As filed with the Securities and Exchange Commission on
January 30, 1998
(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. 97 [ 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
will
become effective 60 days after filing pursuant to
paragraph (a)(1) of Rule 485.
Title of Securities Being Registered...Shares of
Beneficial
Interest, No Par Value Per Share
THIS POST-EFFECTIVE AMENDMENT NO. 97 IS BEING FILED IN ORDER TO
REDESIGNATE IVY INTERNATIONAL BOND FUND AS IVY HIGH YIELD FUND.
THE PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION THAT ARE
INCLUDED IN THIS POST-EFFECTIVE AMENDMENT NO. 97 ARE TO BE USED
CONCURRENTLY WITH AND SEPARATELY FROM THE CURRENTLY EFFECTIVE
PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION FOR IVY
MONEY
MARKET FUND, IVY ASIA PACIFIC FUND, IVY BOND FUND, IVY CANADA
FUND,
IVY CHINA REGION FUND, IVY US 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
SMALL COMPANIES FUND, IVY SOUTH AMERICA FUND, IVY DEVELOPING
NATIONS FUND AND IVY PAN-EUROPE FUND, WHICH ARE NOT INCLUDED IN,
BUT ARE INCORPORATED BY REFERENCE TO, THIS FILING.
IVY FUND
CROSS REFERENCE SHEET
Post-Effective Amendment No. 97 contains the Prospectuses and
Statements of Additional Information to be used with Ivy High
Yield
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 incorporated by reference.
Items Required by Form N-1A
PART A:
1 COVER PAGE: Cover Page
2 SYNOPSIS: Expense Information
3 CONDENSED FINANCIAL INFORMATION: Not Applicable
4 GENERAL DESCRIPTION OF REGISTRANT: Investment Objective and
Policies; Risk Factors and Investment Techniques; Special
Risk
Considerations
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 the 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 Objective and
Policies
13 INVESTMENT OBJECTIVES AND POLICIES: Investment Objective
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 [], 1998
IVY FUND
Ivy High Yield Fund
Ivy Fund (the "Trust") is a registered investment company
currently consisting of eighteen separate portfolios. One of
these portfolios, Ivy High Yield Fund (the "Fund"), is described
in this Prospectus. The Fund offers Class A, Class B, Class C
and Class I shares through this Prospectus. The Fund's Advisor
Class shares are described in a separate prospectus dated [],
1998.
The Fund's investment objective is to achieve a high level
of current income by investing primarily in below investment
grade debt securities.
This Prospectus sets forth concisely the information about
the Fund that a prospective investor should know before
investing. Please read it carefully and retain it for future
reference. Additional information about the Fund is contained in
the Fund's Statement of Additional Information dated [], 1998
(the "SAI"), which has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference into
this Prospectus. The SAI is available upon request and without
charge from the Trust at the Distributor's address and telephone
number below. The SEC maintains a web site (http://www.sec.gov)
that contains the SAI and other material incorporated by
reference.
THE FUND INVESTS SIGNIFICANTLY IN LOWER-QUALITY DEBT
SECURITIES, COMMONLY REFERRED TO AS "JUNK BONDS." BONDS OF THIS
TYPE ARE CONSIDERED TO BE SPECULATIVE WITH REGARD TO THE PAYMENT
OF INTEREST AND RETURN OF PRINCIPAL. THEY CARRY GREATER RISKS,
SUCH AS THE RISK OF DEFAULT, THAN OTHER DEBT SECURITIES.
INVESTORS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN
INVESTMENT IN THE FUND. REFER TO "INVESTMENT OBJECTIVE AND
POLICIES," "RISK FACTORS AND INVESTMENT TECHNIQUES" AND "SPECIAL
RISK CONSIDERATIONS" FOR FURTHER INFORMATION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
Expense Information
Investment Objective and Policies
Risk Factors and Investment Techniques
Special Risk Considerations
Organization and Management of the Fund
Investment Manager
Fund Administration and Accounting
Transfer Agent
Alternative Purchase Arrangements
Dividends and Taxes
Performance Data
How to Buy Shares
How Your Purchase Price is Determined
How the Fund Values Its Shares
Initial Sales Charge Alternative-Class A Shares
Contingent Deferred Sales Charge-Class A Shares
Qualifying for a Reduced Sales Charge-
Contingent Deferred Sales Charge Alternative
Class B and Class C Shares
How to Redeem Shares
Minimum Account Balance Requirements
Signature Guarantees
Choosing a Distribution Option
Tax Identification Number
Certificates
Exchange Privilege
Reinvestment Privilege
Systematic Withdrawal Plan
Automatic Investment Method
Consolidated Account Statements
Retirement Plans
Shareholder Inquiries
Appendix A
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
[IVY MACKENZIE LOGO]
EXPENSE INFORMATION
The expenses and costs associated with investing in the
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)
Class A 4.75%(1) None(2)
Class B None 5.00%(3)
Class C None 1.00%(4)
Class I None None
The Fund does not charge a redemption fee, an exchange fee,
or a sales load on reinvested dividends.
____________
(1) Class A shares may be purchased under a variety of plans
that provide for the reduction or elimination of the sales
charge.
(2) A contingent deferred sales charge ("CDSC") may apply to
the
redemption of Class A shares that are purchased without an
initial sales charge. See "Purchases of Class A Shares at
Net Asset Value" and "Contingent Deferred Sales Charge--
Class A Shares."
(3) The maximum CDSC on Class B shares applies to redemptions
during the first year after purchase. The charge declines
to 4% during the second year, 3% during the third year and
fourth years, 2% during the fifth year, 1% during the sixth
year, and 0% in the seventh year and thereafter.
(4) The CDSC on Class C shares applies to redemptions during
the
first year after purchase.
ANNUAL FUND OPERATING EXPENSES(1)
Estimated for the Fund's fiscal year ending December 31, 1998 as
a percentage of net assets. (After Expense Reimbursements)
12B-1
SERVICE/ TOTAL
FUND
MANAGEMENT DISTRIBUTION OTHER
OPERATING
FEES FEES EXPENSES
EXPENSES
Class A 0.75% 0.25% 0.10%
1.10%
Class B 0.75% 1.00%(2) 0.10%
1.85%
Class C 0.75% 1.00%(2) 0.10%
1.85%
Class I 0.75% None 0.01%(3)
0.76%
(1) Annual fund operating expenses are based on estimated
fees and expenses that the Fund expects to incur in
its initial fiscal year ending December 31, 1998, net
of expense reimbursements from Ivy Management, Inc.
("IMI") and other service providers. 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 0.85% of the Fund's average net assets.
Total Fund Operating Expenses include fees paid
indirectly. See "Investment Manager" for a more
detailed discussion of the Fund's fees and expenses.
(2) Long-term investors may, as a result of the Fund's
12b-1 fees, pay more than the economic equivalent of
the maximum front-end sales charge permitted by the
Conduct Rules of the National Association of
Securities Dealers, Inc. ("NASD").
(3) "Other Expenses" of Class I shares are lower than such
expenses for the Fund's other classes because that
class bears lower administrative service fees and
transfer agency and shareholder service fees than
Class A, Class B and Class C shares. See "Fund
Administration and Accounting" and "Transfer
Agent."
EXAMPLE
The following table lists the expenses an investor
would pay on a $1,000 investment in the Fund, assuming (1) 5%
annual return and (2) unless otherwise noted, redemption at the
end of each time period. This example further assumes
reinvestment of all dividends and distributions, and that the
percentage amounts under "Total Fund Operating Expenses" (above)
remain the same each year. THIS EXAMPLE SHOULD NOT BE CONSIDERED
A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY
BE HIGHER OR LOWER THAN THOSE SHOWN.
1 3
YEAR YEARS
Class A* $ 58 $ 81
Class B $ 69(1) $ 88(2)
Class B (no redemption) $ 19 $ 58
Class C $ 29(3) $ 58
Class C (no redemption) $ 19 $ 58
Class I** $ 8 $ 24
* Assumes deduction of the maximum 4.75% initial sales charge at
the time of purchase and no deduction of a CDSC at the time of
redemption.
** Class I shares are not subject to an initial sales charge at
the time of purchase, nor are they subject to the deduction of a
CDSC at the time of redemption.
(1) Assumes deduction of a 5% CDSC at the time of redemption.
(2) Assumes deduction of a 3% CDSC at the time of redemption.
(3) Assumes deduction of a 1% CDSC at the time of redemption.
The purpose of the foregoing table is to assist you in
understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. The information
presented in the 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," "Investment Manager" and "Fund
Administration and Accounting," and the following section of the
SAI: "Investment Advisory and Other Services."
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is fundamental and may not
be changed without the approval of a majority of the Fund's
outstanding voting shares. Except for the Fund's investment
objective and those investment restrictions specifically
identified as fundamental, all investment policies and practices
described in this Prospectus and in the SAI are non-fundamental,
and may be changed by the Board of Trustees of the Trust
("Trustees") without shareholder approval. There can be no
assurance that the Fund's objective will be met. The different
types of securities and investment techniques used by the Fund
involve varying degrees of risk. For information about the
particular risks associated with each type of investment, see
"Risk Factors and Investment Techniques" and "Special Risk
Considerations" below, and the SAI.
Whenever a 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.
Ivy High Yield Fund's investment objective is to achieve a
high level of current
income by investing primarily in below investment grade debt
securities. The Fund will also consider the possibility of
capital growth when it purchases and sells securities.
The Fund will invest primarily in debt securities rated Ba
or below by Moody's Investors Services, Inc. ("Moody's") or BB or
below by Standard & 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). The Fund normally
invests at least 65% of its total assets in these high yield
bonds (including convertible debt securities), but may invest
without limit in such securities. It should be noted that
achieving the Fund's investment objective may be more dependent
on the credit analysis of IMI, and less on that of credit rating
agencies, than may be the case for funds that invest in more
highly rated bonds.
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
investment-grade bonds (those rated Aaa, Aa, A or Baa by Moody's
or AAA, AA, A or BBB by 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. See Appendix A for a description of Moody's and
S&P's bond ratings.
The Fund may invest up to 20% of its total assets in
dividend-paying common and preferred stocks. As a temporary
measure for extraordinary or emergency purposes, the Fund may
borrow from banks up to 20% of the value of its total assets.
The Fund may invest up to 10% of its net assets in debt
securities of foreign issuers, including non-U.S. dollar-
denominated debt securities, Eurodollar securities and debt
securities issued, assumed or guaranteed by foreign governments
or political subdivisions or instrumentalities thereof. The Fund
may also enter into forward foreign currency contracts, but not
for speculative purposes. The Fund may not invest more than 15%
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.
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.
RISK FACTORS AND INVESTMENT TECHNIQUES
The Fund involves above-average bond fund risk. The Fund
may invest without limit in debt securities rated below
investment-grade (i.e.,"junk bonds"). Bonds of this type are
considered to be speculative with regard to the payment of
interest and return of principal, and generally involve a greater
risk of default and more price volatility than securities in
higher rating categories. The yields on high yield/high risk
bonds will fluctuate over time. Lower rated and unrated
securities are especially subject to adverse changes in general
economic conditions, including changes in interest rates, and
changes in the financial condition of their issuers. See
"Special Risk Considerations -- High Yield/High Risk Securities"
below.
In addition, investment in sovereign debt can involve a
high
degree of risk. Emerging market securities in which the Fund may
invest can be more volatile and less liquid than securities in
more developed markets. Foreign securities often have less
publicly available information and are subject to different
regulations than domestic securities. Political events, changes
in the perceived creditworthiness of issuers, high rates of
inflation, higher brokerage costs, fluctuating national interest
rates, thinner trading markets, foreign taxes and movements in
foreign currencies will affect the value of the Fund's holdings
which determine the Fund's share price.
The Fund's share price is likely to vary from day to day.
An investor incurs principal risk when investing, because Fund
shares, when sold, may be worth more or less than the amount paid
for them. Investors should carefully assess the risks associated
with an investment in the Fund.
BANK OBLIGATIONS: The bank obligations in which the Fund
may invest include certificates of deposit, bankers' acceptances
and other short-term debt obligations. Investments in
certificates of deposit and bankers' acceptances are limited to
obligations of (i) banks having total assets in excess of $1
billion, and (ii) other banks if the principal amount of the
obligation is fully insured by the Federal Deposit Insurance
Corporation ("FDIC"). Investments in certificates of deposit of
savings associations are limited to obligations of Federal or
state-chartered institutions whose total assets exceed $1 billion
and whose deposits are insured by the FDIC.
BORROWING: Borrowing may exaggerate the effect on the
Fund's net asset value of any increase or decrease in the value
of the Fund's portfolio securities. Money borrowed will be
subject to interest costs (which may include commitment fees
and/or the cost of maintaining minimum average balances).
COMMERCIAL PAPER: Commercial paper represents short-term
unsecured promissory notes issued in bearer form by bank holding
companies, corporations, and finance companies. The Fund's
investments in commercial paper are limited to obligations rated
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 Fund may invest include corporate bonds, notes, debentures
and other securities convertible into common stocks. Because
convertible securities can be converted into equity securities,
their 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.
INTERNATIONAL BOND MARKETS: 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. 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.
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.
FOREIGN SECURITIES: The foreign securities in which the
Fund invests may include non-U.S. dollar-denominated debt
securities, Eurodollar securities, and debt securities issued,
assumed or guaranteed by foreign governments (or political
subdivisions or instrumentalities thereof). 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 Fund's 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 Fund 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 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 Fund's foreign security holdings are likely
to be high relative to those of securities issued in the United
States.
Other risks include the possibility of expropriation,
nationalization or confiscatory taxation, foreign exchange
controls (which may include suspension of the ability to transfer
currency from a given country), difficulties in pricing, default
in foreign government securities, high rates of inflation,
difficulties in enforcing foreign judgments, political or social
instability, or other developments that could adversely affect
the Fund's foreign investments.
FORWARD FOREIGN CURRENCY CONTRACTS: A forward foreign
currency contract involves an obligation to purchase or sell a
specific currency at a future date at a predetermined price.
Although these contracts are intended to minimize the risk of
loss due to a decline in the value of the hedged currencies, they
also tend to limit any potential gain that might result should
the value of the currencies increase. In addition, there may be
an imperfect correlation between 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 its exposure to changing
security prices, interest rates, 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 engaging in transactions in foreign currency
futures and related options.
The Fund may also enter into futures transactions in
accordance with its 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.
Investors should be aware that the risks associated with
the
use of options and futures are considerable. Options and futures
transactions generally involve a small investment of cash
relative to the magnitude of the risk assumed, and therefore
could result in a significant loss to the Fund if IMI judges
market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's investments. The Fund may also
experience a significant loss if it is unable to close a
particular position due to the lack of a liquid secondary market.
For further information regarding the use of options and futures
transactions and any associated risks, see the SAI.
REPURCHASE AGREEMENTS: Repurchase agreements are
agreements
under which the Fund buys a money market instrument and obtains a
simultaneous commitment from the seller to repurchase the
instrument at a specified time and agreed-upon yield. The Fund
may enter into repurchase agreements with banks or broker-dealers
deemed to be creditworthy by IMI under guidelines approved by the
Board of Trustees. The Fund could experience a delay in
obtaining direct ownership of the underlying collateral, and
might incur a loss if the value of the security should
decline.
RESTRICTED AND ILLIQUID SECURITIES: An "illiquid security"
is an asset that may not be sold or disposed of in the ordinary
course of business within seven days at approximately the value
at which the Fund has valued the security on its books. A
"restricted security" is a security that cannot be offered to the
public for sale without first being registered under the
Securities Act of 1933, as amended (the "1933 Act"), and is
considered to be illiquid until such filing takes place. There
may be a lapse of time between the Fund's decision to sell a
restricted or illiquid security and the point at which the Fund
is permitted or able to sell the security. If adverse market
conditions were to develop during that period, the Fund might
obtain a price less favorable than the price that prevailed when
it decided to sell. In addition, issuers of restricted and other
illiquid securities may not be subject to the disclosure and
other investor protection requirements that would apply if their
securities were publicly traded. Securities whose proceeds are
subject to limitations on repatriation of principal or profits
for more than seven days, and those for which market quotations
are not readily available, are considered illiquid for purposes
of the 15% percentage limitation that applies to the Fund's
investment in illiquid securities.
"WHEN-ISSUED" SECURITIES AND FIRM COMMITMENTS: The Fund
may
invest in securities sold on a "when-issued" or firm commitment
basis. 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: The Fund may invest in zero coupon
securities. 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,
the 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.
SPECIAL RISK CONSIDERATIONS
HIGH YIELD/HIGH RISK SECURITIES: The Fund may invest
without limit in debt securities which are rated below
investment-grade or which are unrated. The lower the ratings of
such debt securities, the greater their risks. These debt
instruments generally offer a higher current yield than that
available from higher grade issues, but typically involve greater
risk. Investors in the Fund 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 Fund's best interest to retain or dispose of the
security.
The yields on high yield/high risk bonds will fluctuate
over
time. In general, prices of all bonds rise when interest rates
fall and fall when interest rates rise. Lower rated and unrated
securities are especially subject to adverse changes in general
economic conditions and to changes in the financial condition of
their issuers. During periods of economic downturn or rising
interest rates, issuers of these instruments may experience
financial stress that could adversely affect their ability to
make payments of principal and interest and increase the
possibility of default. If the issuer of a bond defaults, the
Fund may incur additional expenses to seek recovery. Adverse
publicity and investor perceptions, whether or not based on
fundamental analysis, may also decrease the values and liquidity
of these securities especially in a market characterized by only
a small amount of trading.
In cases where market quotations are not available, lower
rated securities are valued using guidelines established by the
Board of Trustees. Perceived credit quality in this market can
change suddenly and unexpectedly, and may not fully reflect the
actual risk posed by a particular lower rated or unrated
security.
Over the course of this decade, the market for higher
yielding domestic debt securities has changed dramatically. U.S.
high yield bonds now total over $350 billion, about a quarter of
the entire U.S. corporate bond market. The average quality of
the overall high yield bond category has improved. Growing
companies that may not have access to more traditional sources of
financing are using high yield bonds to raise capital. As a
result of their need to borrow in order to fuel growth, they must
pay out higher levels of income in order to compensate investors
for additional credit risk. The conditions of these companies can
improve over time, thus offering the prospect for price
appreciation as well.
By owning shares in the Fund, investors enjoy the
opportunity to receive high monthly income and growth of
investment capital over time. In return for these potential
benefits, shareholders must be willing to accept a significantly
higher amount of risk when compared with most funds owning U.S.
Government bonds and other investment-grade debt securities.
Changes in interest rates may have a less direct or dominant
impact on high yield bonds than on higher quality issues of
similar maturities. However, the price of high yield bonds can
change significantly or suddenly due to a host of factors
including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth
and, at times, stock market activity. In the case of high yield
bonds structured as zero coupon or pay-in-kind securities, their
market prices are affected to a greater extent by interest rate
changes and thereby tend to be more volatile than securities
which pay interest periodically and in cash. High yield bonds
may contain redemption or call provisions. If an issuer
exercises these provisions in a declining interest rate market,
the Fund may have to replace the security with a lower yielding
security. As a result, investors should be comfortable with the
possibility of wide fluctuations in the Fund's share price and
should not rely on the Fund as a sole source of investment
income. Instead, the Fund should be only one part of a balanced
investment program.
Please refer to Appendix A for further information
concerning debt securities ratings. For a more complete
description of the risks of high yield/high risk securities,
please refer to the Fund's SAI.
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is organized as a separate, diversified portfolio
of the Trust, an open-end management investment company organized
as a Massachusetts business trust on December 21, 1983. The
Fund's business and affairs 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. The Fund has
five classes of shares, designated as Class A, Class B, Class C,
Class I and Advisor Class (the latter of which is offered by a
separate 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 and Class I, 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 Fund's 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
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, Mackenzie Investment Management
Inc. ("MIMI") to provide administrative and accounting services,
Ivy Mackenzie Distributors, Inc. ("IMDI") to distribute the
Fund's shares and Ivy Mackenzie Services Corp. ("IMSC") to
provide transfer agency and shareholder-related services for the
Fund. IMI, IMDI and IMSC are wholly-owned subsidiaries of MIMI.
As of January 22, 1998, IMI had approximately $4.6 billion in
assets under management. MIMI is a subsidiary of Mackenzie
Financial Corporation ("MFC"), which has been an investment
counsel and mutual fund manager in Toronto, Ontario, Canada for
more than 25 years.
INVESTMENT MANAGER
For IMI's business management and investment advisory
services, the Fund pays IMI a fee, that is equal, on an annual
basis, to 0.75% of its average net assets.
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
0.85% of the Fund's average net assets, which may lower the
Fund's expenses and increase its return. This voluntary expense
limitation may be terminated or revised at any time, at which
point the Fund's expenses may increase and its yield 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 series (or class thereof) will be
borne solely by that series (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 individual has
responsibility for management of the Fund:
- - Leslie A. Ferris, a Senior Vice President of IMI, is the
Fund's portfolio manager and 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.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative services for the Fund,
such as maintaining the registration of Fund shares under state
"Blue Sky" laws, and assisting with the preparation of Federal
and state income tax returns, financial statements and periodic
reports to shareholders. MIMI also assists the Trust's legal
counsel with the filing of registration statements, proxies and
other required filings under Federal and state law. Under this
arrangement, the average net assets attributable to the Fund's
Class A, Class B and Class C shares are subject to a fee, accrued
daily and paid monthly, at an annual rate of 0.10%. The net
assets attributable to the Fund's Class I shares are subject to a
fee at the annual rate of 0.01%.
MIMI also provides certain accounting and pricing services
for the 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. Certain
broker-dealers that maintain shareholder accounts with the Fund
through an omnibus account provide transfer agent and other
shareholder-related services that would otherwise be provided by
IMSC if the individual accounts that comprise the omnibus account
were opened by their beneficial owners directly (see "Investment
Advisory and Other Services" in the SAI).
ALTERNATIVE PURCHASE ARRANGEMENTS
CLASS A SHARES: Class A shares are subject to an initial
sales charge, unless the amount you purchase is $500,000 or more
(see "Contingent Deferred Sales Charge -- Class A Shares").
Certain purchases qualify for a reduced initial sales charge (see
"Qualifying for a Reduced Sales Charge"). Class A shares are
subject to ongoing service fees at an annual rate of 0.25% of the
Fund's average net assets attributable to its Class A shares. If
you do not specify on your Account Application which class of
shares you are purchasing, it will be assumed that you are
investing in Class A shares.
CLASS B AND CLASS C SHARES. Class B and Class C shares are
not subject to an initial sales charge, but are subject to a CDSC
if redeemed within six years of purchase, in the case of Class B
shares, or within one year of purchase, in the case of Class C
shares. Both classes of shares are subject to ongoing service
and distribution fees at a combined annual rate of up to 1.00% of
the Fund's average net assets attributable to its Class B or
Class C shares. The ongoing distribution fee will cause these
shares to have a higher expense ratio than that of Class A
shares. Also, to the extent that the Fund pays any dividends,
these higher expenses will result in lower dividends than those
paid on Class A shares.
CLASS I SHARES. Class I shares are offered only to
institutions and certain individuals, and are not subject to an
initial sales charge or a CDSC, nor to any ongoing service or
distribution fees. Class I shares also bear lower administrative
services fees and transfer agency fees than Class A, Class B,
Class C shares.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE: The multi-
class structure of the Fund allows you to choose the most
beneficial way to buy shares given the size of your purchase and
the length of time you expect to hold your shares. You should
consider whether, during the anticipated life of your Fund
investment, the accumulated service and distribution fees on
Class B and Class C shares would be less than the initial sales
charge and accumulated service fees on Class A shares purchased
at the same time, and to what extent this differential would be
offset by the Class A shares' potentially higher return. Also,
sales personnel may receive different compensation depending on
which class of shares they are selling. The tables under the
caption "Annual Fund Operating Expenses" at the beginning of this
Prospectus contain additional information that is designed to
assist you in making this determination.
