 0.00% 1.00%
Ivy International Fund 0.25% 0.00% 1.00%
Ivy International
Small Companies Fund 0.25% 0.00% 1.00%
Ivy International
Fund II 0.25% 0.00% 1.00%
Ivy Latin America
Strategy Fund 0.25% 0.00% 1.00%
Ivy Money Market Fund* 0.00% 0.00% 0.00%
Ivy New Century Fund 0.25% 0.00% 1.00%
Ivy Pan-Europe
Fund 0.25% 0.00% 1.00%
* See footnote 1.
C. ALLOCATION OF EXPENSES AND INCOME
1. "TRUST" AND "FUND" EXPENSES
The gross income, realized and unrealized capital gains and
losses and expenses (other than "Class Expenses," as defined
below) of each Fund shall be allocated to each class on the basis
of its net asset value relative to the net asset value of the
Fund. Expenses so allocated include expenses of Ivy Fund that
are not attributable to a particular Fund or class of a Fund
("Trust Expenses") and expenses of a Fund not attributable to a
particular class of the Fund ("Fund Expenses"). Trust Expenses
include, but are not limited to, Trustees' fees and expenses;
insurance costs; certain legal fees; expenses related to
shareholder reports; and printing expenses. Fund Expenses
include, but are not limited to, certain registration fees (i.e.,
state registration fees imposed on a Fund-wide basis and SEC
registration Fees); custodial fees; transfer agent fees; advisory
fees; fees related to the preparation of separate documents of a
particular Fund, such as a separate prospectus; and other
expenses relating to the management of the Fund's assets.
2. "CLASS" EXPENSES
The types of expenses attributable to a particular class
("Class Expenses") include: (a) payments pursuant to the Rule
12b-1 plan for that class[FN5][Advisor Class and Class I shares
bear no distribution or service fees.]; (b) transfer agent fees
attributable to a particular class; (c) printing and postage
expenses related to preparing and distributing shareholder
reports, prospectuses and proxy materials; (d) registration fees
(other than those set forth in Section C.1. above); (e) the
expense of administrative personnel and services as required to
support the shareholders of a particular class[FN6][Class I
shares bear lower administrative services fees relative to these
Funds' other classes of shares (i.e., Class I shares of the Funds
pay a monthly administrative services fee based upon each Fund's
average daily net assets at the annual rate of only 0.01%, while
Class A, Class B, Class C and Advisor Class shares pay a fee at
the annual rate of 0.10%).]; (f) litigation or other legal
expenses relating solely to a particular class; (g) Trustees'
fees incurred as a result of issues relating to a particular
class; and (h) the expense of holding meetings solely for
shareholders of a particular class. Expenses described in
subpart (a) of this paragraph must be allocated to the class for
which they are incurred. All other expenses described in this
paragraph may (but need not) be allocated as Class Expenses, but
only if Ivy Fund's Board of Trustees determines, or Ivy Fund's
President and Secretary/Treasurer have determined, subject to
ratification by the Board of Trustees, that the allocation of
such expenses by class is consistent with applicable legal
principles under the 1940 Act and the Internal Revenue Code of
1986, as amended.
In the event that a particular expense is no longer
reasonably allocable by class or to a particular class, it shall
be treated as a Trust Expense or Fund Expense, and in the event a
Trust Expense or Fund Expense becomes reasonably allocable as a
Class Expense, it shall be so allocated, subject to compliance
with Rule 18f-3 and to approval or ratification by the Board of
Trustees.
3. WAIVERS OR REIMBURSEMENTS OF EXPENSES
Expenses may be waived or reimbursed by any adviser to Ivy
Fund, by Ivy Fund's underwriter or any other provider of services
to Ivy Fund without the prior approval of Ivy Fund's Board of
Trustees.
D. EXCHANGE PRIVILEGES
Shareholders of each Fund have exchange privileges with the
other Funds and with the five funds that comprise Mackenzie
Series Trust (together, with the Funds, the "Ivy and Mackenzie
Funds").[FN7][Other exchange privileges, not described herein,
exist under certain other circumstances, as described in each
Fund's current prospectus or prospectus supplement.]
1. CLASS A:
INITIAL SALES CHARGE SHARES. Class A shareholders may
exchange their Class A shares ("outstanding Class A shares") for
Class A shares of another Ivy or Mackenzie Fund (or for shares of
another Ivy or Mackenzie Fund that currently offers only a single
class of shares) ("new Class A Shares") on the basis of the
relative net asset value per Class A share, plus an amount equal
to the difference, if any, between the sales charge previously
paid on the outstanding Class A shares and the sales charge
payable at the time of the exchange on the new Class A shares.
Incremental sales charges are waived for outstanding Class A
shares that have been invested for 12 months or longer.
CONTINGENT DEFERRED SALES CHARGE SHARES. Class A
shareholders may exchange their Class A shares subject to a
contingent deferred sales charge ("CDSC"), as described in the
Prospectus ("outstanding Class A shares"), for Class A shares of
another Ivy or Mackenzie Fund (or for shares of another Ivy or
Mackenzie Fund that currently offers only a single class of
shares) ("new Class A shares") on the basis of the relative net
asset value per Class A share, without the payment of a CDSC that
would otherwise be due upon the redemption of the outstanding
Class A shares. Class A shareholders of a Fund exercising the
exchange privilege will continue to be subject to the Fund's CDSC
schedule (or period) following an exchange, unless the CDSC
schedule that applies to the new Class A shares is higher (or
such period is longer) than the CDSC schedule (or period), if
any, applicable to the outstanding Class A shares, in which case
the schedule (or period) of the Fund into which the exchange is
made shall apply.