DIVIDENDS AND TAXES
DIVIDENDS: Distributions you receive from the Fund are
reinvested in additional shares of the same class of the Fund
unless you elect to receive them in cash.
The Fund intends normally to make monthly distributions of
its net investment income. 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. The 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 Internal Revenue Code of 1986, as amended (the "Code").
TAXATION: The following discussion is intended for general
information only. You should consult with your tax adviser as to
the tax consequences of an investment in the Fund, including the
status of distributions from the Fund under applicable state or
local law.
The Fund intends to qualify annually as a regulated
investment company under the Code. To qualify, the Fund must
meet certain income, distribution and diversification
requirements. In any year in which the Fund qualifies as a
regulated investment company and timely distributes all of its
taxable income, the Fund generally will not pay any Federal
income or excise tax.
Dividends paid out of the Fund's investment company taxable
income (including dividends, interest and net short-term capital
gains) will be taxable to a shareholder as ordinary income. If a
portion of the Fund's income consists of dividends paid by U.S.
corporations, a portion of the dividends paid by the Fund may be
eligible for the corporate dividends-received deduction.
Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any, that
the Fund designates as capital gains dividends are taxable at the
applicable mid-term or long-term capital gains rate, regardless
of how long the shareholder has held the shares. Dividends are
taxable to shareholders in the same manner whether received in
cash or reinvested in additional Fund shares.
A distribution will be treated as paid on December 31 of
the
current calendar year if it is declared by the Fund in October,
November or December with a record date in such a month and paid
by the Fund during January of the following calendar year. Such
distributions will be taxable to shareholders in the calendar
year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Investments in securities that are issued at a discount
will
result each year in income to the Fund equal to a portion of the
excess of the face value of the securities over their issue
price, even though the Fund receives no cash interest payments
from the securities.
Income and gains received by the Fund from sources within
foreign countries may be subject to foreign withholding and other
taxes. Unless the Fund is eligible 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 may be eligible for reduced tax
rates, 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 distributions payable to shareholders
who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who
have been notified by the Internal Revenue Service ("IRS") that
they are subject to backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited
against the shareholder's U.S. Federal income tax liability.
Fund distributions may be subject to state, local and
foreign taxes. Distributions of the Fund which are derived from
interest on obligations of the U.S. Government and certain of its
agencies, authorities and instrumentalities may be exempt from
state and local taxes in certain states. Further information
relating to tax consequences is contained in the SAI.
PERFORMANCE DATA
Performance information (e.g., "total return" and "yield")
is computed separately for each class of Fund shares in
accordance with formulas prescribed by the SEC. Performance
information for each class may be compared in reports and
promotional literature to indices such as the Standard and Poor's
500 Stock Index, Dow Jones Industrial Average, and Morgan Stanley
Capital International World Index. Advertisements, sales
literature and communications to shareholders may also contain
statements of the Fund's current yield, various expressions of
total return and current distribution rate. Performance figures
will vary in part because of the different expense structures of
the Fund's different classes. ALL PERFORMANCE INFORMATION IS
HISTORICAL AND IS NOT INTENDED TO SUGGEST FUTURE RESULTS.
"Total return" is the change in value of an investment in
the Fund for a specified period, and assumes the reinvestment of
all distributions and imposition of the maximum applicable sales
charge. "Average annual total return" represents the average
annual compound rate of return of an investment in a particular
class of Fund shares assuming the investment is held for one
year, five years and ten years as of the end of the most recent
calendar quarter. Where the Fund provides total return
quotations for other periods, or based on investments at various
sales charge levels or at net asset value, "total return" is
based on the total of all income and capital gains paid to (and
reinvested by) shareholders, plus (or minus) the change in the
value of the original investment expressed as a percentage of the
purchase price.
"Current yield" reflects the income per share earned by the
Fund's portfolio investments, and is calculated by dividing the
Fund's net investment income per share during a recent 30-day
period by the maximum public offering price on the last day of
that period and then annualizing the result. Dividends or
distributions that were paid to the Fund's shareholders are
reflected in the "current distribution rate," which is computed
by dividing the total amount of dividends per share paid by the
Fund during the preceding 12 months by the Fund's current maximum
offering price (which includes any applicable sales charge). The
"current distribution rate" will differ from the "current yield"
computation because it may include distributions to shareholders
from sources other than dividends and interest, short term
capital gain and net equalization credits and will be calculated
over a different period of time.
HOW TO BUY SHARES
OPENING AN ACCOUNT: Complete and sign the Account
Application on the last page of this Prospectus. Make your check
payable to Ivy High Yield 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 Fund reserves the right to reject any purchase order.
MINIMUM INVESTMENT POLICIES: The minimum initial
investment
in Class A, Class B or Class C shares is $1,000; the minimum
additional investment is $100. Initial or additional amounts for
retirement accounts may be less (see "Retirement Plans").
Accounts in Class I shares can be opened with a minimum
initial investment of $5,000,000; the minimum additional
investment is $10,000. The minimum initial investment in the
Fund's Class I shares may be spread over the thirteen-month
period following the opening of the account.
BUYING ADDITIONAL SHARES: You may add to your account at
any time through any of the following options:
BY MAIL: Complete the investment slip attached to your
statement, or write instructions including the account
registration, fund number, and account number of the shares you
wish to purchase. Send your check (payable to the Fund) 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 Class A shares of the Fund is the
net asset value ("NAV") per share plus a sales charge, which may
be reduced or eliminated in certain circumstances. The purchase
price per share is known as the public offering price. Your
purchase price for Class B, Class C and Class I shares of the
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 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 (the "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 Trustees have 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 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 the Fund are
valued at amortized cost.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Shares are purchased at a public offering price equal to
their NAV per share plus a sales charge, as set forth below.
SALES CHARGE
AS A AS A
PORTION OF
PERCEN- PERCEN- PUBLIC
TAGE OF TAGE OF
OFFERING
PUBLIC NET PRICE
OFFERING AMOUNT
RETAINED
PRICE INVESTED BY
DEALER
Less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than
$250,000 3.75% 3.90% 3.00%
$250,000 but less than
$500,000 2.50% 2.56% 2.00%
$500,000 or over* 0.00% 0.00% 0.00%
* A CDSC may apply to the redemption of Class A shares that
are purchased without an initial sales charge. See
"Contingent Deferred Sales Charge -- Class A Shares."
Sales charges are not applied to any dividends or capital
gains that are reinvested in additional shares of the Fund. An
investor may be charged a transaction fee for Class A or Class I
shares purchased or redeemed at NAV through a broker or agent
other than IMDI.
With respect to purchases of $500,000 or more through
dealers or agents, IMDI may, at the time of purchase, pay such
dealers or agents from its own resources a commission to
compensate such dealers or agents for their distribution
assistance in connection with such purchases. The commission
would be computed as set forth below:
NAV COMMISSION TABLE
PURCHASE AMOUNT
COMMISSION
First $3,000,000 . . . . . . . . . . . . . . . . . . . . . . . .
1.00%
Next $2,000,000. . . . . . . . . . . . . . . . . . . . . . . . .
0.50%
Over $5,000,000. . . . . . . . . . . . . . . . . . . . . . . . .
0.25%
Dealers who receive 90% or more of the sales charge may be
deemed to be "underwriters" as that term is defined in the 1933
Act.
IMDI compensates participating brokers who sell Class A
shares through the initial sales charge. IMDI retains that
portion of the initial sales charge that is not reallowed to the
dealers, which it may use to distribute the Fund's Class A
shares. Pursuant to separate distribution plans for the Fund's
Class A, Class B and Class C shares, IMDI bears various
promotional and sales related expenses, including the cost of
printing and mailing prospectuses to persons other than
shareholders. Pursuant to the Fund's Class A distribution plan,
IMDI currently pays a continuing service fee to qualified dealers
at an annual rate of 0.25% of qualified investments.
IMDI may from time to time pay a bonus or other incentive
to
dealers (other than IMDI) which employ a registered
representative who sells a minimum dollar amount of the shares of
the Fund and/or other funds distributed by IMDI during a
specified period of time. This bonus or other incentive may take
the form of payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered
representatives and members of their families to places within or
without the U.S. or other bonuses such as gift certificates or
the cash equivalent of such bonus or incentive.
CONTINGENT DEFERRED SALES CHARGE--CLASS A SHARES
Purchases of $500,000 or more of Class A shares will be
made
at NAV with no initial sales charge, but if the shares are
redeemed within 24 months after the end of the calendar month in
which the purchase was made (the CDSC period), a CDSC of 1.00%
will be imposed.
The charge will be assessed on an amount equal to the
lesser
of the current market value or the original purchase cost of the
Class A shares redeemed. Accordingly, no CDSC will be imposed on
increases in account value above the initial purchase price,
including any dividends or capital gains which have been
reinvested in additional Class A shares.
In determining whether a CDSC applies to a redemption, the
calculation will be determined in a manner that results in the
lowest possible rate being charged. Therefore, it will be
assumed that the redemption is first made from any shares in your
account not subject to the CDSC. The CDSC is waived in certain
circumstances. See the discussion below under the caption
"Waiver of Contingent Deferred Sales Charge."
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The CDSC is
waived for: (i) redemptions in connection with distributions not
exceeding 12% annually of the initial account balance (i.e., the
value of the shareholder's Class A Fund account at the time of
the initial distribution) (i.a) following retirement under a tax
qualified retirement plan, or (i.b) upon attaining age 59 1/2 in
the case of an IRA, a custodial account pursuant to section
403(b)(7) of the Code or a Keogh Plan; (ii) redemption resulting
from tax-free return of an excess contribution to an IRA; or
(iii) any partial or complete redemption following the death or
disability (as defined in Section 72(m)(7) of the Code) of a
shareholder from an account in which the deceased or disabled is
named, provided that the redemption is requested within one year
of death or disability. IMDI may require documentation prior to
waiver of the CDSC.
Class A shareholders may exchange their Class A shares
subject to a CDSC ("outstanding Class A shares") for Class A
shares of another Ivy fund ("new Class A shares") on the basis of
the relative NAV per Class A share, without the payment of any
CDSC that would be due upon the redemption of the outstanding
Class A shares. The original CDSC rate that would have been
charged if the outstanding Class A shares were redeemed will
carry over to the new Class A shares received in the exchange,
and will be charged accordingly at the time of redemption.
QUALIFYING FOR A REDUCED SALES CHARGE
RIGHTS OF ACCUMULATION (ROA): Rights of Accumulation
("ROA") is calculated by determining the current market value of
all Class A shares in all Ivy fund accounts (except Ivy Money
Market Fund) owned by you, your spouse, and your children under
21 years of age. ROA is also applicable to accounts under a
trustee or other single fiduciary (including retirement accounts
qualified under Section 401 of the Code). The current market
value of each of your accounts as described above is added
together and then added to your current purchase amount. If the
combined total is equal or greater than a breakpoint amount for
the Fund, then you qualify for the reduced sales charge. To
reduce or eliminate the sales charge, you must complete Section
4C of the Account Application.
LETTER OF INTENT (LOI): A Letter of Intent ("LOI") is a
non-binding agreement that states your intention to invest in
additional Class A shares, within a thirteen-month period after
the initial purchase, an amount equal to a breakpoint amount for
the Fund. The LOI may be backdated up to 90 days. To sign an LOI,
please complete Section 4C of the Account Application.
Should the LOI not be fulfilled within the thirteen-month
period, your account will be debited for the difference between
the full sales charge that applies for the amount actually
invested and the reduced sales charge actually paid on purchases
placed under the terms of the LOI.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE: Investors
who held Ivy Fund shares as of December 31, 1991, or who held
shares of certain funds that were reorganized into an Ivy fund,
may be exempt from sales charges on the purchase of Class A
shares of any of the Ivy funds. If you believe you may be
eligible for such an exemption, please contact IMSC at 1-800-235-
3322 for additional information.
Class A shares of the Fund may be purchased without an
initial sales charge or CDSC by (i) officers and Trustees of the
Trust (and their relatives), (ii) officers, directors, employees,
retired employees, legal counsel and accountants of IMI, MIMI,
and MFC (and their relatives), and (iii) directors, officers,
partners, registered representatives, employees and retired
employees (and their relatives) of dealers having a sales
agreement with IMDI (or trustees or custodians of any qualified
retirement plan or IRA established for the benefit of any such
person). In addition, certain investment advisers and financial
planners who charge a management, consulting or other fee for
their services and who place trades for their own accounts or the
accounts of their clients may purchase Class A shares of the Fund
without an initial sales charge or a CDSC, provided such
purchases are placed through a broker or agent who maintains an
omnibus account with the Fund. Also, clients of these advisers
and planners may make purchases under the same conditions if the
purchases are through the master account of such adviser or
planner on the books of such broker or agent. This provision
applies to assets of retirement and deferred compensation plans
and trusts used to fund those plans including, but not limited
to, those defined in Section 401(a), 403(b) or 457 of the Code
and "Rabbi Trusts" whose assets are used to purchase shares of
the Fund through the aforementioned channels.
Class A shares of the Fund may be purchased at NAV by
retirement plans qualified under section 401(a) or 403(b) of the
Code, subject to the Employee Retirement Income Security Act of
1974, as amended. A CDSC of 1.00% will be imposed on such
purchases in the event of certain plan-level redemption
transactions within 24 months following such purchases. Class A
shares of the Fund are made available to Merrill Lynch Daily K
Plan (the "Plan") participants at NAV without an initial sales
charge if the Plan has at least $3 million in assets or 500 or
more eligible employees. Class B shares of the Fund are made
available Plan participants at NAV without a CDSC if the Plan has
less than $3 million in assets or fewer than 500 eligible
employees. For further information see "GROUP SYSTEMATIC
INVESTMENT PROGRAM" in the Fund's SAI.
If investments by retirement plans at NAV are made through
a
dealer who has executed a dealer agreement with respect to the
Fund, IMDI may, at the time of purchase, pay the dealer out of
IMDI's own resources a commission to compensate the dealer for
its distribution assistance in connection with the retirement
plan's investment. Please refer to the NAV Commission Table on
page _____ of this Prospectus. Please contact IMDI for
additional information.
Class A shares can also be purchased without an
initial
sales charge, but subject to a CDSC of 1.00% during the first 24
months by: (a) any state, county, or city (or any
instrumentality, department, authority or agency of such
entities) that is prohibited by applicable investment laws from
paying a sales charge or commission when purchasing shares of a
registered investment management company (an "eligible
governmental authority"), and (b) trust companies, bank trust
departments, credit unions, savings and loans and other similar
organizations in their fiduciary capacity or for their own
accounts, subject to any minimum requirements set by IMDI
(currently, these criteria require that the amount invested or to
be invested in the subsequent 13-month period totals at least
$250,000). In either case, IMDI may pay commissions to dealers
that provide distribution assistance on the same basis as in the
preceding paragraph.
Class A shares of the Fund may also be purchased without a
sales charge in connection with certain liquidation, merger or
acquisition transactions involving other investment companies or
personal holding companies. Additional information on reductions
or waivers may be obtained from IMDI at the address listed on the
cover of the Prospectus.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B AND CLASS C
SHARES
Class B and Class C shares are offered at NAV per share
without a front end sales charge. Class C shares redeemed within
one year of purchase will be subject to a CDSC of 1%, and Class B
shares redeemed within six years of purchase will be subject to a
CDSC at the rates set forth below. This charge will be assessed
on an amount equal to the lesser of the current market value or
the original purchase cost of the shares being redeemed.
Accordingly, you will not be assessed a CDSC on increases in
account value above the initial purchase price, including shares
derived from dividends or capital gains reinvested. In
determining whether a CDSC applies to a redemption, the
calculation will be determined in a manner that results in the
lowest possible rate being charged. It will be assumed that your
redemption comes first from shares you have held beyond the
requisite maximum holding period or those you acquire through
reinvestment of dividends or capital gains, and next from the
shares you have held the longest during the requisite holding
period.
Proceeds from the CDSC are paid to IMDI. The proceeds are
used, in whole or in part, to defray its expenses related to
providing the Fund with distribution services in connection with
the sale of Class B and Class C shares, such as compensating
selected dealers and agents for selling these shares. The
combination of the CDSC and the distribution and service fees
makes it possible for the Fund to sell Class B or Class C shares
without deducting a sales charge at the time of the purchase.
In the case of Class B shares, the amount of the CDSC, if
any, will vary depending on the number of years from the time you
purchase your Class B shares until the time you redeem them.
Solely for purposes of determining this holding period, any
payments you make during the quarter will be aggregated and
deemed to have been made on the last day of the quarter. In the
case of Class C shares, solely for purposes of determining this
holding period, any purchases you make during a month will be
deemed to have been made on the last day of the month.
CLASS B SHARES
CONTINGENT
DEFERRED
SALES
CHARGE AS
A
PERCENTAGE OF
DOLLAR
AMOUNT
SUBJECT TO
CHARGE
First. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .5%
Second . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .4%
Third. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .3%
Fourth . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .3%
Fifth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .2%
Sixth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .1%
Seventh and thereafter . . . . . . . . . . . . . . . . . . . . .
. .0%
IMDI currently intends to pay to dealers a sales commission
of 4% of the sale price of Class B shares that they have sold,
and will receive the entire amount of the CDSC paid by
shareholders on the redemption of Class B shares to finance the
4% commission and related marketing expenses.
With respect to Class C shares, IMDI currently intends to
pay to dealers a sales commission of 1% of the sale price of
Class C shares that they have sold, a portion of which is to
compensate the dealers for providing Class C shareholder account
services during the first year of investment. IMDI will receive
the entire amount of the CDSC paid by shareholders on the
redemption of Class C shares to finance the 1% commission and
related marketing expenses.
In accordance with separate distribution plans for the
Fund's Class B and Class C shares adopted pursuant to Rule 12b-1
under the 1940 Act, IMDI bears various promotional and sales
related expenses, including the cost of printing and mailing
prospectuses to persons other than shareholders. Under the
Fund's Class B plan, IMDI retains 0.75% of the continuing 1.00%
service/distribution fee assessed to Class B shareholders, and
pays a continuing service fee to qualified dealers at an annual
rate of 0.25% of qualified investments. Under the Class C plan,
IMDI pays continuing service/distribution fees to qualified
dealers at an annual rate of 1.00% of qualified investments after
the first year of investment (0.25% of which represents a service
fee).
CONVERSION OF CLASS B SHARES: Your Class B shares and an
appropriate portion of both reinvested dividends and capital
gains on those shares will be converted into Class A shares
automatically no later than the month following eight years after
the shares were purchased, resulting in lower annual distribution
fees. If you exchanged Class B shares into the Fund from Class B
shares of another Ivy fund, the calculation will be based on the
time the shares in the original fund were purchased.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The CDSC is
waived for: (i) redemptions in connection with distributions not
exceeding 12% annually of the initial account balance (i.e., the
value of the shareholder's Class B or Class C Fund account at the
time of the initial distribution) (i.a) following retirement
under a tax qualified retirement plan, or (i.b) upon attaining
age 59 1/2 in the case of an IRA, a custodial account pursuant to
section 403(b)(7) of the Code or a Keogh Plan; (ii) redemption
resulting from tax-free return of an excess contribution to an
IRA; or (iii) any partial or complete redemption following the
death or disability (as defined in Section 72(m)(7) of the Code)
of a shareholder from an account in which the deceased or
disabled is named, provided that the redemption is requested
within one year of death or disability. IMDI may require
documentation prior to waiver of the CDSC.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS: IMDI may, at
its own expense, pay concessions in addition to those described
above to dealers that satisfy certain criteria established from
time to time by IMDI. These conditions relate to increasing
sales of shares of the Fund over specified periods and to certain
other factors. These payments may, depending on the dealer's
satisfaction of the required conditions, be periodic and may be
up to (i) 0.25% of the value of Fund shares sold by the dealer
during a particular period, and (ii) 0.10% of the value of Fund
shares held by the dealer's customers for more than one year,
calculated on an annual basis.
HOW TO REDEEM SHARES
You may redeem your Fund shares through your registered
securities representative, by mail or by telephone. A CDSC may
apply to certain Class A share redemptions, to Class B share
redemptions prior to conversion and to Class C shares that are
redeemed within one year of purchase. All redemptions are made
at the NAV next determined after a redemption request has been
received in good order. Requests for redemptions must be
received by 4:00 p.m. Eastern time to be processed at the NAV for
that day. Any redemption request in good order that is received
after 4:00 p.m. Eastern time will be processed at the price
determined on the following business day. If you own shares of
more than one class of the Fund, the Fund will redeem first the
shares having the highest 12b-1 fees; any shares subject to a
CDSC will be redeemed last unless you specifically elect
otherwise.
When shares are redeemed, the Fund will normally send
redemption proceeds to you on the next business day, but may take
up to seven business days (or longer in the case of shares
recently purchased by check). 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, 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.
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 and
subject to state law requirements, 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 shares of
the same class 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 another Ivy fund of the
same class.
DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED - Dividends will
be paid in cash. Capital gains will be reinvested at NAV in
additional shares of the same class of the Fund or another Ivy
fund of the same class.
DIVIDENDS AND CAPITAL GAINS IN CASH - Both dividends and
capital gains will be paid in cash.
If you wish to have your cash distributions deposited
directly to your bank account via electronic funds transfer,
("EFT") or if you wish to change your distribution option, please
contact IMSC at 1-800-777-6472.
If you wish to have your cash distributions go to an
address
other than the address of record you must provide IMSC with a
letter of instruction signed by all registered owners with
signatures guaranteed.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a 31% U.S. Federal
backup withholding tax on dividends, capital gains distributions
and redemption proceeds, you must furnish the Fund with your
certified tax identification number ("TIN") and certify that you
are not subject to backup withholding due to prior underreporting
of interest and dividends to the IRS. If you fail to provide a
certified TIN, or such other tax-related certifications as the
Fund may require, within 30 days of opening your new account, the
Fund reserves the right to involuntarily redeem your account and
send the proceeds to your address of record.
You can avoid the above withholding and/or redemption by
correctly furnishing your TIN, and making certain certifications,
in Section 2 of the Account Application at the time you open your
new account, unless the IRS requires that backup withholding be
applied to your account.
Certain payees, such as corporations, generally are exempt
from backup withholding. Please complete IRS Form W-9 with the
Account Application to claim this exemption. If the registration
is for an UGMA/UTMA account, please provide the social security
number of the minor. Alien individuals must furnish their
individual TIN on a completed IRS Form W-9. Other non-U.S.
investors who are not required to 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 funds reserve the
right to reject, for any reason, any exchange requests.
Class A shareholders may exchange their outstanding Class A
shares for Class A shares of another Ivy fund on the basis of the
relative NAV per Class A share, plus an amount equal to the
difference between the sales charge previously paid on the
outstanding Class A shares and the sales charge payable at the
time of the exchange on the new Class A shares. Incremental
sales charges are waived for outstanding Class A shares that have
been invested for 12 months or longer.
Class B (and Class C) shareholders may exchange their
outstanding shares for Class B (or Class C) shares of another Ivy
fund on the basis of the relative NAV per share, without the
payment of any CDSC that would otherwise be due upon redemption.
Class B shareholders who exercise the exchange privilege would
continue to be subject to the Fund's CDSC schedule (or period)
following an exchange if such schedule is higher (or longer) than
the CDSC for the new Class B shares.