2. CLASS B AND CLASS C:
Shareholders may exchange their Class B or Class C shares
("outstanding Class B shares" or "outstanding Class C shares,"
respectively) for Class B (or Class C) shares of another Ivy or
Mackenzie Fund ("new Class B shares" or "new Class C shares,"
respectively) on the basis of the net asset value per Class B (or
Class C) share, without the payment of any CDSC that would
otherwise be due upon the redemption of the outstanding Class B
(or Class C) shares. Class B and Class C shareholders of a Fund
exercising the exchange privilege will continue to be subject to
the Fund's CDSC schedule (or period) following an exchange,
unless, in the case of Class B shareholders, the CDSC schedule
that applies to the new Class B shares is higher (or such period
is longer) than the CDSC schedule (or period) applicable to the
outstanding Class B shares, in which case the schedule (or
period) of the Fund into which the exchange is made shall apply.
3. CLASS I:
Advisor Class and Class I shareholders may exchange their
outstanding Advisor Class (or Class I) shares for Advisor Class
(or Class I) shares of another Ivy Fund on the basis of the net
asset value per Advisor Class (or Class I) share.
4. GENERAL:
Shares resulting from the reinvestment of dividends and
other distributions will not be charged an initial sales charge
or CDSC when exchanged into another Ivy or Mackenzie Fund.
With respect to Fund shares subject to a CDSC, if less than
all of an investment is exchanged out of the Fund, the shares
exchanged will reflect, pro rata, the cost, capital appreciation
and/or reinvestment of distributions of the original investment
as well as the original purchase date, for purposes of
calculating any CDSC for future redemptions of the exchanged
shares.
E. CONVERSION FEATURE
Class B shares of a Fund convert automatically to Class A
shares of the Fund as of the close of business on the first
business day after the last day of the calendar quarter in which
the eighth anniversary of the purchase date of the Class B shares
occurs. The conversion will be based on the relative net asset
values per share of the two classes, without the imposition of
any sales load, fee or other charge. For purposes of calculating
the eight year holding period, the "purchase date" shall mean the
date on which the Class B shares were initially purchased,
regardless of whether the Class B shares that are subject to the
conversion were obtained through an exchange (or series of
exchanges) from a different Ivy or Mackenzie Fund. For purposes
of conversion of Class B shares, Class B shares acquired through
the reinvestment of dividends and capital gain distributions paid
in respect of Class B shares will be held in a separate sub-
account. Each time any Class B shares in the shareholder's
regular account (other than those shares in the sub-account)
convert to Class A shares, a pro rata portion of the Class B
shares in the sub-account will also convert to Class A shares.
The portion will be determined by the ratio that the
shareholder's Class B shares converting to Class A shares bears
to the shareholder's total Class B shares not acquired through
the reinvestment of dividends and capital gain distributions.
IV. BOARD REVIEW
A. INITIAL APPROVAL
The Board of Trustees of Ivy Fund, including a majority of
the Trustees who are not interested persons of Ivy Fund, as
defined under the 1940 Act (the "Independent Trustees"), at a
meeting held on December 1-2, 1995, initially approved this Plan
based on a determination that the Plan, including the expense
allocation, is in the best interests of each class of shares of
each Fund individually and Ivy Fund as a whole.[FN8][The Plan, as
initially approved, pertained only to the Class A and Class B
shares of the Funds, and the Class I shares of Ivy Bond Fund and
Ivy International Fund. The Plan was amended and restated on
April 30, 1996 to reflect the establishment and designation of
Class C shares of the Funds. The Plan was further amended and
restated on June 8, 1996 to reflect the establishment and
designation of Ivy Global Science and Technology Fund. The Plan
was further amended and restated on December 7, 1996 to reflect
the establishment and designation of Ivy Global Natural Resources
Fund, Ivy Asia Pacific Fund and Ivy International Small Companies
Fund. The Plan was further amended and restated on February 8,
1997 to reflect the establishment and designation of Ivy Pan-
Europe Fund. The Plan was further amended and restated on April
30, 1997 to reflect the establishment and designation of Ivy
International Fund II. The Plan was further amended and restated
as of the date set forth on the first page hereof to reflect the
establishment and designation of the Funds' Advisor Class of
shares.]
B. APPROVAL OF AMENDMENTS
Before any material amendments to this Plan, Ivy Fund's
Board of Trustees, including a majority of the Independent
Trustees, must find that the Plan, as proposed to be amended
(including any proposed amendments to the method of allocating
class and/or fund expenses), is in the best interests of each
class of shares of each Fund individually and Ivy Fund as a
whole. In considering whether to approve any proposed
amendment(s) to the Plan, the Trustees of Ivy Fund shall request
and evaluate such information as they consider reasonably
necessary to evaluate the proposed amendment(s) to the Plan.
Such information shall address the issue of whether any waivers
or reimbursements of advisory or administrative fees could be
considered a cross-subsidization of one class by another, and
other potential conflicts of interest between classes.
C. PERIODIC REVIEW
The Board of Trustees of Ivy Fund shall review the Plan as
frequently as it deems necessary, consistent with applicable
legal requirements.
V. EFFECTIVE DATE
The Plan first became effective as of January 1, 1996.
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