Class I shareholders may exchange their outstanding Class I
shares for Class I shares of another Ivy fund on the basis of the
relative NAV per 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.
Shares resulting from the reinvestment of dividends and
other distributions will not be charged an initial sales charge
or a CDSC when exchanged into another Ivy fund.
Exchanges are considered to be taxable events, and may
result in a capital gain or a capital loss for tax purposes.
Before executing an exchange, you should obtain and read the
prospectus and consider the investment objective of the fund to
be purchased. Shares must be uncertificated in order to execute
an exchange. Exchanges are available only in states where they
can be legally made. 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.
With respect to shares subject to a CDSC, if less than all
of an investment is exchanged out of the Fund, the shares
exchanged will reflect, pro rata, the cost, capital appreciation
and/or reinvestment of distributions of the original investment
as well as the original purchase date, for purposes of
calculating any CDSC for future redemptions of the exchanged
shares.
Investors who held Ivy Fund shares as of December 31, 1991,
or who held shares of certain funds that were reorganized into an
Ivy fund, may be exempt from sales charges on the exchange of
shares between any of the Ivy funds. If you believe you may be
eligible for such an exemption, please contact IMSC at
1-800-235-3322 for additional information.
In calculating the sales charge assessed on an exchange,
shareholders will be allowed to use the Rights of Accumulation
privilege.
EXCHANGES BY TELEPHONE: If Section 6D of the Account
Application is not completed, telephone exchange privileges will
be provided automatically. Although telephone exchanges may be a
convenient feature, you should realize that you may be giving up
a measure of security that you may otherwise have if you
terminated the privilege and exchanged your shares in writing.
If you do not wish to make telephone exchanges or let your
registered representative do so on your behalf, you must notify
IMSC in writing.
In order to execute an exchange, please contact IMSC at 1-
800-777-6472. Have the account number of your current fund and
the exact name in which it is registered available to give to the
telephone representative.
The Fund employs reasonable procedures that require
personal
identification prior to acting on exchange instructions
communicated by telephone to confirm that such instructions are
genuine. In the absence of such procedures, the Fund may be
liable for any losses due to unauthorized or fraudulent telephone
instructions.
EXCHANGES IN WRITING: In a letter, request an exchange and
provide the following information:
- - The name and class of the fund whose shares you currently
own.
- - Your account number.
- - The name(s) in which the account is registered.
- - The name of the fund in which you wish your exchange to be
invested.
- - The number of shares or the dollar amount you wish to
exchange.
The request must be signed by all registered owners.
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A shares of the Fund have
a one-time privilege of reinvesting all or a part of the proceeds
of the redemption back into Class A shares of the Fund at NAV
(without a sales charge) within 60 days after the date of
redemption. IN ORDER TO REINVEST WITHOUT A SALES CHARGE,
SHAREHOLDERS OR THEIR BROKERS MUST INFORM IMSC THAT THEY ARE
EXERCISING THE REINVESTMENT PRIVILEGE AT THE TIME OF
REINVESTMENT. The tax status of a gain realized on a redemption
generally will not be affected by the exercise of the
reinvestment privilege, but a loss realized on a redemption
generally may be disallowed by the IRS if the reinvestment
privilege is exercised within 30 days after the redemption. In
addition, upon a reinvestment, the shareholder may not be
permitted to take into account sales charges incurred on the
original purchase of shares in computing their taxable gain or
loss.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal Plan at any time by
completing the Account Application, which is attached to this
Prospectus. (This option is not available to Class I
shareholders of the Fund.) You can also obtain this application
by contacting your registered representative or IMSC at 1-800-
777-6472. To be eligible, you must have at least $5,000 in your
account. Payments (minimum distribution amount -- $50) from your
account can be made monthly, quarterly, semi-annually, annually
or on a selected monthly basis, to yourself or any other
designated payee. You may elect to have your systematic
withdrawal paid directly to your bank account via EFT, at no
charge. 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 $1,000 while the
plan is in effect. However, it may not be advantageous to
purchase additional Class A, Class B or Class C shares when you
have a Systematic Withdrawal Plan, because you may be subject to
an initial sales charge on your purchase of Class A shares or to
a CDSC imposed on your redemptions of Class B or Class C shares.
In addition, redemptions are taxable events.
Amounts paid to you through the Systematic Withdrawal Plan
are derived from the redemption of shares in your account. Any
applicable CDSC will be assessed upon the redemptions. A CDSC
will not be assessed on withdrawals not exceeding 12% annually of
the initial account balance when the Systematic Withdrawal Plan
was started.
Should you wish at any time to add a Systematic Withdrawal
Plan to an existing account or change payee instructions, you
will need to submit a written request, signed by all registered
owners, with signatures guaranteed.
Retirement accounts are eligible for Systematic Withdrawal
Plans. Please contact IMSC at 1-800-777-6472 to obtain the
necessary paperwork to establish a plan.
If the U.S. Postal Service cannot deliver your checks, or
if
deposits to a bank account are returned for any reason, your
redemptions will be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be automatically drawn
each month from your bank for investment in Fund shares by
completing Sections 6A and 7B of the Account Application. Attach
a "voided" check to your Account Application. At pre-specified
intervals, your bank account will be debited and the proceeds
will be credited to your Ivy account. The minimum investment
under this plan is $50 per month ($25 per month for retirement
plans). There is no charge to you for this program.
You may terminate or suspend your Automatic Investment
Method by telephone at any time by contacting IMSC at 1-800-777-
6472.
If you have investments being withdrawn from a bank account
and we are notified that the account has been closed, your
Automatic Investment Method will be discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy 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 family of funds offer several tax-sheltered
retirement plans that may fit your needs:
- - IRA (Individual Retirement Account)
- - 401(k), Money Purchase Pension and Profit Sharing Plans
- - SEP-IRA (Simplified Employee Pension Plan)
- 403(b)(7) Plan
- - 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 W-4P, 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 Fund should be directed to IMSC at
1-800-777-6472.
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 1997 Issue (McGraw Hill, New
York, 1997).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's are judged by
Moody's to be of the best quality, carrying the smallest degree
of investment risk. Interest payments are protected by a large
or exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds rated Aa are
judged by Moody's to be of high quality by all standards. Aa
bonds are rated lower than Aaa bonds because margins of
protection may not be as large as those of Aaa bonds, or
fluctuations of protective elements may be of greater amplitude,
or there may be other elements present which make the long-term
risks appear somewhat larger than those applicable to Aaa
securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are to be considered as upper
medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Bonds rated Baa by Moody's are considered medium-grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other terms
of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest. Bonds which are rated Ca
represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the highest
commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by management of obligations which may be present
or may arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the
relative strengths of these factors. The designation of Prime-1
indicates the highest quality repayment capacity of the rated
issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt rating is a
current assessment of the creditworthiness of an obligor with
respect to a specific obligation. The ratings are based on
current information furnished by the issuer or obtained by S&P
from other sources it considers reliable. The ratings described
below may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
Debt rated AA is judged by S&P to have a very strong capacity to
pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A by S&P has a
strong capacity to pay interest and repay principal, although it
is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated
categories.
Debt rated BBB by S&P is regarded by S&P as having an
adequate capacity to pay interest and repay principal. Although
such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating. Debt rated B has a greater vulnerability to default
but currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used
for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating. Debt rated CCC has a currently
identifiable vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an actual or
implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt
service payments are continued.
The rating CI is reserved for income bonds on which no
interest is being paid. Debt rated D is in payment default. The
D rating category is used when interest payments or principal
payments are not made on the date due, even if the applicable
grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
considered short-term in the relevant market.
The commercial paper rating A-1 by S&P indicates that the
degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
For commercial paper with an A-2 rating, the capacity for timely
payment on issues is satisfactory, but not as high as for issues
designated A-1. Issues rated A-3 have adequate capacity for
timely payment, but are more vulnerable to the adverse effects of
changes in circumstances than obligations carrying higher
designations.
Issues rated B are regarded as having only speculative
capacity for timely payment. The C rating is assigned to short-
term debt obligations with a doubtful capacity for payment. Debt
rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the
date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Ivy High Yield Fund
ACCOUNT APPLICATION
USE THIS APPLICATION FOR CLASS A, CLASS B AND CLASS C
Please mail applications and checks to: Ivy Mackenzie
Services Corp., P.O. Box 3022, Boca Raton, FL 33431-0922.
(This application should not be used for retirement accounts for
which Ivy Fund is custodian.)
Account Number:
(Fund Use Only)
Dealer #:
Branch #:
Rep. I.D. #:
Acct. Type:
Soc Cd:
Div Cd:
CG Cd:
Exc Cd:
Red Cd:
1. REGISTRATION
/ / Individual
/ / Joint Tenant
/ / Estate
/ / UGMA/UTMA
/ / Corporation
/ / Partnership
/ / Sole Proprietor
/ / Trust
/ / Other
Date of Trust
Owner, Custodian or Trustee
Co-owner or Minor
Minor's State of Residence
Street
City
State
Zip Code
Phone Number -- Day
Phone Number -- Evening
2. TAX ID
Citizenship: / / U.S. / / Other ________________
Social Security Number
Tax Identification Number
Under penalties of perjury, I certify by signing in Section
8 below that: (1) the number shown in this section is my
correct taxpayer identification number (TIN), and (2) I am
not subject to backup withholding because: (a) I have not
been notified by the Internal Revenue Service (IRS) that I
am subject to backup withholding as a result of a failure
to
report all interest or dividends, or (b) the IRS has
notified me that I am no longer subject to backup
withholding. (Cross out item (2) if you have been notified
by the IRS that you are currently subject to backup
withholding because of underreporting interest or dividends
on your tax return.) Please see the "Tax Identification
Number" section of the Prospectus for additional
information
on completing this section.
3. DEALER INFORMATION
The undersigned ("Dealer") agrees to all applicable
provisions in this Application, guarantees the signature
and
legal capacity of the Shareholder, and agrees to notify
IMSC
of any purchases made under a Letter of Intent or Rights of
Accumulation.
Dealer Name
Branch Office Address
City
State
Zip Code
Representative's Name and Number
Representative's Phone Number
Authorized Signature of Dealer
4. INVESTMENTS
A. Enclosed is my check ($1,000 minimum) made payable to
Ivy High Yield Fund. Please invest it in Class A __
or
Class B __ or Class C shares.*
$_______________________(Amount Enclosed)
B. I qualify for an elimination of the sales charge due
to
the following privilege (applies only to Class A
shares):
__ New Letter of Intent (if ROA or 90-day backdate
privilege is applicable, provide account(s)
information below.)
__ ROA with the account(s) listed below.
__ Existing Letter of Intent with account(s) listed
below.
Fund Name(s)
Account Number(s)
If establishing a Letter of Intent, you will need to
purchase Class A shares over a thirteen-month period
in
accordance with the provisions in the Prospectus. The
Aggregate amount of these purchases will be at least
equal to the amount indicated below (see Prospectus
for
minimum amount required for reduced sales charges).
/ / $ 50,000
/ / $100,000
/ / $250,000
/ / $500,000
C. FOR DEALER USE
Confirmed trade orders: [Confirm Number, Number of
Shares, Trade Date]
5. DISTRIBUTION OPTIONS
I would like to reinvest dividends and capital gains into
additional shares in this account at net asset value unless
a different option is checked below.
A. / / Reinvest all dividends and capital gains into
additional shares of a different Ivy or Mackenzie
fund.
Fund Name
Account Number
B. / / Pay all dividends in cash and reinvest capital
gains into additional shares in this Fund or a
different Ivy or Mackenzie fund.
Fund Name
Account Number
C. / / Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH DISTRIBUTION, SELECTED IN C OR D
ABOVE, BE:
/ / Sent to the address listed in the registration.
/ / Sent to the special payee listed in Section
7A / / (By Mail)
7B / / (By E.F.T.)
6. OPTIONAL SPECIAL FEATURES
A. / / Automatic Investment Method (AIM)
- I wish to invest _________________
/ / once per month
/ / twice
/ / 3 times
/ / 4 times
- My bank account will be debited on the _________ day
of
the month
Please invest $___________________ each period starting in
the month of __________________ in Ivy High Yield Fund.
/ / Class A
/ / Class B
/ / Class C
/ / I have attached a voided check to ensure my correct
bank account will be debited.
B. Systematic Withdrawal Plans**
I wish to automatically withdraw funds from my account in
Ivy High Yield Fund
/ / Monthly / / Quarterly / /Semiannually / / Annually
/ / Once / / Twice / / 3 times / / 4 times per month
I request the distribution be:
/ / Sent to the address listed in the registration.
/ / Sent to the special payee listed in Section 7.
/ / Invested into additional shares of the same class of a
different Ivy Mackenzie fund.
Fund Name
Account Number
Amount $__________________(Minimum $50) starting on or
about
the
- _______ day of the month
- _______ day of the month
- _______ day of the month*
NOTE: Account minimum: $5,000 in shares at current offering
price
C. Electronic Funds Transfer for Redemption Proceeds**
I authorize the Agent to honor telephone instructions
for the redemption of Fund shares up to $50,000.
Proceeds may be wire transferred to the bank account
designated ($1,000 minimum). (Complete Section 7B)
D. Telephone Exchanges** / / Yes / / No
I authorize exchanges by telephone among the Ivy and
Mackenzie family of funds upon instructions from any
person as more fully described in the Prospectus. To
change this option once established, written
instructions must be received from the shareholder of
record or the current registered representative.
If neither box is checked, the telephone exchange
privilege will be provided automatically.
E. Telephonic Redemptions** / / Yes / / No
The Fund or its agents are authorized to honor
telephone instructions from any person as more fully
described in the Prospectus for the redemption of Fund
shares. The amount of the redemption shall not exceed
$50,000 and the proceeds are to be payable to the
shareholder of record and mailed to the address of
record. To change this option once established,
written
instructions must be received from the shareholder of
record or the current registered representative.
If neither box is checked, the telephone redemption
privilege will be provided automatically.
* There must be a period of at least seven calendar days
between each investment/withdrawal period.
** This option may not be used if shares are issued in
certificate form.
7. SPECIAL PAYEE
A. MAILING ADDRESS
Please send all disbursements to this special payee:
Name of Bank or Individual
Account Number (If Applicable)
Street
City/State/Zip
B. FED WIRE / E.F.T. INFORMATION
Financial Institution
ABA #
Account #
Street
City/State/Zip
(Please attach a voided check)
8. SIGNATURES
Investors should be aware that the failure to check the
"No"
under Section 6D or 6E above means that the Telephone
Exchange/Redemption Privileges will be provided. The Funds
employ reasonable procedures that require personal
identification prior to acting on exchange/redemption
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such
procedures,
a Fund may be liable for any losses due to unauthorized or
fraudulent telephone instructions. Please see "Exchange
Privilege" and "How to Redeem Shares" in the Prospectus for
more information on these privileges.
I certify to my legal capacity to purchase or redeem shares
of the Fund for my own account or for the account of the
organization named in Section 1. I have received a current
Prospectus and understand its terms are incorporated in
this
application by reference. I am certifying my taxpayer
information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT
TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
______________________________
________________________
Signature of Owner, Custodian, Date
Trustee or Corporate Officer
______________________________
________________________
Signature of Joint Owner, Date
Co-Trustee or Corporate Officer
(Remember to sign Section 8)
PROSPECTUS [], 1998
IVY FUND
Ivy High Yield 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 High
Yield 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, Class C and
Class I shares are described in a separate prospectus dated [],
1998.
The Fund's investment objective is to achieve a high level
of current income by investing primarily in below investment
grade debt securities.
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 Fund's Statement
of Additional Information for the Advisor Class shares dated [],
1998 (the "SAI"), which has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference into
this Prospectus. The SAI is available upon request and without
charge from the Trust at the Distributor's address and telephone
number below. The SEC maintains a web site (http://www.sec.gov)
that contains the SAI and other material incorporated by
reference.
THE FUND INVESTS SIGNIFICANTLY IN LOWER-QUALITY DEBT
SECURITIES, COMMONLY REFERRED TO AS "JUNK BONDS." BONDS OF THIS
TYPE ARE CONSIDERED TO BE SPECULATIVE WITH REGARD TO THE PAYMENT
OF INTEREST AND RETURN OF PRINCIPAL. THEY CARRY GREATER RISKS,
SUCH AS THE RISK OF DEFAULT, THAN OTHER DEBT SECURITIES.
INVESTORS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN
INVESTMENT IN THE FUND. REFER TO "INVESTMENT OBJECTIVE AND
POLICIES," "RISK FACTORS AND INVESTMENT TECHNIQUES" AND "SPECIAL
RISK CONSIDERATIONS" FOR FURTHER INFORMATION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
Expense Information
Investment Objective and Policies
Risk Factors and Investment Techniques
Special Risk Considerations
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 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
Appendix A
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
[IVY MACKENZIE LOGO]
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 MAXIMUM
CONTINGENT
LOAD IMPOSED DEFERRED SALES
ON PURCHASES CHARGE (AS A % OF
(AS A % OF ORIGINAL PURCHASE
OFFERING PRICE) PRICE)
IVY HIGH YIELD None None
FUND
The Fund does not charge a redemption fee, an exchange fee,
or a sales load on reinvested dividends.
ANNUAL FUND OPERATING EXPENSES(1)
Estimated for the Fund's fiscal year ending December 31, 1998 as
a percentage of net assets. (After Expense Reimbursements)
12B-1
SERVICE/ TOTAL
FUND
MANAGEMENT DISTRIBUTION OTHER
OPERATING
FEES FEES EXPENSES
EXPENSES
IVY HIGH YIELD 0.75% NONE 0.10%
0.85%
FUND
(1) Annual fund operating expenses are based on estimated fees
and expenses that the Fund expects to incur in its initial
fiscal year ending December 31, 1998, net expense
reimbursements from Ivy Management, Inc. ("IMI") and other
service providers. 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 0.85% of the
Fund's average net assets. Total Fund Operating Expenses
include fees paid indirectly. See "Investment Manager" for
a more detailed discussion of the Fund's fees and
expenses.
EXAMPLE
The following table lists the expenses 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. This example further
assumes reinvestment of all dividends and distributions, and that
the percentage amounts under "Total Fund Operating Expenses"
(above) remain the same each year. THIS EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN.
1 3
YEAR YEARS
Ivy High Yield Fund $9 $27
The purpose of the foregoing table is to assist you in
understanding the various costs and expenses that an investor in
the Fund's Advisor Class shares will bear directly or indirectly.
The information presented in the 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," "Investment Manager"
and "Fund Administration and Accounting," and the following
section of the SAI: "Investment Advisory and Other Services."
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is fundamental and may not
be changed without the approval of a majority of the Fund's
outstanding voting shares. Except for the Fund's investment
objective and those investment restrictions specifically
identified as fundamental, all investment policies and practices
described in this Prospectus and in the SAI are non-fundamental,
and may be changed by the Board of Trustees of the Trust
("Trustees") without shareholder approval. There can be no
assurance that the Fund's objective will be met. The different
types of securities and investment techniques used by the Fund
involve varying degrees of risk. For information about the
particular risks associated with each type of investment, see
"Risk Factors and Investment Techniques" and "Special Risk
Considerations" below, and the SAI.
Whenever a 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.
Ivy High Yield Fund's investment objective is to achieve a
high level of current
income by investing primarily in below investment grade debt
securities. The Fund will also consider the possibility of
capital growth when it purchases and sells securities.
The Fund will invest primarily in (i) debt securities rated
Ba or below by Moody's Investors Services, Inc. ("Moody's") or BB
or below by Standard & 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). The Fund
normally invests at least 65% of its total assets in these high
yield bonds (including convertible debt securities), but may
invest without limit in such securities. It should be noted that
achieving the Fund's investment objective may be more dependent
on the credit analysis of IMI, and less on that of credit rating
agencies, than may be the case for funds that invest in more
highly rated bonds.
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
investment-grade bonds (those rated Aaa, Aa, A or Baa by Moody's
or AAA, AA, A or BBB by 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. See Appendix A for a description of Moody's and
S&P's bond ratings.
The Fund may invest up to 20% of its total assets in
dividend-paying common and preferred stocks. As a temporary
measure for extraordinary or emergency purposes, the Fund may
borrow from banks up to 20% of the value of its total assets.
The Fund may invest up to 10% of its net assets in debt
securities of foreign issuers, including non-U.S. dollar-
denominated debt securities, Eurodollar securities and debt
securities issued, assumed or guaranteed by foreign governments
or political subdivisions or instrumentalities thereof. The Fund
may also enter into forward foreign currency contracts, but not
for speculative purposes. The Fund may not invest more than 15%
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.
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.
RISK FACTORS AND INVESTMENT TECHNIQUES
The Fund involves above-average bond fund risk. The Fund
may invest without limit in debt securities rated below
investment-grade (i.e.,"junk bonds"). Bonds of this type are
considered to be speculative with regard to the payment of
interest and return of principal, and generally involve a greater
risk of default and more price volatility than securities in
higher rating categories. The yields on high yield/high risk
bonds will fluctuate over time. Lower rated and unrated
securities are especially subject to adverse changes in general
economic conditions, including changes in interest rates, and
changes in the financial condition of their issuers. See
"Special Risk Considerations -- High Yield/High Risk Securities"
below.
In addition, investment in sovereign debt can involve a
high
degree of risk. Emerging market securities in which the Fund may
invest can be more volatile and less liquid than securities in
more developed markets. Foreign securities often have less
publicly available information and are subject to different
regulations than domestic securities. Political events, changes
in the perceived creditworthiness of issuers, high rates of
inflation, higher brokerage costs, fluctuating national interest
rates, thinner trading markets, foreign taxes and movements in
foreign currencies will affect the value of the Fund's holdings
which determine the Fund's share price.
The Fund's share price is likely to vary from day to day.
An investor incurs principal risk when investing, because Fund
shares, when sold, may be worth more or less than the amount paid
for them. Investors should carefully assess the risks associated
with an investment in the Fund.
BANK OBLIGATIONS: The bank obligations in which the Fund
may invest include certificates of deposit, bankers' acceptances
and other short-term debt obligations. Investments in
certificates of deposit and bankers' acceptances are limited to
obligations of (i) banks having total assets in excess of $1
billion, and (ii) other banks if the principal amount of the
obligation is fully insured by the Federal Deposit Insurance
Corporation ("FDIC"). Investments in certificates of deposit of
savings associations are limited to obligations of Federal or
state-chartered institutions whose total assets exceed $1 billion
and whose deposits are insured by the FDIC.
BORROWING: Borrowing may exaggerate the effect on the
Fund's net asset value of any increase or decrease in the value
of the Fund's portfolio securities. Money borrowed will be
subject to interest costs (which may include commitment fees
and/or the cost of maintaining minimum average balances).
COMMERCIAL PAPER: Commercial paper represents short-term
unsecured promissory notes issued in bearer form by bank holding
companies, corporations, and finance companies. The Fund's
investments in commercial paper are limited to obligations rated
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 Fund may invest include corporate bonds, notes, debentures
and other securities convertible into common stocks. Because
convertible securities can be converted into equity securities,
their 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.
INTERNATIONAL BOND MARKETS: 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. 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.
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.
FOREIGN SECURITIES: The foreign securities in which the
Fund invests may include non-U.S. dollar-denominated debt
securities, Eurodollar securities, and debt securities issued,
assumed or guaranteed by foreign governments (or political
subdivisions or instrumentalities thereof). 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 Fund's 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 Fund 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 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 Fund's foreign security holdings are likely
to be high relative to those of securities issued in the United
States.
Other risks include the possibility of expropriation,
nationalization or confiscatory taxation, foreign exchange
controls (which may include suspension of the ability to transfer
currency from a given country), difficulties in pricing, default
in foreign government securities, high rates of inflation,
difficulties in enforcing foreign judgments, political or social
instability, or other developments that could adversely affect
the Fund's foreign investments.
FORWARD FOREIGN CURRENCY CONTRACTS: A forward foreign
currency contract involves an obligation to purchase or sell a
specific currency at a future date at a predetermined price.
Although these contracts are intended to minimize the risk of
loss due to a decline in the value of the hedged currencies, they
also tend to limit any potential gain that might result should
the value of the currencies increase. In addition, there may be
an imperfect correlation between 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 its exposure to changing
security prices, interest rates, 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 engaging in transactions in foreign currency
futures and related options.
The Fund may also enter into futures transactions in
accordance with its 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.
Investors should be aware that the risks associated with
the
use of options and futures are considerable. Options and futures
transactions generally involve a small investment of cash
relative to the magnitude of the risk assumed, and therefore
could result in a significant loss to the Fund if IMI judges
market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's investments. The Fund may also
experience a significant loss if it is unable to close a
particular position due to the lack of a liquid secondary market.
For further information regarding the use of options and futures
transactions and any associated risks, see the SAI.
REPURCHASE AGREEMENTS: Repurchase agreements are
agreements
under which the Fund buys a money market instrument and obtains a
simultaneous commitment from the seller to repurchase the
instrument at a specified time and agreed-upon yield. The Fund
may enter into repurchase agreements with banks or broker-dealers
deemed to be creditworthy by IMI under guidelines approved by the
Board of Trustees. The Fund could experience a delay in
obtaining direct ownership of the underlying collateral, and
might incur a loss if the value of the security should decline.
RESTRICTED AND ILLIQUID SECURITIES: An "illiquid security"
is an asset that may not be sold or disposed of in the ordinary
course of business within seven days at approximately the value
at which the Fund has valued the security on its books. A
"restricted security" is a security that cannot be offered to the
public for sale without first being registered under the
Securities Act of 1933, as amended (the "1933 Act"), and is
considered to be illiquid until such filing takes place. There
may be a lapse of time between the Fund's decision to sell a
restricted or illiquid security and the point at which the Fund
is permitted or able to sell the security. If adverse market
conditions were to develop during that period, the Fund might
obtain a price less favorable than the price that prevailed when
it decided to sell. In addition, issuers of restricted and other
illiquid securities may not be subject to the disclosure and
other investor protection requirements that would apply if their
securities were publicly traded. Securities whose proceeds are
subject to limitations on repatriation of principal or profits
for more than seven days, and those for which market quotations
are not readily available, are considered illiquid for purposes
of the 15% percentage limitation that applies to the Fund's
investment in illiquid securities.
"WHEN-ISSUED" SECURITIES AND FIRM COMMITMENTS: The Fund
may
invest in securities sold on a "when-issued" or firm commitment
basis. 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: The Fund may invest in 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, the 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.
SPECIAL RISK CONSIDERATIONS
HIGH YIELD/HIGH RISK SECURITIES: The Fund may invest
without limit in debt securities which are rated below
investment-grade or which are unrated. The lower the ratings of
such debt securities, the greater their risks. These debt
instruments generally offer a higher current yield than that
available from higher grade issues, but typically involve greater
risk. Investors in the Fund 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 Fund's best interest to retain or dispose of the
security.
The yields on high yield/high risk bonds will fluctuate
over
time. In general, prices of all bonds rise when interest rates
fall and fall when interest rates rise. Lower rated and unrated
securities are especially subject to adverse changes in general
economic conditions and to changes in the financial condition of
their issuers. During periods of economic downturn or rising
interest rates, issuers of these instruments may experience
financial stress that could adversely affect their ability to
make payments of principal and interest and increase the
possibility of default. If the issuer of a bond defaults, the
Fund may incur additional expenses to seek recovery. Adverse
publicity and investor perceptions, whether or not based on
fundamental analysis, may also decrease the values and liquidity
of these securities especially in a market characterized by only
a small amount of trading.
In cases where market quotations are not available, lower
rated securities are valued using guidelines established by the
Board of Trustees. Perceived credit quality in this market can
change suddenly and unexpectedly, and may not fully reflect the
actual risk posed by a particular lower rated or unrated
security.
Over the course of this decade, the market for higher
yielding domestic debt securities has changed dramatically. U.S.
high yield bonds now total over $350 billion, about a quarter of
the entire U.S. corporate bond market. The average quality of
the overall high yield bond category has improved. Growing
companies that may not have access to more traditional sources of
financing are using high yield bonds to raise capital. As a
result of their need to borrow in order to fuel growth, they must
pay out higher levels of income in order to compensate investors
for additional credit risk. The conditions of these companies can
improve over time, thus offering the prospect for price
appreciation as well.
By owning shares in the Fund, investors enjoy the
opportunity to receive high monthly income and growth of
investment capital over time. In return for these potential
benefits, shareholders must be willing to accept a significantly
higher amount of risk when compared with most funds owning U.S.
Government bonds and other investment-grade debt securities.
Changes in interest rates may have a less direct or dominant
impact on high yield bonds than on higher quality issues of
similar maturities. However, the price of high yield bonds can
change significantly or suddenly due to a host of factors
including changes in interest rates, fundamental credit quality,
market psychology, government regulations, U.S. economic growth
and, at times, stock market activity. In the case of high yield
bonds structured as zero coupon or pay-in-kind securities, their
market prices are affected to a greater extent by interest rate
changes and thereby tend to be more volatile than securities
which pay interest periodically and in cash. High yield bonds
may contain redemption or call provisions. If an issuer
exercises these provisions in a declining interest rate market,
the Fund may have to replace the security with a lower yielding
security. As a result, investors should be comfortable with the
possibility of wide fluctuations in the Fund's share price and
should not rely on the Fund as a sole source of investment
income. Instead, the Fund should be only one part of a balanced
investment program.
Please refer to Appendix A for further information
concerning debt securities ratings. For a more complete
description of the risks of high yield/high risk securities,
please refer to the Fund's SAI.
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is organized as a separate, diversified portfolio
of the Trust, an open-end management investment company organized
as a Massachusetts business trust on December 21, 1983. The
Fund's business and affairs 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. The Trustees
of the Trust also have the authority, without shareholders
approval, to classify and reclassify the shares of the Fund into
one or more classes. The Fund has five classes of shares,
designated as Class A, Class B, Class C, Class I and 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
and Class I, 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, Mackenzie Investment Management
Inc. ("MIMI") to provide administrative and accounting services,
Ivy Mackenzie Distributors, Inc. ("IMDI") to distribute the
Fund's shares and Ivy Mackenzie Services Corp. ("IMSC") to
provide transfer agency and shareholder-related services for the
Fund. IMI, IMDI and IMSC are wholly-owned subsidiaries of MIMI.
As of January 22, 1998, IMI had approximately $4.6 billion in
assets under management. MIMI is a subsidiary of Mackenzie
Financial Corporation ("MFC"), which has been an investment
counsel and mutual fund manager in Toronto, Ontario, Canada for
more than 25 years.
INVESTMENT MANAGER
For IMI's business management and investment advisory
services, the Fund pays IMI a fee, that is equal, on an annual
basis, to 0.75% of its average net assets.
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
0.85% of the Fund's average net assets, which may lower the
Fund's expenses and increase its return. This voluntary expense
limitation may be terminated or revised at any time, at which
point the Fund's expenses may increase and its yield 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 series (or class thereof) will be
borne solely by that series (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 individual has
responsibility for management of the Fund:
- - Leslie A. Ferris, a Senior Vice President of IMI, is the
Fund's portfolio manager and 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.
FUND ADMINISTRATION AND ACCOUNTING
MIMI provides various administrative services for the Fund,
such as maintaining the registration of Fund shares under state
"Blue Sky" laws, and assisting with the preparation of Federal
and state income tax returns, financial statements and periodic
reports to shareholders. MIMI also assists the Trust's legal
counsel with the filing of registration statements, proxies and
other required filings under Federal and state law. Under this
arrangement, the average net assets attributable to the Fund's
Advisor Class shares are subject to a fee, accrued daily and paid
monthly, at an annual rate of 0.10%.
MIMI also provides certain accounting and pricing services
for the Fund (see "Fund Accounting Services" in the SAI for more
information).
TRANSFER AGENT
IMSC is the transfer and dividend-paying agent for the
Fund,
and also provides certain shareholder-related services. 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 shares of the same class of the Fund
unless you elect to receive them in cash.
The Fund intends normally to make monthly distributions of
its net investment income. 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. The 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 Internal Revenue Code of 1986, as amended (the "Code").
TAXATION: The following discussion is intended for general
information only. You should consult with your tax adviser as to
the tax consequences of an investment in the Fund, including the
status of distributions from the Fund under applicable state or
local law.
The Fund intends to qualify annually as a regulated
investment company under the Code. To qualify, the Fund must
meet certain income, distribution and diversification
requirements. In any year in which the Fund qualifies as a
regulated investment company and timely distributes all of its
taxable income, the Fund generally will not pay any Federal
income or excise tax.
Dividends paid out of the Fund's investment company taxable
income (including dividends, interest and net short-term capital
gains) will be taxable to a shareholder as ordinary income. If a
portion of the Fund's income consists of dividends paid by U.S.
corporations, a portion of the dividends paid by the Fund may be
eligible for the corporate dividends-received deduction.
Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any, that
the Fund designates as capital gains dividends are taxable at the
applicable mid-term or long-term capital gains rate, regardless
of how long the shareholder has held the shares. Dividends are
taxable to shareholders in the same manner whether received in
cash or reinvested in additional Fund shares.
A distribution will be treated as paid on December 31 of
the
current calendar year if it is declared by the Fund in October,
November or December with a record date in such a month and paid
by the Fund during January of the following calendar year. Such
distributions will be taxable to shareholders in the calendar
year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Investments in securities that are issued at a discount
will
result each year in income to the Fund equal to a portion of the
excess of the face value of the securities over their issue
price, even though the Fund receives no cash interest payments
from the securities.
Income and gains received by the Fund from sources within
foreign countries may be subject to foreign withholding and other
taxes. Unless the Fund is eligible 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 may be eligible for reduced tax
rates, 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 distributions payable to shareholders
who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who
have been notified by the Internal Revenue Service ("IRS") that
they are subject to backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited
against the shareholder's U.S. Federal income tax liability.
Fund distributions may be subject to state, local and
foreign taxes. Distributions of the Fund which are derived from
interest on obligations of the U.S. Government and certain of its
agencies, authorities and instrumentalities may be exempt from
state and local taxes in certain states. Further information
relating to tax consequences is contained in the SAI.
PERFORMANCE DATA
Performance information (e.g., "total return" and "yield")
is computed separately for each class of Fund shares in
accordance with formulas prescribed by the SEC. Performance
information for each class may be compared in reports and
promotional literature to indices such as the Standard and Poor's
500 Stock Index, Dow Jones Industrial Average, and Morgan Stanley
Capital International World Index. Advertisements, sales
literature and communications to shareholders may also contain
statements of the Fund's current yield, various expressions of
total return and current distribution rate. Performance figures
will vary in part because of the different expense structures of
the Fund's different classes. ALL PERFORMANCE INFORMATION IS
HISTORICAL AND IS NOT INTENDED TO SUGGEST FUTURE RESULTS.
"Total return" is the change in value of an investment in
the Fund for a specified period, and assumes the reinvestment of
all distributions and imposition of the maximum applicable sales
charge. "Average annual total return" represents the average
annual compound rate of return of an investment in a particular
class of Fund shares assuming the investment is held for one
year, five years and ten years as of the end of the most recent
calendar quarter. Where the Fund provides total return
quotations for other periods, or based on investments at various
sales charge levels or at net asset value, "total return" is
based on the total of all income and capital gains paid to (and
reinvested by) shareholders, plus (or minus) the change in the
value of the original investment expressed as a percentage of the
purchase price.
"Current yield" reflects the income per share earned by the
Fund's portfolio investments, and is calculated by dividing the
Fund's net investment income per share during a recent 30-day
period by the maximum public offering price on the last day of
that period and then annualizing the result. Dividends or
distributions that were paid to the Fund's shareholders are
reflected in the "current distribution rate," which is computed
by dividing the total amount of dividends per share paid by the
Fund during the preceding 12 months by the Fund's current maximum
offering price (which includes any applicable sales charge). The
"current distribution rate" will differ from the "current yield"
computation because it may include distributions to shareholders
from sources other than dividends and interest, short term
capital gain and net equalization credits and will be calculated
over a different period of time.
HOW TO BUY SHARES
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 investor (a) with an account over which 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) whose 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 High Yield 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 $1,000. Initial or additional amounts for
retirement accounts may be less (see "Retirement Plans"). The
minimum initial investment in the Advisor Class may be spread
over the thirteen-month period following the opening of the
account.
BUYING ADDITIONAL SHARES: You may add to your account at
any time through any of the following options:
BY MAIL: Complete the investment slip attached to your
statement, or write instructions including the account
registration, fund number, and account number of the shares you
wish to purchase. Send your check (payable to the Fund) 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 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 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 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 (the "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 Trustees have 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 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 the Fund are
valued at amortized cost.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS: IMDI may, at
its own expense, pay concessions in addition to those described
above to dealers that satisfy certain criteria established from
time to time by IMDI. These conditions relate to increasing
sales of shares of the Fund over specified periods and to certain
other factors. These payments may, depending on the dealer's
satisfaction of the required conditions, be periodic and may be
up to (i) 0.25% of the value of Fund shares sold by the dealer
during a particular period, and (ii) 0.10% of the value of Fund
shares held by the dealer's customers for more than one year,
calculated on an annual basis.
HOW TO REDEEM SHARES
You may redeem your 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.
When shares are redeemed, the Fund will normally send
redemption proceeds to you on the next business day, but may take
up to seven business days (or longer in the case of shares
recently purchased by check). 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, 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.
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 and
subject to state law requirements, 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
Account Application to claim this exemption. If the registration
is for an UGMA/UTMA account, please provide the social security
number of the minor. Alien individuals must furnish their
individual TIN on a completed IRS Form W-9. Other non-U.S.
investors who are not required to 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 funds reserve the
right to reject, for any reason, any exchange requests.
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 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.
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 at least $10,000 in your
account. Payments (minimum distribution amount -- $50) from your
account can be made monthly, quarterly, semi-annually, annually
or on a selected monthly basis, to yourself or any other
designated payee. You may elect to have your systematic
withdrawal paid directly to your bank account via EFT, at no
charge. 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 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 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 W-4P, 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 Fund should be directed to IMSC at
1-800-777-6472.
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 1997 Issue (McGraw Hill, New
York, 1997).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's are judged by
Moody's to be of the best quality, carrying the smallest degree
of investment risk. Interest payments are protected by a large
or exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds rated Aa are
judged by Moody's to be of high quality by all standards. Aa
bonds are rated lower than Aaa bonds because margins of
protection may not be as large as those of Aaa bonds, or
fluctuations of protective elements may be of greater amplitude,
or there may be other elements present which make the long-term
risks appear somewhat larger than those applicable to Aaa
securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are to be considered as upper
medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Bonds rated Baa by Moody's are considered medium-grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other terms
of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest. Bonds which are rated Ca
represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the highest
commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by management of obligations which may be present
or may arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the
relative strengths of these factors. The designation of Prime-1
indicates the highest quality repayment capacity of the rated
issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt rating is a
current assessment of the creditworthiness of an obligor with
respect to a specific obligation. The ratings are based on
current information furnished by the issuer or obtained by S&P
from other sources it considers reliable. The ratings described
below may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
Debt rated AA is judged by S&P to have a very strong capacity to
pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A by S&P has a
strong capacity to pay interest and repay principal, although it
is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated
categories.
Debt rated BBB by S&P is regarded by S&P as having an
adequate capacity to pay interest and repay principal. Although
such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating. Debt rated B has a greater vulnerability to default
but currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used
for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating. Debt rated CCC has a currently
identifiable vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an actual or
implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt
service payments are continued.
The rating CI is reserved for income bonds on which no
interest is being paid. Debt rated D is in payment default. The
D rating category is used when interest payments or principal
payments are not made on the date due, even if the applicable
grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
considered short-term in the relevant market.
The commercial paper rating A-1 by S&P indicates that the
degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
For commercial paper with an A-2 rating, the capacity for timely
payment on issues is satisfactory, but not as high as for issues
designated A-1. Issues rated A-3 have adequate capacity for
timely payment, but are more vulnerable to the adverse effects of
changes in circumstances than obligations carrying higher
designations.
Issues rated B are regarded as having only speculative
capacity for timely payment. The C rating is assigned to short-
term debt obligations with a doubtful capacity for payment. Debt
rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the
date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Ivy High Yield Fund
ACCOUNT APPLICATION
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 High Yield
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 HIGH YIELD FUND
series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
[], 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 South America Fund) is
diversified. Ivy South America Fund is a non-diversified
portfolio. This Statement of Additional Information ("SAI")
relates to Class A, Class B, Class C and Class I shares of Ivy
High Yield Fund (the "Fund"). The other seventeen portfolios of
the Trust are described in separate statements of additional
information.
This SAI is not a prospectus and should be read in
conjunction with the prospectus for the Fund dated [], 1998 (the
"Prospectus"), which may be obtained upon request and without
charge from the Trust at the Distributor's address and telephone
number listed below. The Fund also offers Advisor Class shares,
which are offered only to investors through 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 OBJECTIVE AND POLICIES. . . . . . . . . . . . . . .
DEVELOPMENT OF THE HIGH YIELD MARKET. . . . . . . . . . . .
HIGH YIELD BONDS-PORFOLIO DIVERSIFICATION . . . . . . . . .
HIGH YIELD/HIGH RISK SECURITIES . . . . . . . . . . . . . .
U.S. GOVERNMENT SECURITIES. . . . . . . . . . . . . . . . .
FOREIGN SECURITIES. . . . . . . . . . . . . . . . . . . .
FOREIGN CURRENCIES. . . . . . . . . . . . . . . . . . . . .
FORWARD FOREIGN CURRENCY CONTRACTS. . . . . . . . . . . . .
DEBT SECURITIES, IN GENERAL . . . . . . . . . . . . . . . .
INTERNATIONAL BOND MARKETS. . . . . . . . . . . . . . . . .
SMALL COMPANIES . . . . . . . . . . . . . . . . . . . . . .
WHEN-ISSUED PURCHASES AND FIRM COMMITMENT AGREEMENTS. . . .
ZERO COUPON BONDS . . . . . . . . . . . . . . . . . . . .
RESTRICTED AND ILLIQUID SECURITIES. . . . . . . . . . . .
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. . . .
GENERAL. . . . . . . . . . . . . . . . . . . . . . .
INTEREST RATE FUTURES CONTRACTS. . . . . . . . . . .
OPTIONS ON INTEREST RATE FUTURES CONTRACTS . . . . .
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. .
COMBINED TRANSACTIONS. . . . . . . . . . . . . . . .
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . .
ADDITIONAL RESTRICTIONS. . . . . . . . . . . . . . . . . . . . .
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . . . . . . .
AUTOMATIC INVESTMENT METHOD . . . . . . . . . . . . . . . .
EXCHANGE OF SHARES. . . . . . . . . . . . . . . . . . . . .
INITIAL SALES CHARGE SHARES. . . . . . . . . . . . . .
CONTINGENT DEFERRED SALES CHARGE SHARES. CLASS A . . .
CLASS B. . . . . . . . . . . . . . . . . . . . . . . .
CLASS C. . . . . . . . . . . . . . . . . . . . . . . .
CLASS I. . . . . . . . . . . . . . . . . . . . . . . .
ALL CLASSES. . . . . . . . . . . . . . . . . . . . . .
LETTER OF INTENT. . . . . . . . . . . . . . . . . . . . . .
RETIREMENT PLANS. . . . . . . . . . . . . . . . . . . . . .
INDIVIDUAL RETIREMENT ACCOUNTS . . . . . . . . . . . .
QUALIFIED PLANS. . . . . . . . . . . . . . . . . . . .
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND CHARITABLE
ORGANIZATIONS ("403(B)(7) ACCOUNT"). . . . . . . . . .
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS . . . . . . .
SIMPLE PLANS . . . . . . . . . . . . . . . . . . . . .
REINVESTMENT PRIVILEGE. . . . . . . . . . . . . . . . . . .
RIGHTS OF ACCUMULATION. . . . . . . . . . . . . . . . . . .
SYSTEMATIC WITHDRAWAL PLAN. . . . . . . . . . . . . . . . .
GROUP SYSTEMATIC INVESTMENT PROGRAM . . . . . . . . . . . .
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI. . . . . . . . . .
COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . .
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES. . . .
DISTRIBUTION SERVICES. . . . . . . . . . . . . . . . .
RULE 18F-3 PLAN. . . . . . . . . . . . . . . . . . . .
RULE 12B-1 DISTRIBUTION PLANS. . . . . . . . . . . . .
CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . .
FUND ACCOUNTING SERVICES. . . . . . . . . . . . . . . . . .
TRANSFER AGENT AND DIVIDEND PAYING AGENT. . . . . . . . . .
ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . .
AUDITORS. . . . . . . . . . . . . . . . . . . . . . . . . .
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . . . . . . .
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . .
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . .
REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .
CONVERSION OF CLASS B SHARES . . . . . . . . . . . . . . . . . .
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS . .
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES . .
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES. . . . .
DEBT SECURITIES ACQUIRED AT A DISCOUNT. . . . . . . . . . .
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . .
DISPOSITION OF SHARES . . . . . . . . . . . . . . . . . . .
FOREIGN WITHHOLDING TAXES . . . . . . . . . . . . . . . . .
BACKUP WITHHOLDING. . . . . . . . . . . . . . . . . . . . .
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . .
AVERAGE ANNUAL TOTAL RETURN. . . . . . . . . . . . . .
CUMULATIVE TOTAL RETURN. . . . . . . . . . . . . . . .
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION.
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . .
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P")
AND MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
CORPORATE BOND AND COMMERCIAL PAPER RATINGS . . . . . . . .
INVESTMENT OBJECTIVE AND POLICIES
The Fund has its own investment objective and policies,
which are described in the Prospectus under the captions
"Investment Objective and Policies" and "Risk Factors and
Investment Techniques." Additional information regarding the
characteristics and risks associated with the Fund's investment
techniques is set forth below.
DEVELOPMENT OF THE HIGH YIELD BOND MARKET
Over the course of this decade, the market for higher
yielding domestic debt securities has changed dramatically. U.S.
high yield bonds now total over $350 billion, about a quarter of
the entire U.S. corporate bond market.
In the early 1970s high yield bonds emerged as a way for new
companies, companies with troubled credit histories, or any
company without access to more traditional financing to raise
capital. The category grew and changed from a small, illiquid
market for special circumstances, to a larger, more liquid market
offering an alternative way to raise capital to companies of
every size and structure.
As the economy strengthened throughout the 1980s, some
companies began to replace more and more of the equity in their
capital structure with high yield debt. In the late 1980s, many
companies had little equity supporting the outstanding debt.
Those who had anticipated continuing growth and increasing cash
flows to contribute to debt service found that as the economy
slowed, they were unable to pay their creditors. This led to
defaults and the high yield bond market nearly collapsed under
the weight of several factors including a recession, the
bankruptcy of a major high yield bond underwriter, and the forced
withdrawal of thrifts from this market.
Expanding companies are now turning to the high yield bond
market for financing real growth. The average quality of the
overall high yield bond category has improved. There are many
opportunities to buy the debt of growing companies or companies
that may not yet have the track record necessary to utilize more
traditional sources of financing. The conditions of these
borrowing companies can improve over time, and as the quality of
the debt improves, the prospect for price appreciation adds to
the return from income.
HIGH YIELD BONDS-PORTFOLIO DIVERSIFICATION
The benefits of investing in high yield debt securities
include the potential for superior yields and also portfolio
diversification which may result in enhanced total returns with
the potential for reduced overall portfolio risk.
High yield bonds show a relatively low correlation with both
stocks and investment-grade bonds. Due to this low correlation,
high yield bonds offer diversification benefits to both equity
and income portfolios.
HIGH YIELD/HIGH RISK SECURITIES
The Fund invests in debt securities rated Ba or lower by
Moody's, or BB or lower by S&P and comparable unrated securities.
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. Below investment-grade securities (rated Ba or below
by Moody's and BB or below by S&P) or unrated securities of
equivalent quality in which the Fund may invest carry a high
degree of risk (including the possibility of default or
bankruptcy of the issuers of such securities), generally involve
greater volatility of price and risk of principal and income, and
may be less liquid, than securities in the higher rating
categories and are considered speculative. (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.
Economic downturns may disrupt the high yield market and
impair the ability of issuers to repay principal and interest.
Also, an increase in interest rates would likely have an adverse
impact on the value of such obligations. During an economic
downturn or period of rising interest rates, highly leveraged
issues may experience financial stress which could adversely
affect their ability to service their principal and interest
payment obligations. Prices and yields of high yield securities
will fluctuate over time and, during periods of economic
uncertainty, volatility of high yield securities may adversely
affect the Fund's net asset value. In addition, investments in
high yield zero coupon or pay-in-kind bonds, rather than
income-bearing high yield securities, may be more speculative and
may be subject to greater fluctuations in value due to changes in
interest rates.
The trading market for high yield securities may be thin to
the extent that there is no established retail secondary market
or because of a decline in the value of such securities. A thin
trading market may limit the ability of the Fund to accurately
value high yield securities in the Fund's portfolio, could
adversely affect the price at which the Fund could sell such
securities, and cause large fluctuations in the daily net asset
value of the Fund's shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of low-rated debt securities,
especially in a thinly traded market. When secondary markets for
high yield securities become relatively less liquid, it may be
more difficult to value the securities, requiring additional
research and elements of judgment. These securities may also
involve special registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties.
Credit quality in the high yield securities market can
change suddenly and unexpectedly, and even recently issued credit
ratings may not fully reflect the actual risks posed by a
particular high-yield security. For these reasons, it is the
policy of IMI not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such
ratings with its own independent and on-going review of credit
quality. The achievement of the Fund's investment objective by
investment in such securities may be more dependent on IMI's
credit analysis than is the case for higher quality bonds.
Should the rating of a portfolio security be downgraded, IMI will
determine whether it is in the best interest of the Fund to
retain or dispose of such security.
Prices for high yield securities may be affected by
legislative and regulatory developments. For example, federal
rules require savings and loan institutions to gradually reduce
their holdings of this type of security. Also, Congress has from
time to time considered legislation which would restrict or
eliminate the corporate tax deduction for interest payments in
these securities and regulate corporate restructurings. Such
legislation may significantly depress the prices of outstanding
securities of this type.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities.
Securities guaranteed by the U.S. Government include: (1) direct
obligations of the U.S. Treasury (such as Treasury bills, notes,
and bonds) and (2) Federal agency obligations guaranteed as to
principal and interest by the U.S. Treasury (such as GNMA
certificates, which are mortgage-backed securities). When such
securities are held to maturity, the payment of principal and
interest is unconditionally guaranteed by the U.S. Government,
and thus they are of the highest possible credit quality. U.S.
Government securities that are not held to maturity are subject
to variations in market value due to fluctuations in interest
rates.
Mortgage-backed securities are securities representing part
ownership of a pool of mortgage loans. For example, GNMA
certificates are such securities in which the timely payment of
principal and interest is guaranteed by the full faith and credit
of the U.S. Government. Although the mortgage loans in the pool
will have maturities of up to 30 years, the actual average life
of the loans typically will be substantially less because the
mortgages will be subject to principal amortization and may be
prepaid prior to maturity. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of
falling interest rates, the rate of prepayment tends to increase,
thereby shortening the actual average life of the security.
Conversely, rising interest rates tend to decrease the rate of
prepayments, thereby lengthening the actual average life of the
security (and increasing the security's price volatility).
Accordingly, it is not possible to predict accurately the average
life of a particular pool. Reinvestment of prepayment may occur
at higher or lower rates than the original yield on the
certificates. Due to the prepayment feature and the need to
reinvest prepayments of principal at current rates, mortgage-
backed securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of
declining interest rates. 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.
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, which are not
typically associated with investing in United States securities
and which may affect the Fund's performance favorably or
unfavorably.
The risks of investing in foreign securities are likely to
be intensified in the case of investments in issuers domiciled or
doing substantial business in countries with emerging or
developing economies ("emerging markets"). For example,
countries with emerging markets may have relatively unstable
governments and therefore be susceptible to sudden adverse
government action (such as nationalization of businesses,
restrictions on foreign ownership or prohibitions against
repatriation of assets). Security prices in emerging markets can
also be significantly more volatile than in the more developed
nations of the world, and communications between the U.S. and
emerging market countries may be unreliable, increasing the risk
of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Delayed settlements could
cause the Fund to miss attractive investment opportunities or
impair its ability to dispose of portfolio securities, resulting
in a loss if the value of the securities subsequently declines.
In addition, many emerging markets have experienced and continue
to experience especially high rates of inflation. In certain
countries, inflation has at times accelerated rapidly to
hyperinflationary levels, creating a negative interest rate
environment and sharply eroding the value of outstanding
financial assets in those countries.
In recent years, many emerging market countries 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 Fund and its 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 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.
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.
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.
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. 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.
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 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. 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 15% 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.
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 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.
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 objective as set forth in the
Prospectus under "Investment Objective and Policies," together
with the investment restrictions set forth below, are fundamental
policies of the Fund and may not be changed 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 the Fund's portfolio securities in
accordance with applicable guidelines established by
the SEC and any guidelines established by the Trust's
Trustees, or (c) the entry into repurchase agreements
with banks or broker-dealers;
(vi) Borrow amounts in excess of 20% 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 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
(except obligations of domestic banks or the U.S.
Government, its agencies, authorities, or
instrumentalities) 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, except to the
extent that, in connection with the sale of
securities, it may be deemed to be an underwriter
under applicable securities laws;
(x) Make short sales of securities or maintain a short
position;
(xi) 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; or
(xii) 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.
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) invest more than 15% 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 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; or
(iv) 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.
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 also 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 US 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
Small Companies Fund, Ivy South America Fund, Ivy Developing
Nations Fund, Ivy Pan-Europe Fund, and Ivy Money Market Fund (the
other seventeen series of the Trust). (Effective April 18, 1997,
Ivy International Fund suspended the offer of its shares to new
investors.) Shareholders should obtain a current prospectus
before exercising any right or privilege that may relate to these
funds.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a Fund
shareholder to have specified amounts automatically drawn each
month from his or her bank for investment in Fund shares, is
available for all classes of shares, except Class I. The minimum
initial and subsequent investment under this method is $50 per
month (except in the case of a tax qualified retirement plan for
which the minimum initial and subsequent investment is $25 per
month). A shareholder may terminate the Automatic Investment
Method at any time upon delivery to Ivy Mackenzie Services Corp.
("IMSC") of telephone instructions or written notice. See
"Automatic Investment Method" in the Prospectus. To begin the
plan, complete Sections 6A and 7B of the Account Application.
EXCHANGE OF SHARES
As described in the Prospectus, shareholders of each Fund
have an exchange privilege with certain other Ivy funds (except
Ivy International Fund unless they have an existing Ivy
International Fund account). Before effecting an exchange,
shareholders of the Fund should obtain and read the currently
effective prospectus for the Ivy fund into which the exchange is
to be made.
INITIAL SALES CHARGE SHARES. Class A shareholders may
exchange their Class A shares ("outstanding Class A shares") for
Class A shares of another Ivy fund ("new Class A Shares") on the
basis of the relative net asset value per Class A share, plus an
amount equal to the difference, if any, between the sales charge
previously paid on the outstanding Class A shares and the sales
charge payable at the time of the exchange on the new Class A
shares. (The additional sales charge will be waived for Class A
shares that have been invested for a period of 12 months or
longer.) Class A shareholders may also exchange their shares for
shares of Ivy Money Market Fund (no initial sales charge will be
assessed at the time of such an exchange).
CONTINGENT DEFERRED SALES CHARGE SHARES. CLASS A: Class A
shareholders may exchange their Class A shares that are subject
to a contingent deferred sales charge ("CDSC"), as described in
the Prospectus ("outstanding Class A shares"), for Class A shares
of another Ivy fund ("new Class A shares") on the basis of the
relative net asset value per Class A share, without the payment
of any CDSC that would otherwise be due upon the redemption of
the outstanding Class A shares. Class A shareholders of the Fund
exercising the exchange privilege will continue to be subject to
the Fund's CDSC period following an exchange if such period is
longer than the CDSC period, if any, applicable to the new
Class A shares.
For purposes of computing the CDSC that may be payable upon
the redemption of the new Class A shares, the holding period of
the outstanding Class A shares is "tacked" onto the holding
period of the new Class A shares.
CLASS B: Class B shareholders may exchange their Class B
shares ("outstanding Class B shares") for Class B shares of
another Ivy fund ("new Class B shares") on the basis of the
relative net asset value per Class B share, without the payment
of any CDSC that would otherwise be due upon the redemption of
the outstanding Class B shares. Class B shareholders of the Fund
exercising the exchange privilege will continue to be subject to
the Fund's CDSC schedule (or period) following an exchange if
such schedule is higher (or such period is longer) than the CDSC
schedule (or period) applicable to the new Class B shares.
Class B shares of the Fund acquired through an exchange of
Class B shares of another Ivy fund will be subject to the Fund's
CDSC schedule (or period) if such schedule is higher (or such
period is longer) than the CDSC schedule (or period) applicable
to the Ivy fund from which the exchange was made.
For purposes of both the conversion feature and computing
the CDSC that may be payable upon the redemption of the new
Class B shares (prior to conversion), the holding period of the
outstanding Class B shares is "tacked" onto the holding period of
the new Class B shares.
The following CDSC table applies to Class B shares of Ivy
Asia Pacific Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy China
Region Fund, Ivy US 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 High
Yield Fund, Ivy International Fund, Ivy International Fund II,
Ivy International Small Companies Fund, Ivy South America Fund,
Ivy Developing Nations Fund and Ivy Pan-Europe Fund:
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
DOLLAR AMOUNT SUBJECT TO
YEAR SINCE PURCHASE CHARGE
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
CLASS C: Class C shareholders may exchange their Class C
shares ("outstanding Class C shares") for Class C shares of
another Ivy fund ("new Class C shares") on the basis of the
relative net asset value per Class C share, without the payment
of any CDSC that would otherwise be due upon redemption. (Class
C shares are subject to a CDSC of 1% if redeemed within one year
of the date of purchase.)
CLASS I: Subject to the restrictions set forth in the
following paragraph, Class I shareholders may exchange their
outstanding Class I shares for Class I shares of another Ivy fund
on the basis of the relative net asset value per Class I
share.
ALL CLASSES: The minimum value of shares which may be
exchanged into an Ivy fund in which shares are not already held
is $1,000 ($5,000,000 in the case of Class I shares of Ivy Global
Science & Technology Fund, Ivy High Yield Fund, Ivy International
Fund, Ivy International Fund II and Ivy International Small
Companies Fund, (generally referred to herein as the "Class I
Funds")and $250,000 in the case of Ivy Bond Fund). 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 that Fund to less than $1,000 ($5,000,000 in the case of
Class I shares of the Class I Funds).
Each exchange will be made on the basis of the relative net
asset values per share of each fund of Ivy Fund next computed
following receipt by IMSC of telephone instructions by IMSC or a
properly executed request. Exchanges, whether written or
telephonic, must be received by IMSC by the close of regular
trading on the Exchange (normally 4:00 p.m., eastern time) to
receive the price computed on the day of receipt. Exchange
requests received after that time will receive the price next
determined following receipt of the request. The exchange
privilege may be modified or terminated at any time, upon at
least 60 days' notice to the extent required by applicable law.
See "Redemptions."
An exchange of shares between any of the Ivy funds will
result in a taxable gain or loss. Generally, this will be a
capital gain or loss (long-term or short-term, depending on the
holding period of the shares) in the amount of the difference
between the net asset value of the shares surrendered and the
shareholder's tax basis for those shares. However, in certain
circumstances, shareholders will be ineligible to take sales
charges into account in computing taxable gain or loss on an
exchange. See "Taxation."
With limited exceptions, gain realized by a tax-deferred
retirement plan will not be taxable to the plan and will not be
taxed to the participant until distribution. Each investor
should consult his or her tax adviser regarding the tax
consequences of an exchange transaction.
LETTER OF INTENT
Reduced sales charges apply to initial investments in
Class A shares of the Fund made pursuant to a non-binding Letter
of Intent. A Letter of Intent may be submitted by an individual,
his or her spouse and children under the age of 21, or a trustee
or other fiduciary of a single trust estate or single fiduciary
account. See the Account Application in the Prospectus. Any
investor may submit a Letter of Intent stating that he or she
will invest, over a period of 13 months, at least $50,000 in
Class A shares of the Fund. A Letter of Intent may be submitted
at the time of an initial purchase of Class A shares of the Fund
or within 90 days of the initial purchase, in which case the
Letter of Intent will be back dated. A shareholder may include,
as an accumulation credit, the value (at the applicable offering
price) of all Class A shares of Ivy Asia Pacific Fund, Ivy China
Region Fund, Ivy Canada Fund, Ivy South America Fund, Ivy
International Fund, Ivy International Fund II, Ivy Pan-Europe
Fund, Ivy Global Fund, Ivy Global Natural Resources Fund, Ivy
Global Science & Technology Fund, Ivy Growth Fund, Ivy Growth
with Income Fund, Ivy US Emerging Growth Fund, Ivy High Yield
Fund, Ivy International Small Companies Fund, Ivy Developing
Nations Fund and Ivy Bond Fund (and shares that have been
exchanged into Ivy Money Market Fund from any of the other funds
in the Ivy funds) held of record by him or her as of the date of
his or her Letter of Intent. During the term of the Letter of
Intent, the Transfer Agent will hold Class A shares representing
5% of the indicated amount (less any accumulation credit value)
in escrow. The escrowed Class A shares will be released when the
full indicated amount has been purchased. If the full indicated
amount is not purchased during the term of the Letter of Intent,
the investor is required to pay IMDI an amount equal to the
difference between the dollar amount of sales charge that he or
she has paid and that which he or she would have paid on his or
her aggregate purchases if the total of such purchases had been
made at a single time. Such payment will be made by an automatic
liquidation of Class A shares in the escrow account. A Letter of
Intent does not obligate the investor to buy or the Trust to sell
the indicated amount of Class A shares, and the investor should
read carefully all the provisions of such letter before
signing.
RETIREMENT PLANS
Shares may be purchased in connection with several types of
tax-deferred retirement plans. Shares of more than one fund
distributed by IMDI may be purchased in a single application
establishing a single plan account, and shares held in such an
account may be exchanged among the funds of Ivy Fund in
accordance with the terms of the applicable plan and the exchange
privilege available to all shareholders. Initial and subsequent
purchase payments in connection with tax-deferred retirement
plans must be at least $25 per participant.
The following fees will be charged to individual shareholder
accounts as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per account
For shareholders whose retirement accounts are diversified
across several funds of Ivy Fund, 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 an Ivy fund
(which primarily distributes exempt-interest dividends).
An individual who has not reached age 70-1/2 and who
receives compensation or earned income is eligible to contribute
to an IRA, whether or not he or she is an active participant in a
retirement plan. An individual who receives a distribution from
another IRA, a qualified retirement plan, a qualified annuity
plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible
to establish an IRA by rolling over the distribution either
directly or within 60 days after its receipt. Tax advice should
be obtained in connection with planning a rollover contribution
to an IRA.
In general, an eligible individual may contribute up to the
lesser of $2,000 or 100% of his or her compensation or earned
income to an IRA each year. If a husband and wife are both
employed, and both are under age 70-1/2, each may set up his or
her own IRA within these limits. If both earn at least $2,000
per year, the maximum potential contribution is $4,000 per year
for both. For years after 1996, the result is similar even if
one spouse has no earned income; if the joint earned income of
the spouses is at least $4,000, a contribution of up to $2,000
may be made to each spouse's IRA. For years before 1997,
however, if one spouse has (or elects to be treated as having) no
earned income for IRA purposes for a year, the working spouse may
contribute up to the lesser of $2,250 or 100% of his or her
compensation or earned income for the year to IRAs for both
spouses, provided that no more than $2,000 is contributed to the
IRA of one spouse. Rollover contributions are not subject to
these limits.
An individual may deduct his or her annual contributions to
an IRA in computing his or her Federal income tax within the
limits described above, provided he or she (or his or her spouse,
if they file a joint Federal income tax return) is not an active
participant in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan,
403(b) plan, simplified employee pension, or governmental plan.
If he or she (or his or her spouse) is an active participant, a
full deduction is only available if he or she has adjusted gross
income that is less than a specified level ($40,000 for married
couples filing a joint return, $25,000 for single individuals,
and $0 for a married individual filing a separate return). The
deduction is phased out ratably for active participants with
adjusted gross income between certain levels ($40,000 and $50,000
for married individuals filing a joint return, $25,000 and
$35,000 for single individuals, and $0 and $10,000 for married
individuals filing separate returns). Individuals who are active
participants with income above the specified phase-out level may
not deduct their IRA contributions. Rollover contributions are
not includible in income for Federal income tax purposes and
therefore are not deductible from it.
Generally, earnings on an IRA are not subject to current
Federal income tax until distributed. Distributions attributable
to tax-deductible contributions and to IRA earnings are taxed as
ordinary income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches age 59-1/2
are subject to a nondeductible penalty tax equal to 10% of the
taxable amount of the distribution. The 10% penalty tax does not
apply to amounts withdrawn from an IRA after the individual
reaches age 59-1/2, becomes disabled or dies, or if withdrawn in
the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated benefi-
ciary, if any, or rolled over into another IRA, or, for years
after 1996, amounts withdrawn and used to pay for deductible
medical expenses and amounts withdrawn by certain unemployed
individuals not in excess of amounts paid for certain health
insurance premiums. Distributions must begin to be withdrawn not
later than April 1 of the calendar year following the calendar
year in which the individual reaches age 70-1/2. Failure to take
certain minimum required distributions will result in the
imposition of a 50% non-deductible penalty tax. Extremely large
distributions in any one year (other than 1997, 1998 or 1999)
from an IRA (or from an IRA and other retirement plans) may also
result in a penalty tax.
QUALIFIED PLANS: For those self-employed individuals who
wish to purchase shares of one or more of the funds of Ivy Fund
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 sales charge for purchases of less
than $10,000 of Class A shares is set forth under "Retirement
Plans" in the Prospectus. Sales charges for purchases of $10,000
or more of Class A shares are the same as those set forth under
"Initial Sales Charge Alternative -- Class A Shares" in the
Prospectus. The special application for a 403(b)(7) Account is
available from IMSC.
Distributions from the 403(b)(7) Account may be made only
following death, disability, separation from service, attainment
of age 59-1/2, or incurring a financial hardship. A 10% penalty
tax generally applies to distributions to an individual before he
or she reaches age 59-1/2, unless the individual (1) has reached
age 55 and separated from service; (2) dies or becomes disabled;
(3) uses the withdrawal to pay tax-deductible medical expenses;
(4) takes the withdrawal as part of a series of substantially
equal payments over his or her life expectancy or the joint life
expectancy of himself or herself and a designated beneficiary; or
(5) rolls over the distribution. There is no set-up fee for
403(b)(7) Accounts and the annual maintenance fee is $20.00 per
account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS: An employer may
deduct contributions to a SEP up to the lesser of $30,000 or 15%
of compensation. SEP accounts generally are subject to all rules
applicable to IRA accounts, except the deduction limits, and are
subject to certain employee participation requirements. No new
salary reduction SEPs ("SARSEPs") may be established after 1996,
but existing SARSEPs may continue to be maintained, and non-
salary reduction SEPs may continue to be established as well as
maintained after 1996.
SIMPLE PLANS: An employer may establish a SIMPLE IRA or a
SIMPLE 401(k) for years after 1996. An employee can make pre-tax
salary reduction contributions to a SIMPLE Plan, up to $6,000 a
year. Subject to certain limits, the employer will either match
a portion of employee contributions, or will make a contribution
equal to 2% of each employee's compensation without regard to the
amount the employee contributes. An employer cannot maintain a
SIMPLE Plan for its employees if any contributions or benefits
are credited to those employees under any other qualified
retirement plan maintained by the employer.
REINVESTMENT PRIVILEGE
Shareholders who have redeemed Class A shares of the Fund
may reinvest all or a part of the proceeds of the redemption back
into Class A shares of the Fund at net asset value (without a
sales charge) within 60 days from the date of redemption. This
privilege may be exercised only once. The reinvestment will be
made at the net asset value next determined after receipt by IMSC
of the reinvestment order accompanied by the funds to be
reinvested. No compensation will be paid to any sales personnel
or dealer in connection with the transaction.
Any redemption is a taxable event. A loss realized on a
redemption generally may be disallowed for tax purposes if the
reinvestment privilege is exercised within 30 days after the
redemption. In certain circumstances, shareholders will be
ineligible to take sales charges into account in computing
taxable gain or loss on a redemption if the reinvestment
privilege is exercised. See "Taxation."
RIGHTS OF ACCUMULATION
A scale of reduced sales charges applies to any investment
of $50,000 or more in Class A shares of the Fund. See "Initial
Sales Charge Alternative -- Class A Shares" in the Prospectus.
The reduced sales charge is applicable to investments made at one
time by an individual, his or her spouse and children under the
age of 21, or a trustee or other fiduciary of a single trust
estate or single fiduciary account (including a pension, profit
sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Code). It is also
applicable to current purchases of all of the funds of Ivy Fund
(except Ivy Money Market Fund) by any of the persons enumerated
above, where the aggregate quantity of Class A shares of Ivy Asia
Pacific Fund, Ivy Bond Fund, Ivy Canada Fund, Ivy China Region
Fund, Ivy US 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 High Yield Fund, Ivy International Small Companies Fund, Ivy
South America Fund, Ivy Developing Nations Fund, Ivy
International Fund II and Ivy Pan-Europe Fund (and shares that
have been exchanged into Ivy Money Market Fund from any of the
other funds in the Ivy funds) and of any other investment company
distributed by IMDI, previously purchased or acquired and
currently owned, determined at the higher of current offering
price or amount invested, plus the Class A shares being
purchased, amounts to $50,000 or more for Ivy Asia Pacific Fund,
Ivy Canada Fund, Ivy China Region Fund, Ivy US Emerging Growth
Fund, Ivy Global Fund, Ivy Global Natural Resources Fund, Ivy
Global Science & Technology Fund, Ivy Growth Fund, Ivy Growth
with Income Fund, Ivy International Fund, Ivy International Small
Companies Fund, Ivy South America Fund, Ivy Developing Nations
Fund, Ivy International Fund II, Ivy Pan-Europe Fund; or $100,000
or more for Ivy Bond Fund or Ivy High Yield Fund.
At the time an investment takes place, IMSC must be notified
by the investor or his or her dealer that the investment
qualifies for the reduced sales charge on the basis of previous
investments. The reduced sales charge is subject to confirmation
of the investor's holdings through a check of the particular
Fund's records.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder (except shareholders with accounts in Class I
of the Class I Funds) may establish a Systematic Withdrawal Plan
(a "Withdrawal Plan"), by telephone instructions or by delivery
to IMSC of a written election to have his or her shares withdrawn
periodically, accompanied by a surrender to IMSC of all share
certificates then outstanding in such shareholder's name,
properly endorsed by the shareholder. To be eligible to elect a
Withdrawal Plan, a shareholder must have at least $5,000 in his
or her account. A Withdrawal Plan may not be established if the
investor is currently participating in the Automatic Investment
Method. A Withdrawal Plan may involve the depletion of a
shareholder's principal, depending on the amount withdrawn.
A redemption under a Withdrawal Plan is a taxable event.
Shareholders contemplating participating in a Withdrawal Plan
should consult their tax advisers.
Additional investments made by investors participating in a
Withdrawal Plan must equal at least $1,000 each while the
Withdrawal Plan is in effect. Making additional purchases while
a Withdrawal Plan is in effect may be disadvantageous to the
investor because of applicable initial sales charges or CDSCs.
An investor may terminate his or her participation in the
Withdrawal Plan at any time by delivering written notice to IMSC.
If all shares held by the investor are liquidated at any time,
participation in the Withdrawal Plan will terminate
automatically. The Trust or IMSC may terminate the Withdrawal
Plan option at any time after reasonable notice to shareholders.
GROUP SYSTEMATIC INVESTMENT PROGRAM
Shares 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.
Class A shares of the Fund are made available to Merrill
Lynch Daily K Plan (the "Plan") participants at NAV without an
initial sales charge if:
(i) the Plan is recordkept on a daily valuation basis
by Merrill Lynch and, on the date the Plan Sponsor
signs the Merrill Lynch Recordkeeping Service
Agreement, the Plan has $3 million or more in assets
invested in broker/dealer funds not advised or
managed by Merrill Lynch Asset Management, L.P.
("MLAM") that are made available pursuant to a
Service Agreement between Merrill Lynch and the
fund's principal underwriter or distributor and in
funds advised or managed by MLAM (collectively, the
"Applicable Investments");
(ii) the Plan is recordkept on a daily valuation basis by an
independent recordkeeper whose services are provided through
a contract or alliance arrangement with Merrill Lynch, and
on the date the Plan Sponsor signs the Merrill Lynch
Recordkeeping Service Agreement, the Plan has $3 million or
more in assets, excluding money market funds, invested in
Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as
determined by Merrill Lynch plan conversion manager, on the
date the Plan Sponsor signs the Merrill Lynch Recordkeeping
Service Agreement.
Alternatively, Class B shares of the Fund are made available
to Plan participants at NAV without a CDSC if the Plan conforms
with the requirements for eligibility set forth in (i) through
(iii) above but either does not meet the $3 million asset
threshold or does not have 500 or more eligible employees.
Plans recordkept on a daily basis by Merrill Lynch or an
independent recordkeeper under a contract with Merrill Lynch that
are currently investing in Class B shares of the Fund convert to
Class A shares once the Plan has reached $5 million invested in
Applicable Investments, or 10 years after the date of the initial
purchase by a participant under the Plan--the Plan will receive a
Plan level share conversion.
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 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.
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. 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).
As of January 30, 1998, the Fund had not yet commenced
operations. Accordingly, the Officers and Trustees of the Trust
as a group owned no Fund shares.
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 $16,000
Anderegg, Jr.
(Trustee)
Paul H. $7,419 N/A N/A $16,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson[**]
(Trustee and
President)
Stanley $4,949 N/A N/A $16,000
Channick[*]
(Trustee)
Frank W. $7,419 N/A N/A $16,000
DeFriece, Jr.
(Trustee)
Roy J. $7,419 N/A N/A $16,000
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 $16,000
Rosenthal
(Trustee)
Richard N. $10,000 N/A N/A $16,000
Silverman
(Trustee)
J. Brendan $7,419 N/A N/A $16,000
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.
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 (the "Agreement"). The Agreement
was approved by the sole shareholder of the Fund on [], 1998.
Prior to shareholder approval, the Agreement 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")) on [], 1998 with respect to the
Fund.
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 and registered in Ontario as a mutual fund
dealer whose shares are listed for trading on the TSE. MFC
provides investment advisory services to certain of the Ivy
funds.
IMI currently acts as manager and investment adviser to the
following additional investment companies registered under the
1940 Act: Ivy China Region Fund, Ivy Global Fund, Ivy
International Fund, Ivy South America Fund, Ivy Developing
Nations Fund, Ivy Global Science & Technology Fund, Ivy
International Small Companies Fund, Ivy International Fund II,
Ivy Asia Pacific Fund, Ivy Pan-Europe Fund, Ivy Growth Fund, Ivy
US Emerging Growth Fund, Ivy Growth with Income Fund, Ivy Bond
Fund and Ivy Money Market 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 SEC and of state securities commissions and
other regulatory agencies.
The Fund pays IMI a monthly fee for providing business
management and investment advisory services at an annual rate of
0.75% of its average net assets.
Advisory fee information is not yet available for the Fund,
which has 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, interest, taxes, brokerage
commissions, class-specific expenses, litigation and
indemnification expenses, and other extraordinary expenses) to an
annual rate of 0.85% 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.
The initial term of the Agreement between IMI and the Fund,
which commenced on [], 1998, will run for a period of two years
from the date of commencement. The Agreement will continue in
effect with respect to the Fund from year to year, or for more
than the initial period, as the case may be, only so long as the
continuance is specifically approved at least annually (i) by the
vote of a majority of the Independent Trustees and (ii) either
(a) by the vote of a majority of the outstanding voting securi-
ties (as defined in the 1940 Act) of the 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 Ivy 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. At a meeting held on [], 1998, the
Board approved the Distribution Agreement on behalf of the Fund.
IMDI distributes shares of the Fund through broker-dealers who
are members of the National Association of Securities Dealers,
Inc. and who have executed dealer agreements with IMDI. IMDI
distributes shares of the Fund on a continuous basis, but
reserves the right to suspend or discontinue distribution on that
basis. IMDI is not obligated to sell any specific amount of Fund
shares.
Pursuant to the Distribution Agreement, IMDI is entitled to
deduct a commission on all Class A Fund shares sold equal to the
difference, if any, between the public offering price, as set
forth in the Fund's then-current prospectus, and the net asset
value on which such price is based. Out of that commission, IMDI
may reallow to dealers such concession as IMDI may determine from
time to time. In addition, IMDI is entitled to deduct a CDSC on
the redemption of Class A shares sold without an initial sales
charge and Class B and Class C shares in accordance with, and in
the manner set forth in, the Prospectus.
Under the Distribution Agreement, the Fund bears, among
other expenses, the expenses of registering and qualifying its
shares for sale under Federal and state securities laws and
preparing and distributing to existing shareholders periodic
reports, proxy materials and prospectuses.
As of the date of this SAI, IMDI had not received any
payments under the Distribution Agreement with respect to the
Fund since the Fund had not yet commenced operations.
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 [], 1998, the Board adopted the Rule 18f-3 plan
on behalf of the Fund. The key features of the Rule 18f-3 plan
are as follows: (i) shares of each class of the Fund represent
an equal pro rata interest in the Fund and generally have
identical voting, dividend, liquidation, and other rights,
preferences, powers, restrictions, limitations, qualifications,
terms and conditions, except that each class bears certain class-
specific expenses and has separate voting rights on certain
matters that relate solely to that class or in which the
interests of shareholders of one class differ from the interests
of shareholders of another class; (ii) subject to certain
limitations described in the Prospectus, shares of a particular
class of the Fund may be exchanged for shares of the same class
of another Ivy fund; and (iii) the Fund's Class B shares will
convert automatically into Class A shares of the Fund after a
period of eight years, based on the relative net asset value of
such shares at the time of conversion.
RULE 12B-1 DISTRIBUTION PLANS. The Trust has adopted on
behalf of the Fund, in accordance with Rule 12b-1 under the 1940
Act, separate Rule 12b-1 distribution plans pertaining to the
Fund's Class A, Class B and Class C shares (each, a "Plan"). In
adopting each Plan, a majority of the Independent Trustees
concluded in accordance with the requirements of Rule 12b-1 that
there is a reasonable likelihood that each Plan will benefit the
Fund and its shareholders. The Trustees of the Trust believe
that the Plans should result in greater sales and/or fewer
redemptions of the Fund's shares, although it is impossible to
know for certain the level of sales and redemptions of the Fund's
shares in the absence of a Plan or under an alternative
distribution arrangement.
Under each Plan, the Fund pays IMDI a service fee, accrued
daily and paid monthly, at the annual rate of up to 0.25% of the
average daily net assets attributable to its Class A, Class B or
Class C shares, as the case may be. The services for which
service fees may be paid include, among other things, advising
clients or customers regarding the purchase, sale or retention of
shares of the Fund, answering routine inquiries concerning the
Fund and assisting shareholders in changing options or enrolling
in specific plans. Pursuant to each Plan, service fee payments
made out of or charged against the assets attributable to the
Fund's Class A, Class B or Class C shares must be in
reimbursement for services rendered for or on behalf of the
affected class. The expenses not reimbursed in any one month may
be reimbursed in a subsequent month. The Class A Plan does not
provide for the payment of interest or carrying charges as
distribution expenses.
Under the Fund's Class B and Class C Plans, the Fund also
pays IMDI a distribution fee, accrued daily and paid monthly, at
the annual rate of 0.75% of the average daily net assets
attributable to its Class B or Class C shares. IMDI may reallow
to dealers all or a portion of the service and distribution fees
as IMDI may determine from time to time. The distribution fee
compensates IMDI for expenses incurred in connection with
activities primarily intended to result in the sale of the Fund's
Class B or Class C shares, including the printing of prospectuses
and reports for persons other than existing shareholders and the
preparation, printing and distribution of sales literature and
advertising materials. Pursuant to each Class B and Class C
Plan, IMDI may include interest, carrying or other finance
charges in its calculation of distribution expenses, if not
prohibited from doing so pursuant to an order of or a regulation
adopted by the SEC.
Among other things, each Plan provides that (1) IMDI will
submit to the Board at least quarterly, and the Trustees will
review, written reports regarding all amounts expended under the
Plan and the purposes for which such expenditures were made;
(2) each Plan will continue in effect only so long as such
continuance is approved at least annually, and any material
amendment thereto is approved, by the votes of a majority of the
Board, including the Independent Trustees, cast in person at a
meeting called for that purpose; (3) payments by the Fund under
each Plan shall not be materially increased without the
affirmative vote of the holders of a majority of the outstanding
shares of the relevant class; and (4) while each Plan is in
effect, the selection and nomination of Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust
shall be committed to the discretion of the Trustees who are not
"interested persons" of the Trust.
IMDI may make payments for distribution assistance and for
administrative and accounting services from resources that may
include the management fees paid by the Fund. IMDI also may make
payments (such as the service fee payments described above) to
unaffiliated broker-dealers for services rendered in the
distribution of the Fund's shares. To qualify for such payments,
shares may be subject to a minimum holding period. However, no
such payments will be made to any dealer or broker if at the end
of each year the amount of shares held does not exceed a minimum
amount. The minimum holding period and minimum level of holdings
will be determined from time to time by IMDI.
A report of the amount expended pursuant to each Plan, and
the purposes for which such expenditures were incurred, must be
made to the Board for its review at least quarterly.
No payments were made with respect to the Fund, which
had not commenced operations as of the date of this SAI.
Each Plan may be amended at any time with respect to the
class of shares of the Fund to which the Plan relates by vote of
the Trustees, including a majority of the Independent Trustees,
cast in person at a meeting called for the purpose of considering
such amendment. Each Plan may be terminated at any time with
respect to the class of shares of the Fund to which the Plan
relates, without payment of any penalty, by vote of a majority of
the Independent Trustees, or by vote of a majority of the
outstanding voting securities of that class.
If the Distribution Agreement or the Distribution Plans are
terminated (or not renewed) with respect to any of the Ivy funds
(or class of shares thereof), each may continue in effect with
respect to any other fund (or Class of shares thereof) as to
which they have not been terminated (or have been renewed).
CUSTODIAN
Pursuant to a Custodian Agreement with the Trust, Brown
Brothers Harriman & Co. (the "Custodian"), a private bank and
member of the principal securities exchanges, located at 40 Water
Street, Boston, Massachusetts 02109, 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, the
Custodian has entered into subcustodial agreements for the
holding of the Fund's foreign securities. The Custodian may
receive, as partial payment for its services to the Fund, a
portion of the Trust's brokerage business, subject to its ability
to provide best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement, MIMI
provides certain accounting and pricing services for the Fund.
As compensation for those services, the Fund pays MIMI a monthly
fee plus out-of-pocket expenses as incurred. The monthly fee is
based upon the net assets of the Fund at the preceding month end
at the following rates: $1,250 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
_______, 1998, 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, IMSC, a wholly owned subsidiary of MIMI, is the
transfer agent for the Fund. The Fund (except with respect to
its Class I shares) pays a monthly fee at an annual rate of
$20.00 for each open Class A, Class B and Class C account. The
Fund pays $10.25 per open Class I 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. No payments have
been made by the Fund, which had not commenced operations as of
the date of this SAI. Certain broker-dealers that maintain
shareholder accounts with the Fund through an omnibus account
provide transfer agent and other shareholder-related services
that would otherwise be provided by IMSC if the individual
accounts that comprise the omnibus account were opened by their
beneficial owners directly. IMSC pays such broker-dealers a per
account fee for each open account within the omnibus account, or
a fixed rate (e.g., .10%) fee, based on the average daily net
asset value of the omnibus account (or a combination
thereof).
ADMINISTRATOR
Pursuant to an Administrative Services Agreement, MIMI
provides certain administrative services to the Fund. As
compensation for these services, the Fund (except with respect to
its Class I shares) pays MIMI a monthly fee at the annual rate of
.10% of the Fund's average daily net assets. The Fund pays MIMI
a monthly fee at the annual rate of .01% of its average daily net
assets for Class I. As of the date of this SAI, the Fund had not
commenced operations.
Outside of providing administrative services to the Trust,
as described above, MIMI may also act on behalf of IMDI in paying
commissions to broker-dealers with respect to sales of Class B
and Class C shares of the Fund.
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
related 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 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 Class A, Class B, and Class C shares for Ivy
International Fund and Class A, Class B, Class C and Advisor
Class shares for Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada
Fund, Ivy China Region Fund, Ivy US 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 High Yield Fund, Ivy
South America Fund, Ivy Money Market Fund, Ivy Developing Nations
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, Ivy High Yield
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 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 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 the Fund means the vote of the
lesser of: (1) 67% of the shares of the Fund (or of the Trust)
present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy; or (2) more
than 50% of the outstanding shares of the Fund (or of the
Trust).
With respect to the submission to shareholder vote of a
matter requiring separate voting by the Fund, the matter shall
have been effectively acted upon with respect to the Fund if a
majority of the outstanding voting securities of the Fund votes
for the approval of the matter, notwithstanding that: (1) the
matter has not been approved by a majority of the outstanding
voting securities of any other fund of the Trust; or (2) the
matter has not been approved by a majority of the outstanding
voting securities of the Trust.
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.
As of January 30, 1998, no shares of the Fund have been
issued.
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 The
Nasdaq Stock Market Inc. ("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 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 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 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.
Valuation of below investment-grade debt securities may be
supplied by a pricing agent; if valuations are not available
through a pricing agent, such valuations may be supplied through
a broker or otherwise as determined in good faith by the Board of
Trustees.
The sale of shares of the Fund will be suspended during any
period when the determination of its net asset value is suspended
pursuant to rules or orders of the SEC and may be suspended by
the Board 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, less any applicable CDSC.
Unless a shareholder requests that the proceeds of any
redemption be wired to his or her bank account, payment for
shares tendered for redemption is made by check within seven days
after tender in proper form, except that the Trust reserves the
right to suspend the right of redemption or to postpone the date
of payment upon redemption beyond seven days, (i) for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which trading on the Exchange is
restricted, (ii) for any period during which an emergency exists
as determined by the SEC as a result of which disposal of
securities owned by the Fund is not reasonably practicable or it
is not reasonably practicable for the Fund to fairly determine
the value of its net assets, or (iii) for such other periods as
the SEC may by order permit for the protection of shareholders of
the Fund.
Under unusual circumstances, when the Board deems it in the
best interest of the Fund's shareholders, the Fund may make
payment for shares repurchased or redeemed in whole or in part in
securities of the Fund taken at current values. If any such
redemption in kind is to be made, the Fund intends to make an
election pursuant to Rule 18f-1 under the 1940 Act. This will
require the Fund to redeem with cash at a shareholder's election
in any case where the redemption involves less than $250,000 (or
1% of the Fund's net asset value at the beginning of each 90-day
period during which such redemptions are in effect, if that
amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs
in converting such securities to cash.
The Trust may redeem those accounts of shareholders who
have maintained an investment, including sales charges paid, of
less than $1,000 in the Fund for a period of more than 12 months.
All accounts below that minimum will be redeemed simultaneously
when MIMI deems it advisable. The $1,000 balance will be deter-
mined 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 the Fund for up to seven days if deemed
appropriate under then-current market conditions. The Trust
reserves the right to change this minimum or to terminate the
telephonic redemption privilege without prior notice. The Trust
cannot be responsible for the efficiency of the Federal wire
system of the shareholder's dealer of record or bank. The
shareholder is responsible for any charges by the shareholder's
bank.
The Fund employs reasonable procedures that require personal
identification prior to acting on redemption or exchange
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such instructions,
the Fund may be liable for any losses due to unauthorized or
fraudulent telephone instructions.
CONVERSION OF CLASS B SHARES
As described in the Prospectus, Class B shares of the Fund
will automatically convert to Class A shares of the Fund, based
on the relative net asset values per share of the two classes, no
later than the month following the eighth anniversary of the
initial issuance of such Class B shares of the Fund occurs. For
the purpose of calculating the holding period required for
conversion of Class B shares, the date of initial issuance shall
mean: (1) the date on which such Class B shares were issued, or
(2) for Class B shares obtained through an exchange, or a series
of exchanges, (subject to the exchange privileges for Class B
shares) the date on which the original Class B shares were
issued. For purposes of conversion of Class B shares, Class B
shares purchased through the reinvestment of dividends and
capital gain distributions paid in respect of Class B shares will
be held in a separate sub-account. Each time any Class B shares
in the shareholder's regular account (other than those shares in
the sub-account) convert to Class A shares, a pro rata portion of
the Class B shares in the sub-account will also convert to
Class A shares. The portion will be determined by the ratio that
the shareholder's Class B shares converting to Class A shares
bears to the shareholder's total Class B shares not acquired
through the reinvestment of dividends and capital gain
distributions.
TAXATION
The following is a general discussion of certain tax rules
thought to be applicable with respect to the Fund. It is merely
a summary and is not an exhaustive discussion of all possible
situations or of all potentially applicable taxes. Accordingly,
shareholders and prospective shareholders should consult a
competent tax adviser 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; and (b) diversify its
holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of the Fund's assets is represented by
cash, U.S. Government securities, the securities of other
regulated investment companies and other securities, with such
other securities limited, in respect of any one issuer, to an
amount not greater than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other
than U.S. Government securities and the securities of other
regulated investment companies).
As a regulated investment company, the Fund generally will
not be subject to U.S. Federal income tax on its income and gains
that it distributes to shareholders, if at least 90% of its
investment company taxable income (which includes, among other
items, dividends, interest and the excess of any short-term
capital gains over long-term capital losses) for the taxable year
is distributed. The Fund intends to distribute all such income.
Amounts not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a
nondeductible 4% excise tax at the Fund level. To avoid the tax,
the Fund must distribute during each calendar year, (1) at least
98% of its ordinary income (not taking into account any capital
gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending
on October 31 of the calendar year, and (3) all ordinary income
and capital gains for previous years that were not distributed
during such years. To avoid application of the excise tax, the
Fund intends to make distributions in accordance with the
calendar year distribution requirements. A distribution will be
treated as paid on December 31 of the current calendar year if it
is declared by the Fund in October, November or December of the
year with a record date in such a month and paid by the Fund
during January of the following year. Such distributions will be
taxable to shareholders in the calendar year the distributions
are declared, rather than the calendar year in which the
distributions are received.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS
The taxation of equity options and OTC options on debt
securities is governed by Code section 1234. Pursuant to Code
section 1234, the premium received by the Fund for selling a put
or call option is not included in income at the time of receipt.
If the option expires, the premium is short-term capital gain to
the Fund. If the Fund enters into a closing transaction, the
difference between the amount paid to close out its position and
the premium received is short-term capital gain or loss. If a
call option written by the Fund is exercised, thereby requiring
the Fund to sell the underlying security, the premium will
increase the amount realized upon the sale of such security and
any resulting gain or loss will be a capital gain or loss, and
will be long-term or short-term depending upon the holding period
of the security. With respect to a put or call option that is
purchased by the Fund, if the option is sold, any resulting gain
or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If
the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the
option. If the option is exercised, the cost of the option, in
the case of a call option, is added to the basis of the purchased
security and, in the case of a put option, reduces the amount
realized on the underlying security in determining gain or loss.
Some of the options, futures and foreign currency forward
contracts in which the Fund may invest may be "section 1256
contracts." Gains (or losses) on these contracts generally are
considered to be 60% long-term and 40% short-term capital gains
or losses; however, as described below, foreign currency gains or
losses arising from certain section 1256 contracts are ordinary
in character. Also, section 1256 contracts held by the Fund at
the end of each taxable year (and on certain other dates
prescribed in the Code) are "marked-to-market" with the result
that unrealized gains or losses are treated as though they were
realized.
The transactions in options, futures and forward contracts
undertaken by the Fund may result in "straddles" for Federal
income tax purposes. The straddle rules may affect the character
of gains or losses realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may
be deferred under the straddle rules, rather than being taken
into account in calculating the taxable income for the taxable
year in which such losses are realized. Because only a few
regulations implementing the straddle rules have been
promulgated, the consequences of such transactions to the Fund
are not entirely clear. The straddle rules may increase the
amount of short-term capital gain realized by the Fund, which is
taxed as ordinary income when distributed to shareholders.
The Fund may make one or more of the elections available
under the Code which are applicable to straddles. If the Fund
makes any of the elections, the amount, character and timing of
the recognition of gains or losses from the affected straddle
positions will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to shareholders
as ordinary income or long-term capital gain may be increased or
decreased substantially as compared to a fund that did not engage
in such transactions.
Notwithstanding any of the foregoing, the Fund may recognize
gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if the Fund enters into a short
sale, offsetting notional principal contract, futures or forward
contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial
positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and
short sales) in stock, partnership interests, certain actively
traded trust instruments and certain debt instruments.
Constructive sale treatment of appreciated financial positions
does not apply to certain transactions closed in the 90-day
period ending with the 30th day after the close of the Fund's
taxable year, if certain conditions are met.
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.
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 a Fund held the
PFIC shares. The Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated
to prior Fund taxable years and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable
years. Certain distributions from a PFIC as well as gain from
the sale of PFIC shares are treated as excess distributions.
Excess distributions are characterized as ordinary income even
though, absent application of the PFIC rules, certain excess
distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment
with respect to PFIC shares. The Fund may elect to mark to
market its PFIC shares, resulting in the shares being treated as
sold at fair market value on the last business day of each
taxable year. Any resulting gain would be reported as ordinary
income; any resulting loss and any loss from an actual
disposition of the shares would be reported as ordinary loss to
the extent of any net gains reported in prior years. Under
another election that currently is available in some
circumstances, the Fund generally would be required to include in
its gross income its share of the earnings of a PFIC on a current
basis, regardless of whether distributions are received from the
PFIC in a given year.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by the Fund may be treated as debt securities that are
issued originally at a discount. Generally, the amount of the
original issue discount ("OID") is treated as interest income and
is included in income over the term of the debt security, even
though payment of that amount is not received until a later time,
usually when the debt security matures.
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 at
the applicable mid-term or long-term capital gains rate, 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 or the shares of the Fund are held by the
Fund or the shareholder, as the case may be, for less than 16
days (46 days in the case of preferred shares) during the 30-day
period (90-day period for preferred shares) beginning 15 days (45
days for preferred shares) before the shares become ex-
dividend.
The foregoing is only a general description of the foreign
tax credit under current law. Because application of the credit
depends on the particular circumstances of each shareholder,
shareholders are advised to consult their own tax advisers.
BACKUP WITHHOLDING
The Fund will be required to report to the Internal Revenue
Service ("IRS") all taxable distributions as well as gross
proceeds from the redemption of the Fund's shares, except in the
case of certain exempt shareholders. All such distributions and
proceeds will be subject to withholding of Federal income tax at
a rate of 31% ("backup withholding") in the case of non-exempt
shareholders if (1) the shareholder fails to furnish the Fund
with and to certify the shareholder's correct taxpayer
identification number or social security number, (2) the IRS
notifies the shareholder or the Fund that the shareholder has
failed to report properly certain interest and dividend income to
the IRS and to respond to notices to that effect, or (3) when
required to do so, the shareholder fails to certify that he or
she is not subject to backup withholding. If the withholding
provisions are applicable, any such distributions or proceeds,
whether reinvested in additional shares or taken in cash, will be
reduced by the amounts required to be withheld.
Distributions may also be subject to additional state, local
and foreign taxes depending on each shareholder's particular
situation. Non-U.S. shareholders may be subject to U.S. tax
rules that differ significantly from those summarized above.
This discussion does not purport to deal with all of the tax
consequences applicable to the Fund or shareholders.
Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an
investment in the Fund.
PERFORMANCE INFORMATION
Performance information for the classes of shares of the Fund
may be compared, in reports and promotional literature, to:
(i) the S&P 500 Index, the Dow Jones Industrial Average ("DJIA"),
or other unmanaged indices so that investors may compare the
Fund's results with those of a group of unmanaged securities
widely regarded by investors as representative of the securities
markets in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, a widely used independent research
firm that ranks mutual funds by overall performance, investment
objectives and assets, or tracked by other services, companies,
publications or other criteria; and (iii) the Consumer Price
Index (measure for inflation) to assess the real rate of return
from an investment in the Fund. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions
or administrative and management costs and expenses. Performance
rankings are based on historical information and are not intended
to indicate future performance.
In addition, the Trust may, from time to time, include the
yield, 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.
YIELD. Quotations of yield for a specific Class of shares
of the Fund will be based on all investment income attributable
to that Class earned during a particular 30-day (or one month)
period (including dividends and interest), less expenses
attributable to that Class accrued during the period ("net
investment income"), and will be computed by dividing the net
investment income per share of that Class earned during the
period by the maximum offering price per share (in the case of
Class A 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.
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 Fund
shares during the designated period. Standardized Return
quotations for the Fund does 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 the Fund for a specified
period. Cumulative total return quotations reflect changes in
the price of the Fund's shares and assume that all dividends and
capital gains distributions during the period were reinvested in
Fund shares. Cumulative total return is calculated by computing
the cumulative rates of return of a hypothetical investment in a
specific Class of shares of the Fund over 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 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 30, 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 ended 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 1997 Issue (McGraw Hill, New
York, 1997).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's are judged
by Moody's to be of the best quality, carrying the smallest
degree of investment risk. Interest payments are protected by a
large or exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds rated Aa are
judged by Moody's to be of high quality by all standards. Aa
bonds are rated lower than Aaa bonds because margins of
protection may not be as large as those of Aaa bonds, or
fluctuations of protective elements may be of greater amplitude,
or there may be other elements present which make the long-term
risks appear somewhat larger than those applicable to Aaa
securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are to be considered as upper
medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Bonds rated Baa by Moody's are considered medium-grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other terms
of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest. Bonds which are rated Ca
represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the highest
commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by management of obligations which may be present
or may arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the
relative strengths of these factors. The designation of Prime-1
indicates the highest quality repayment capacity of the rated
issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt rating is a
current assessment of the creditworthiness of an obligor with
respect to a specific obligation. The ratings are based on
current information furnished by the issuer or obtained by S&P
from other sources it considers reliable. The ratings described
below may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
Debt rated AA is judged by S&P to have a very strong capacity to
pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A by S&P has a
strong capacity to pay interest and repay principal, although it
is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated
categories.
Debt rated BBB by S&P is regarded by S&P as having an
adequate capacity to pay interest and repay principal. Although
such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating. Debt rated B has a greater vulnerability to default
but currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used
for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating. Debt rated CCC has a currently
identifiable vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an actual or
implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt
service payments are continued.
The rating CI is reserved for income bonds on which no
interest is being paid. Debt rated D is in payment default. The
D rating category is used when interest payments or principal
payments are not made on the date due, even if the applicable
grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
considered short-term in the relevant market.
The commercial paper rating A-1 by S&P indicates that the
degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
For commercial paper with an A-2 rating, the capacity for timely
payment on issues is satisfactory, but not as high as for issues
designated A-1. Issues rated A-3 have adequate capacity for
timely payment, but are more vulnerable to the adverse effects of
changes in circumstances than obligations carrying higher
designations.
Issues rated B are regarded as having only speculative
capacity for timely payment. The C rating is assigned to short-
term debt obligations with a doubtful capacity for payment. Debt
rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the
date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
IVY HIGH YIELD 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
[ ], 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 South America Fund) is
diversified. This Statement of Additional Information ("SAI")
relates to the Advisor Class shares of Ivy High Yield Fund (the
"Fund").
This SAI is not a prospectus and should be read in
conjunction with the prospectus for the Fund dated [], 1998 (the
"Prospectus"), which may be obtained upon request and without
charge from the Trust at the Distributor's address and telephone
number listed below. Advisor Class shares are only offered to
certain investors (see the Prospectus). The Fund also offers
Class A, Class B, Class C and Class I 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
INVESTMENT OBJECTIVE AND POLICIES. . . . . . . . . . . . . . .
DEVELOPMENT OF THE HIGH YIELD MARKET. . . . . . . . . . . .
HIGH YIELD BONDS-PORFOLIO DIVERSIFICATION . . . . . . . . .
HIGH YIELD/HIGH RISK SECURITIES . . . . . . . . . . . . . .
U.S. GOVERNMENT SECURITIES. . . . . . . . . . . . . . . . .
FOREIGN SECURITIES. . . . . . . . . . . . . . . . . . . .
FOREIGN CURRENCIES . . . . . . . . . . . . . . . . . .
FORWARD FOREIGN CURRENCY CONTRACTS . . . . . . . . . .
DEBT SECURITIES, IN GENERAL . . . . . . . . . . . . . . . .
INTERNATIONAL BOND MARKETS. . . . . . . . . . . . . . . . .
SMALL COMPANIES . . . . . . . . . . . . . . . . . . . . . .
WHEN-ISSUED PURCHASES AND FIRM COMMITMENT
AGREEMENTS . . . . . . . . . . . . . . . . . . . . .
ZERO COUPON BONDS. . . . . . . . . . . . . . . . . .
RESTRICTED AND ILLIQUID SECURITIES . . . . . . . . .
FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS . . . . . . . . . . . . . . . . . . .
GENERAL . . . . . . . . . . . . . . . . . . . .
INTEREST RATE FUTURES CONTRACTS . . . . . . . .
OPTIONS ON INTEREST RATE FUTURES CONTRACTS. . .
FOREIGN CURRENCY FUTURES CONTRACTS AND
RELATED OPTIONS . . . . . . . . . . . . . . . .
RISKS ASSOCIATED WITH FUTURES AND RELATED
OPTIONS . . . . . . . . . . . . . . . . . . . .
COMBINED TRANSACTIONS. . . . . . . . . . . . . . . .
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . .
ADDITIONAL RESTRICTIONS . . . . . . . . . . . . . . . . . .
ADDITIONAL RIGHTS AND PRIVILEGES. . . . . . . . . . . . . .
AUTOMATIC INVESTMENT METHOD. . . . . . . . . . . . . .
EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . .
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . .
INDIVIDUAL RETIREMENT ACCOUNTS. . . . . . . . . .
QUALIFIED PLANS . . . . . . . . . . . . . . . . .
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(B)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . . . .
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS. . . . .
SIMPLE PLANS . . . . . . . . . . . . . . . . . . . . .
SYSTEMATIC WITHDRAWAL PLAN . . . . . . . . . . . . . .
GROUP SYSTEMATIC INVESTMENT PROGRAM. . . . . . . . . .
BROKERAGE ALLOCATION. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
PERSONAL INVESTMENTS BY EMPLOYEES OF IMI . . . . . . .
COMPENSATION TABLE. . . . . . . . . . . . . . . . . . . . .
INVESTMENT ADVISORY AND OTHER SERVICES. . . . . . . . . . .
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY
SERVICES . . . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION SERVICES . . . . . . . . . . . . . .
RULE 18F-3 PLAN . . . . . . . . . . . . . . . . .
CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . .
FUND ACCOUNTING SERVICES . . . . . . . . . . . . . . .
TRANSFER AGENT AND DIVIDEND PAYING AGENT . . . . . . .
ADMINISTRATOR. . . . . . . . . . . . . . . . . . . . .
AUDITORS . . . . . . . . . . . . . . . . . . . . . . .
CAPITALIZATION AND VOTING RIGHTS. . . . . . . . . . . . . .
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . .
PORTFOLIO TURNOVER. . . . . . . . . . . . . . . . . . . . .
REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . .
CONVERSION OF CLASS B SHARES. . . . . . . . . . . . . . . .
TAXATION. . . . . . . . . . . . . . . . . . . . . . . . . .
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD
CONTRACTS. . . . . . . . . . . . . . . . . . . . . . .
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR
LOSSES . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT IN PASSIVE FOREIGN INVESTMENT
COMPANIES. . . . . . . . . . . . . . . . . . . . . . .
DEBT SECURITIES ACQUIRED AT A DISCOUNT . . . . . . . .
DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . .
DISPOSITION OF SHARES. . . . . . . . . . . . . . . . .
FOREIGN WITHHOLDING TAXES. . . . . . . . . . . . . . .
BACKUP WITHHOLDING . . . . . . . . . . . . . . . . . .
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . .
AVERAGE ANNUAL TOTAL RETURN . . . . . . . . . . .
CUMULATIVE TOTAL RETURN . . . . . . . . . . . . .
OTHER QUOTATIONS, COMPARISONS AND GENERAL
INFORMATION . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . .
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION ("S&P")
AND MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
CORPORATE BOND AND COMMERCIAL PAPER RATINGS . . . . . .
INVESTMENT OBJECTIVE AND POLICIES
The Fund has its own investment objective and policies,
which are described in the Prospectus under the captions
"Investment Objective and Policies" and "Risk Factors and
Investment Techniques." Additional information regarding the
characteristics and risks associated with the Fund's investment
techniques is set forth below.
DEVELOPMENT OF THE HIGH YIELD BOND MARKET
Over the course of this decade, the market for higher
yielding domestic debt securities has changed dramatically. U.S.
high yield bonds now total over $350 billion, about a quarter of
the entire U.S. corporate bond market.
In the early 1970s high yield bonds emerged as a way for new
companies, companies with troubled credit histories, or any
company without access to more traditional financing to raise
capital. The category grew and changed from a small, illiquid
market for special circumstances, to a larger, more liquid market
offering an alternative way to raise capital to companies of
every size and structure.
As the economy strengthened throughout the 1980s, some
companies began to replace more and more of the equity in their
capital structure with high yield debt. In the late 1980s, many
companies had little equity supporting the outstanding debt.
Those who had anticipated continuing growth and increasing cash
flows to contribute to debt service found that as the economy
slowed, they were unable to pay their creditors. This led to
defaults and the high yield bond market nearly collapsed under
the weight of several factors including a recession, the
bankruptcy of a major high yield bond underwriter, and the forced
withdrawal of thrifts from this market.
Expanding companies are now turning to the high yield bond
market for financing real growth. The average quality of the
overall high yield bond category has improved. There are many
opportunities to buy the debt of growing companies or companies
that may not yet have the track record necessary to utilize more
traditional sources of financing. The conditions of these
borrowing companies can improve over time, and as the quality of
the debt improves, the prospect for price appreciation adds to
the return from income.
HIGH YIELD BONDS-PORTFOLIO DIVERSIFICATION
The benefits of investing in high yield debt securities
include the potential for superior yields and also portfolio
diversification which may result in enhanced total returns with
the potential for reduced overall portfolio risk.
High yield bonds show a relatively low correlation with both
stocks and investment-grade bonds. Due to this low correlation,
high yield bonds offer diversification benefits to both equity
and income portfolios.
HIGH YIELD/HIGH RISK SECURITIES
The Fund invests in debt securities rated Ba or lower by
Moody's, or BB or lower by S&P and comparable unrated securities.
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. Below investment-grade securities (rated Ba or below
by Moody's and BB or below by S&P) or unrated securities of
equivalent quality in which the Fund may invest carry a high
degree of risk (including the possibility of default or
bankruptcy of the issuers of such securities), generally involve
greater volatility of price and risk of principal and income, and
may be less liquid, than securities in the higher rating
categories and are considered speculative. (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.
Economic downturns may disrupt the high yield market and
impair the ability of issuers to repay principal and interest.
Also, an increase in interest rates would likely have an adverse
impact on the value of such obligations. During an economic
downturn or period of rising interest rates, highly leveraged
issues may experience financial stress which could adversely
affect their ability to service their principal and interest
payment obligations. Prices and yields of high yield securities
will fluctuate over time and, during periods of economic
uncertainty, volatility of high yield securities may adversely
affect the Fund's net asset value. In addition, investments in
high yield zero coupon or pay-in-kind bonds, rather than
income-bearing high yield securities, may be more speculative and
may be subject to greater fluctuations in value due to changes in
interest rates.
The trading market for high yield securities may be thin to
the extent that there is no established retail secondary market
or because of a decline in the value of such securities. A thin
trading market may limit the ability of the Fund to accurately
value high yield securities in the Fund's portfolio, could
adversely affect the price at which the Fund could sell such
securities, and cause large fluctuations in the daily net asset
value of the Fund's shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of low-rated debt securities,
especially in a thinly traded market. When secondary markets for
high yield securities become relatively less liquid, it may be
more difficult to value the securities, requiring additional
research and elements of judgment. These securities may also
involve special registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties.
Credit quality in the high yield securities market can
change suddenly and unexpectedly, and even recently issued credit
ratings may not fully reflect the actual risks posed by a
particular high-yield security. For these reasons, it is the
policy of IMI not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such
ratings with its own independent and on-going review of credit
quality. The achievement of the Fund's investment objective by
investment in such securities may be more dependent on IMI's
credit analysis than is the case for higher quality bonds.
Should the rating of a portfolio security be downgraded, IMI will
determine whether it is in the best interest of the Fund to
retain or dispose of such security.
Prices for high yield securities may be affected by
legislative and regulatory developments. For example, federal
rules require savings and loan institutions to gradually reduce
their holdings of this type of security. Also, Congress has from
time to time considered legislation which would restrict or
eliminate the corporate tax deduction for interest payments in
these securities and regulate corporate restructurings. Such
legislation may significantly depress the prices of outstanding
securities of this type.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities.
Securities guaranteed by the U.S. Government include: (1) direct
obligations of the U.S. Treasury (such as Treasury bills, notes,
and bonds) and (2) Federal agency obligations guaranteed as to
principal and interest by the U.S. Treasury (such as GNMA
certificates, which are mortgage-backed securities). When such
securities are held to maturity, the payment of principal and
interest is unconditionally guaranteed by the U.S. Government,
and thus they are of the highest possible credit quality. U.S.
Government securities that are not held to maturity are subject
to variations in market value due to fluctuations in interest
rates.
Mortgage-backed securities are securities representing part
ownership of a pool of mortgage loans. For example, GNMA
certificates are such securities in which the timely payment of
principal and interest is guaranteed by the full faith and credit
of the U.S. Government. Although the mortgage loans in the pool
will have maturities of up to 30 years, the actual average life
of the loans typically will be substantially less because the
mortgages will be subject to principal amortization and may be
prepaid prior to maturity. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of
falling interest rates, the rate of prepayment tends to increase,
thereby shortening the actual average life of the security.
Conversely, rising interest rates tend to decrease the rate of
prepayments, thereby lengthening the actual average life of the
security (and increasing the security's price volatility).
Accordingly, it is not possible to predict accurately the average
life of a particular pool. Reinvestment of prepayment may occur
at higher or lower rates than the original yield on the
certificates. Due to the prepayment feature and the need to
reinvest prepayments of principal at current rates, mortgage-
backed securities can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of
declining interest rates. 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.
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, which are not
typically associated with investing in United States securities
and which may affect the Fund's performance favorably or
unfavorably.
The risks of investing in foreign securities are likely to
be intensified in the case of investments in issuers domiciled or
doing substantial business in countries with emerging or
developing economies ("emerging markets"). For example,
countries with emerging markets may have relatively unstable
governments and therefore be susceptible to sudden adverse
government action (such as nationalization of businesses,
restrictions on foreign ownership or prohibitions against
repatriation of assets). Security prices in emerging markets can
also be significantly more volatile than in the more developed
nations of the world, and communications between the U.S. and
emerging market countries may be unreliable, increasing the risk
of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Delayed settlements could
cause the Fund to miss attractive investment opportunities or
impair its ability to dispose of portfolio securities, resulting
in a loss if the value of the securities subsequently declines.
In addition, many emerging markets have experienced and continue
to experience especially high rates of inflation. In certain
countries, inflation has at times accelerated rapidly to
hyperinflationary levels, creating a negative interest rate
environment and sharply eroding the value of outstanding
financial assets in those countries.
In recent years, many emerging market countries 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 Fund and its 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 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.
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.
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.
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. 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.
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 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. 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 15% 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.
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 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.
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 objective as set forth in the
Prospectus under "Investment Objective and Policies," together
with the investment restrictions set forth below, are fundamental
policies of the Fund and may not be changed 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 the Fund's portfolio securities in
accordance with applicable guidelines established by
the SEC and any guidelines established by the Trust's
Trustees, or (c) the entry into repurchase agreements
with banks or broker-dealers;
(vi) Borrow amounts in excess of 20% 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 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
(except obligations of domestic banks or the U.S.
Government, its agencies, authorities, or
instrumentalities) 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, except to the
extent that, in connection with the sale of
securities, it may be deemed to be an underwriter
under applicable securities laws;
(x) Make short sales of securities or maintain a short
position;
(xi) 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; or
(xiii) 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.
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) invest more than 15% 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 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; or
(iv) 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.
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 also
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 US 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 Small Companies Fund, Ivy South America Fund,
Ivy Developing Nations Fund, Ivy Pan-Europe Fund, and Ivy Money
Market Fund (the other seventeen series of the Trust).
Shareholders should obtain a current prospectus before exercising
any right or privilege that may relate to these funds.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method, which enables a Fund
shareholder to have specified amounts automatically drawn each
month from his or her bank for investment in Fund shares, is
available for all classes of shares, except Class I. The minimum
initial and subsequent investment under this method is $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 with certain other Ivy
funds (except Ivy International Fund unless they have an existing
Ivy International Fund account). 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.
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 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 each fund of Ivy Fund 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 funds of Ivy Fund in
accordance with the terms of the applicable plan and the exchange
privilege available to all shareholders. Initial and subsequent
purchase payments in connection with tax-deferred retirement
plans must be at least $25 per participant.
The following fees will be charged to individual shareholder
accounts as described in the retirement prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per account
For shareholders whose retirement accounts are diversified
across several funds of Ivy Fund, 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 an Ivy fund
(which primarily distributes exempt-interest dividends).
An individual who has not reached age 70-1/2 and who
receives compensation or earned income is eligible to contribute
to an IRA, whether or not he or she is an active participant in a
retirement plan. An individual who receives a distribution from
another IRA, a qualified retirement plan, a qualified annuity
plan or a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible
to establish an IRA by rolling over the distribution either
directly or within 60 days after its receipt. Tax advice should
be obtained in connection with planning a rollover contribution
to an IRA.
In general, an eligible individual may contribute up to the
lesser of $2,000 or 100% of his or her compensation or earned
income to an IRA each year. If a husband and wife are both
employed, and both are under age 70-1/2, each may set up his or
her own IRA within these limits. If both earn at least $2,000
per year, the maximum potential contribution is $4,000 per year
for both. For years after 1996, the result is similar even if
one spouse has no earned income; if the joint earned income of
the spouses is at least $4,000, a contribution of up to $2,000
may be made to each spouse's IRA. For years before 1997,
however, if one spouse has (or elects to be treated as having) no
earned income for IRA purposes for a year, the working spouse may
contribute up to the lesser of $2,250 or 100% of his or her
compensation or earned income for the year to IRAs for both
spouses, provided that no more than $2,000 is contributed to the
IRA of one spouse. Rollover contributions are not subject to
these limits.
An individual may deduct his or her annual contributions to
an IRA in computing his or her Federal income tax within the
limits described above, provided he or she (or his or her spouse,
if they file a joint Federal income tax return) is not an active
participant in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity plan,
403(b) plan, simplified employee pension, or governmental plan.
If he or she (or his or her spouse) is an active participant, a
full deduction is only available if he or she has adjusted gross
income that is less than a specified level ($40,000 for married
couples filing a joint return, $25,000 for single individuals,
and $0 for a married individual filing a separate return). The
deduction is phased out ratably for active participants with
adjusted gross income between certain levels ($40,000 and $50,000
for married individuals filing a joint return, $25,000 and
$35,000 for single individuals, and $0 and $10,000 for married
individuals filing separate returns). Individuals who are active
participants with income above the specified phase-out level may
not deduct their IRA contributions. Rollover contributions are
not includible in income for Federal income tax purposes and
therefore are not deductible from it.
Generally, earnings on an IRA are not subject to current
Federal income tax until distributed. Distributions attributable
to tax-deductible contributions and to IRA earnings are taxed as
ordinary income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches age 59-1/2
are subject to a nondeductible penalty tax equal to 10% of the
taxable amount of the distribution. The 10% penalty tax does not
apply to amounts withdrawn from an IRA after the individual
reaches age 59-1/2, becomes disabled or dies, or if withdrawn in
the form of substantially equal payments over the life or life
expectancy of the individual and his or her designated benefi-
ciary, if any, or rolled over into another IRA, or, for years
after 1996, amounts withdrawn and used to pay for deductible
medical expenses and amounts withdrawn by certain unemployed
individuals not in excess of amounts paid for certain health
insurance premiums. Distributions must begin to be withdrawn not
later than April 1 of the calendar year following the calendar
year in which the individual reaches age 70-1/2. Failure to take
certain minimum required distributions will result in the
imposition of a 50% non-deductible penalty tax. Extremely large
distributions in any one year (other than 1997, 1998 or 1999)
from an IRA (or from an IRA and other retirement plans) may also
result in a penalty tax.
QUALIFIED PLANS: For those self-employed individuals who
wish to purchase shares of one or more of the funds of Ivy Fund
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, 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. A
Withdrawal Plan may not be established if the investor is
currently participating in the Automatic Investment Method.
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 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 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.
As of January 30, 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. 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).
As of January 30, 1998, the Fund has not commenced
operations. Accordingly, the Officers and Trustees of the Trust
as a group own no Fund shares.
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 $16,000
Anderegg, Jr.
(Trustee)
Paul H. $7,419 N/A N/A $16,000
Broyhill
(Trustee)
Keith J. $0 N/A N/A $0
Carlson[**]
(Trustee and
President)
Stanley $4,949 N/A N/A $16,000
Channick[*]
(Trustee)
Frank W. $7,419 N/A N/A $16,000
DeFriece, Jr.
(Trustee)
Roy J. $7,419 N/A N/A $16,000
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 $16,000
Rosenthal
(Trustee)
Richard N. $10,000 N/A N/A $16,000
Silverman
(Trustee)
J. Brendan $7,419 N/A N/A $16,000
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.
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 (the "Agreement"). The Agreement
was approved by the sole shareholder of the Fund on [], 1998.
Prior to shareholder approval, the Agreement 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")) on [], 1998 with respect to the
Fund.
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 and registered in Ontario as a mutual fund
dealer whose shares are listed for trading on the TSE. MFC
provides investment advisory services to certain of the Ivy
funds.
IMI currently acts as manager and investment adviser to the
following additional investment companies registered under the
1940 Act: Ivy China Region Fund, Ivy Global Fund, Ivy
International Fund, Ivy South America Fund, Ivy Developing
Nations Fund, Ivy Global Science & Technology Fund, Ivy
International Small Companies Fund, Ivy International Fund II,
Ivy Asia Pacific Fund, Ivy Pan-Europe Fund, Ivy Growth Fund, Ivy
US Emerging Growth Fund, Ivy Growth with Income Fund, Ivy Bond
Fund and Ivy Money Market 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 SEC and of state securities commissions and
other regulatory agencies.
The Fund pays IMI a monthly fee for providing business
management and investment advisory services at an annual rate of
0.75% of its average net assets.
Advisory fee information is not yet available for the Fund,
which has 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, interest, taxes, brokerage
commissions, class-specific expenses, litigation and
indemnification expenses, and other extraordinary expenses) to an
annual rate of 0.85% 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.
The initial term of the Agreement between IMI and the Fund,
which commenced on [], 1998, will run for a period of two years
from the date of commencement. The Agreement will continue in
effect with respect to the Fund from year to year, or for more
than the initial period, as the case may be, only so long as the
continuance is specifically approved at least annually (i) by the
vote of a majority of the Independent Trustees and (ii) either
(a) by the vote of a majority of the outstanding voting securi-
ties (as defined in the 1940 Act) of the 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 Ivy 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. At a meeting held on [], 1998, the
Board approved the Distribution Agreement on behalf of the Fund.
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.
As of the date of this SAI, IMDI had not received any
payments under the Distribution Agreement with respect to the
Fund since the Fund had not yet commenced operations.
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.
IMDI may make payments for distribution assistance and for
administrative and accounting services from resources that may
include the management fees paid by the Fund. IMDI also may make
payments to unaffiliated broker-dealers for services rendered in
the distribution of the Fund's shares. To qualify for such
payments, shares may be subject to a minimum holding period.
However, no such payments will be made to any dealer or broker if
at the end of each year the amount of shares held does not exceed
a minimum amount. The minimum holding period and minimum level
of holdings will be determined from time to time by IMDI.
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 [], 1998, the Board adopted the Rule 18f-3 plan
on behalf of the Fund. The key features of the Rule 18f-3 plan
are as follows: (i) shares of each class of the Fund represent
an equal pro rata interest in the Fund and generally have
identical voting, dividend, liquidation, and other rights,
preferences, powers, restrictions, limitations, qualifications,
terms and conditions, except that each class bears certain class-
specific expenses and has separate voting rights on certain
matters that relate solely to that class or in which the
interests of shareholders of one class differ from the interests
of shareholders of another class; (ii) subject to certain
limitations described in the Prospectus, shares of a particular
class of the Fund may be exchanged for shares of the same class
of another Ivy 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. (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, the
Custodian has entered into subcustodial agreements for the
holding of the Fund's foreign securities. The Custodian may
receive, as partial payment for its services to the Fund, a
portion of the Trust's brokerage business, subject to its ability
to provide best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement, MIMI
provides certain accounting and pricing services for the Fund.
As compensation for those services, the Fund pays MIMI a monthly
fee plus out-of-pocket expenses as incurred. The monthly fee is
based upon the net assets of the Fund at the preceding month end
at the following rates: $1,250 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 [ ],
1998, 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, 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 for each 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 (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 the Fund. As
compensation for these services, the Fund (except with respect to
its Class I shares) pays MIMI a monthly fee at the annual rate of
.10% of the average daily net assets 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
related 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 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 Class A, Class B, and Class C shares for Ivy
International Fund and Class A, Class B, Class C and Advisor
Class for Ivy Asia Pacific Fund, Ivy Bond Fund, Ivy Canada Fund,
Ivy China Region Fund, Ivy US 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 High Yield Fund, Ivy South America
Fund, Ivy Money Market Fund, Ivy Developing Nations 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, Ivy High Yield 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 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 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 the Fund means the vote of the
lesser of: (1) 67% of the shares of the Fund (or of the Trust)
present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy; or (2) more
than 50% of the outstanding shares of the Fund (or of the Trust).
With respect to the submission to shareholder vote of a
matter requiring separate voting by the Fund, the matter shall
have been effectively acted upon with respect to the Fund if a
majority of the outstanding voting securities of the Fund votes
for the approval of the matter, notwithstanding that: (1) the
matter has not been approved by a majority of the outstanding
voting securities of any other fund of the Trust; or (2) the
matter has not been approved by a majority of the outstanding
voting securities of the Trust.
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.
As of January 30, 1998, no shares of the Fund have been
issued.
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 The
Nasdaq Stock Market Inc. ("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 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 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 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 securities may be
supplied by a pricing agent; if valuations are not available
through a pricing agent, such valuations may be supplied through
a broker or otherwise as determined in good faith by the Board of
Trustees.
The sale of shares of the Fund will be suspended during any
period when the determination of its net asset value is suspended
pursuant to rules or orders of the SEC and may be suspended by
the Board 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, less any applicable CDSC.
Unless a shareholder requests that the proceeds of any
redemption be wired to his or her bank account, payment for
shares tendered for redemption is made by check within seven days
after tender in proper form, except that the Trust reserves the
right to suspend the right of redemption or to postpone the date
of payment upon redemption beyond seven days, (i) for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which trading on the Exchange is
restricted, (ii) for any period during which an emergency exists
as determined by the SEC as a result of which disposal of
securities owned by the Fund is not reasonably practicable or it
is not reasonably practicable for the Fund to fairly determine
the value of its net assets, or (iii) for such other periods as
the SEC may by order permit for the protection of shareholders of
the Fund.
Under unusual circumstances, when the Board deems it in the
best interest of the Fund's shareholders, the Fund may make
payment for shares repurchased or redeemed in whole or in part in
securities of the Fund taken at current values. If any such
redemption in kind is to be made, the Fund intends to make an
election pursuant to Rule 18f-1 under the 1940 Act. This will
require the Fund to redeem with cash at a shareholder's election
in any case where the redemption involves less than $250,000 (or
1% of the Fund's net asset value at the beginning of each 90-day
period during which such redemptions are in effect, if that
amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs
in converting such securities to cash.
The Trust may redeem those Advisor Class accounts of
shareholders who have maintained an investment, including sales
charges paid, of less than $10,000 in the Fund for a period of
more than 12 months. All Advisor Class accounts below that
minimum will be redeemed simultaneously when MIMI deems it
advisable. The $10,000 balance will be determined by actual
dollar amounts invested by the shareholder, unaffected by market
fluctuations. The Trust will notify any such shareholder by
certified mail of its intention to redeem such account, and the
shareholder shall have 60 days from the date of such letter to
invest such additional sums as shall raise the value of such
account above that minimum. Should the shareholder fail to
forward such sum within 60 days of the date of the Trust's letter
of notification, the Trust will redeem the shares held in such
account and transmit the redemption in value thereof to the
shareholder. However, those shareholders who are investing
pursuant to the Automatic Investment Method will not be redeemed
automatically unless they have ceased making payments pursuant to
the plan for a period of at least six consecutive months, and
these shareholders will be given six-months' notice by the Trust
before such redemption. Shareholders in a qualified retirement,
pension or profit sharing plan who wish to avoid tax consequences
must "rollover" any sum so redeemed into another qualified plan
within 60 days. The Trustees of the Trust may change the minimum
account size.
If a shareholder has given authorization for telephonic
redemption privilege, shares can be redeemed and proceeds sent by
Federal wire to a single previously designated bank account.
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 adviser 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; and (b) diversify its
holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of the Fund's assets is represented by
cash, U.S. Government securities, the securities of other
regulated investment companies and other securities, with such
other securities limited, in respect of any one issuer, to an
amount not greater than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other
than U.S. Government securities and the securities of other
regulated investment companies).
As a regulated investment company, the Fund generally will
not be subject to U.S. Federal income tax on its income and gains
that it distributes to shareholders, if at least 90% of its
investment company taxable income (which includes, among other
items, dividends, interest and the excess of any short-term
capital gains over long-term capital losses) for the taxable year
is distributed. The Fund intends to distribute all such income.
Amounts not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a
nondeductible 4% excise tax at the Fund level. To avoid the tax,
the Fund must distribute during each calendar year, (1) at least
98% of its ordinary income (not taking into account any capital
gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending
on October 31 of the calendar year, and (3) all ordinary income
and capital gains for previous years that were not distributed
during such years. To avoid application of the excise tax, the
Fund intends to make distributions in accordance with the
calendar year distribution requirements. A distribution will be
treated as paid on December 31 of the current calendar year if it
is declared by the Fund in October, November or December of the
year with a record date in such a month and paid by the Fund
during January of the following year. Such distributions will be
taxable to shareholders in the calendar year the distributions
are declared, rather than the calendar year in which the
distributions are received.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS
The taxation of equity options and OTC options on debt
securities is governed by Code section 1234. Pursuant to Code
section 1234, the premium received by the Fund for selling a put
or call option is not included in income at the time of receipt.
If the option expires, the premium is short-term capital gain to
the Fund. If the Fund enters into a closing transaction, the
difference between the amount paid to close out its position and
the premium received is short-term capital gain or loss. If a
call option written by the Fund is exercised, thereby requiring
the Fund to sell the underlying security, the premium will
increase the amount realized upon the sale of such security and
any resulting gain or loss will be a capital gain or loss, and
will be long-term or short-term depending upon the holding period
of the security. With respect to a put or call option that is
purchased by the Fund, if the option is sold, any resulting gain
or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If
the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the
option. If the option is exercised, the cost of the option, in
the case of a call option, is added to the basis of the purchased
security and, in the case of a put option, reduces the amount
realized on the underlying security in determining gain or loss.
Some of the options, futures and foreign currency forward
contracts in which the Fund may invest may be "section 1256
contracts." Gains (or losses) on these contracts generally are
considered to be 60% long-term and 40% short-term capital gains
or losses; however, as described below, foreign currency gains or
losses arising from certain section 1256 contracts are ordinary
in character. Also, section 1256 contracts held by the Fund at
the end of each taxable year (and on certain other dates
prescribed in the Code) are "marked-to-market" with the result
that unrealized gains or losses are treated as though they were
realized.
The transactions in options, futures and forward contracts
undertaken by the Fund may result in "straddles" for Federal
income tax purposes. The straddle rules may affect the character
of gains or losses realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may
be deferred under the straddle rules, rather than being taken
into account in calculating the taxable income for the taxable
year in which such losses are realized. Because only a few
regulations implementing the straddle rules have been
promulgated, the consequences of such transactions to the Fund
are not entirely clear. The straddle rules may increase the
amount of short-term capital gain realized by the Fund, which is
taxed as ordinary income when distributed to shareholders.
The Fund may make one or more of the elections available
under the Code which are applicable to straddles. If the Fund
makes any of the elections, the amount, character and timing of
the recognition of gains or losses from the affected straddle
positions will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to shareholders
as ordinary income or long-term capital gain may be increased or
decreased substantially as compared to a fund that did not engage
in such transactions.
Notwithstanding any of the foregoing, the Fund may recognize
gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if the Fund enters into a short
sale, offsetting notional principal contract, futures or forward
contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial
positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and
short sales) in stock, partnership interests, certain actively
traded trust instruments and certain debt instruments.
Constructive sale treatment of appreciated financial positions
does not apply to certain transactions closed in the 90-day
period ending with the 30th day after the close of the Fund's
taxable year, if certain conditions are met.
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.
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 a Fund held the
PFIC shares. The Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated
to prior Fund taxable years and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable
years. Certain distributions from a PFIC as well as gain from
the sale of PFIC shares are treated as excess distributions.
Excess distributions are characterized as ordinary income even
though, absent application of the PFIC rules, certain excess
distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment
with respect to PFIC shares. The Fund may elect to mark to
market its PFIC shares, resulting in the shares being treated as
sold at fair market value on the last business day of each
taxable year. Any resulting gain would be reported as ordinary
income; any resulting loss and any loss from an actual
disposition of the shares would be reported as ordinary loss to
the extent of any net gains reported in prior years. Under
another election that currently is available in some
circumstances, the Fund generally would be required to include in
its gross income its share of the earnings of a PFIC on a current
basis, regardless of whether distributions are received from the
PFIC in a given year.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by the Fund may be treated as debt securities that are
issued originally at a discount. Generally, the amount of the
original issue discount ("OID") is treated as interest income and
is included in income over the term of the debt security, even
though payment of that amount is not received until a later time,
usually when the debt security matures.
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 at
the applicable mid-term or long-term capital gains rate, 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 or the shares of the Fund are held by the
Fund or the shareholder, as the case may be, for less than 16
days (46 days in the case of preferred shares) during the 30-day
period (90-day period for preferred shares) beginning 15 days (45
days for preferred shares) before the shares become ex-
dividend.
The foregoing is only a general description of the foreign
tax credit under current law. Because application of the credit
depends on the particular circumstances of each shareholder,
shareholders are advised to consult their own tax advisers.
BACKUP WITHHOLDING
The Fund will be required to report to the Internal
Revenue Service ("IRS") all taxable distributions as well as
gross proceeds from the redemption of the Fund's shares, except
in the case of certain exempt shareholders. All such
distributions and proceeds will be subject to withholding of
Federal income tax at a rate of 31% ("backup withholding") in the
case of non-exempt shareholders if (1) the shareholder fails to
furnish the Fund with and to certify the shareholder's correct
taxpayer identification number or social security number, (2) the
IRS notifies the shareholder or the Fund that the shareholder has
failed to report properly certain interest and dividend income to
the IRS and to respond to notices to that effect, or (3) when
required to do so, the shareholder fails to certify that he or
she is not subject to backup withholding. If the withholding
provisions are applicable, any such distributions or proceeds,
whether reinvested in additional shares or taken in cash, will be
reduced by the amounts required to be withheld.
Distributions may also be subject to additional state, local
and foreign taxes depending on each shareholder's particular
situation. Non-U.S. shareholders may be subject to U.S. tax
rules that differ significantly from those summarized above.
This discussion does not purport to deal with all of the tax
consequences applicable to the Fund or shareholders.
Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an
investment in the Fund.
PERFORMANCE INFORMATION
Performance information for the classes of shares of the
Fund may be compared, in reports and promotional literature, to:
(i) the S&P 500 Index, the Dow Jones Industrial Average ("DJIA"),
or other unmanaged indices so that investors may compare the
Fund's results with those of a group of unmanaged securities
widely regarded by investors as representative of the securities
markets in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, a widely used independent research
firm that ranks mutual funds by overall performance, investment
objectives and assets, or tracked by other services, companies,
publications or other criteria; and (iii) the Consumer Price
Index (measure for inflation) to assess the real rate of return
from an investment in the Fund. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions
or administrative and management costs and expenses. Performance
rankings are based on historial information and are not intended
to indicate future performance.
In addition, the Trust may, from time to time, include the
yield, 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.
YIELD. Quotations of yield for a specific Class of shares
of the Fund will be based on all investment income attributable
to that Class earned during a particular 30-day (or one month)
period (including dividends and interest), less expenses
attributable to that Class accrued during the period ("net
investment income"), and will be computed by dividing the net
investment income per share of that Class earned during the
period by the maximum offering price per share (in the case of
Class A 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.
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 Fund
shares during the designated period. Standardized Return
quotations for the Fund does 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 the Fund for a specified
period. Cumulative total return quotations reflect changes in
the price of the Fund's shares and assume that all dividends and
capital gains distributions during the period were reinvested in
Fund shares. Cumulative total return is calculated by computing
the cumulative rates of return of a hypothetical investment in a
specific Class of shares of the Fund over 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 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 30, 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 ended 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 1997 Issue (McGraw Hill, New
York, 1997).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's are judged
by Moody's to be of the best quality, carrying the smallest
degree of investment risk. Interest payments are protected by a
large or exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds rated Aa are
judged by Moody's to be of high quality by all standards. Aa
bonds are rated lower than Aaa bonds because margins of
protection may not be as large as those of Aaa bonds, or
fluctuations of protective elements may be of greater amplitude,
or there may be other elements present which make the long-term
risks appear somewhat larger than those applicable to Aaa
securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are to be considered as upper
medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Bonds rated Baa by Moody's are considered medium-grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered well-assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other terms
of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest. Bonds which are rated Ca
represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the highest
commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by management of obligations which may be present
or may arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on the
relative strengths of these factors. The designation of Prime-1
indicates the highest quality repayment capacity of the rated
issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt rating is a
current assessment of the creditworthiness of an obligor with
respect to a specific obligation. The ratings are based on
current information furnished by the issuer or obtained by S&P
from other sources it considers reliable. The ratings described
below may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
Debt rated AA is judged by S&P to have a very strong capacity to
pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A by S&P has a
strong capacity to pay interest and repay principal, although it
is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated
categories.
Debt rated BBB by S&P is regarded by S&P as having an
adequate capacity to pay interest and repay principal. Although
such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating. Debt rated B has a greater vulnerability to default
but currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used
for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating. Debt rated CCC has a currently
identifiable vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an actual or
implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt
service payments are continued.
The rating CI is reserved for income bonds on which no
interest is being paid. Debt rated D is in payment default. The
D rating category is used when interest payments or principal
payments are not made on the date due, even if the applicable
grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
(b) COMMERCIAL PAPER. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt
considered short-term in the relevant market.
The commercial paper rating A-1 by S&P indicates that the
degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
For commercial paper with an A-2 rating, the capacity for timely
payment on issues is satisfactory, but not as high as for issues
designated A-1. Issues rated A-3 have adequate capacity for
timely payment, but are more vulnerable to the adverse effects of
changes in circumstances than obligations carrying higher
designations.
Issues rated B are regarded as having only speculative
capacity for timely payment. The C rating is assigned to short-
term debt obligations with a doubtful capacity for payment. Debt
rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the
date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
PART C. OTHER INFORMATION
Item 24: Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A: None
Included in Part B:
Statement of Assets and Liabilities and Report of
Independent Accountants to be filed by amendment.
(b) Exhibits:
1. (a) Amended and Restated Declaration of Trust
dated December 10, 1992, filed with Post-
Effective Amendment No. 71 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(b) Amendment to Amended and Restated Declaration
of Trust, filed with Post-Effective Amendment
No. 73 to Registration Statement No. 2-17613
and incorporated by reference herein.
(c) Amendment to Amended and Restated Declaration
of Trust, filed with Post-Effective Amendment
No. 74 to Registration Statement No. 2-17613
and incorporated by reference herein.
(d) Establishment and Designation of Additional
Series (Ivy Emerging Growth Fund), filed with
Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(e) Redesignation of Shares (Ivy Growth with
Income Fund--Class A) and Establishment and
Designation of Additional Class (Ivy Growth
with Income Fund--Class C), filed with Post-
Effective Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(f) Redesignation of Shares (Ivy Emerging Growth
Fund--Class A, Ivy Growth Fund--Class A and
Ivy International Fund--Class A), filed with
Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(g) Establishment and Designation of Additional
Series (Ivy China Region Fund), filed with
Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(h) Establishment and Designation of Additional
Class (Ivy China Region Fund--Class B, Ivy
Emerging Growth Fund--Class B, Ivy Growth
Fund--Class B, Ivy Growth with Income Fund--
Class B and Ivy International Fund--Class B),
filed with Post-Effective Amendment No. 74
for Registration Statement No. 2-17613 and
incorporated by reference herein.
(i) Establishment and Designation of Additional
Class (Ivy International Fund--Class I),
filed with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(j) Establishment and Designation of Series and
Classes (Ivy Latin American Strategy Fund--
Class A and Class B, Ivy New Century Fund--
Class A and Class B), filed with Post-
Effective Amendment No. 75 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(k) Establishment and Designation of Series and
Classes (Ivy International Bond Fund--Class A
and Class B), filed with Post-Effective
Amendment No. 76 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(l) Establishment and Designation of Series and
Classes (Ivy Bond Fund, Ivy Canada Fund, Ivy
Global Fund, Ivy Short-Term U.S. Government
Securities Fund (now known as Ivy Short-Term
Bond Fund) -- Class A and Class B), filed
with Post-Effective Amendment No. 77 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(m) Redesignation of Ivy Short-Term U.S.
Government Securities Fund as Ivy Short-Term
Bond Fund, filed with Post-Effective
Amendment No. 81 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(n) Redesignation of Shares (Ivy Money Market
Fund--Class A and Ivy Money Market Fund--
Class B), filed with Post-Effective Amendment
No. 84 to Registration Statement No. 2-17613
and incorporated by reference herein.
(o) Form of Establishment and Designation of
Additional Class (Ivy Bond Fund--Class C; Ivy
Canada Fund--Class C; Ivy China Region Fund--
Class C; Ivy Emerging Growth Fund--Class C;
Ivy Global Fund--Class C; Ivy Growth Fund--
Class C; Ivy Growth with Income Fund--Class
C; Ivy International Fund--Class C; Ivy Latin
America Strategy Fund--Class C; Ivy
International Bond Fund--Class C; Ivy Money
Market Fund--Class C; Ivy New Century Fund--
Class C), filed with Post-Effective Amendment
No. 84 to Registration Statement No. 2-17613
and incorporated by reference herein.
(p) Establishment and Designation of Series and
Classes (Ivy Global Science & Technology
Fund--Class A, Class B, Class C and Class I),
filed with Post-Effective Amendment No. 86 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(q) Establishment and designation of Series and
Classes (Ivy Global Natural Resources Fund--
Class A, Class B and Class C; Ivy Asia
Pacific Fund--Class A, Class B and Class C;
Ivy International Small Companies Fund--Class
A, Class B, Class C and Class I), filed with
Post-Effective Amendment No. 89 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(r) Establishment and designation of Series and
Classes (Ivy Pan-Europe Fund--Class A, Class
B and Class C), filed with 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 Post-
Effective Amendment No. 96 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(u) Redesignations of Series and Classes (Ivy
Emerging Growth Fund as Ivy US Emerging
Growth Fund; Ivy New Century Fund as Ivy
Developing Nations Fund; and, Ivy Latin
America Strategy Fund as Ivy South America
Fund), filed with this Post-Effective
Amendment No. 97 to Registration Statement 2-
17613.
2. By-Laws, as amended, 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 Post-Effective Amendment No. 96 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
7. Not Applicable
8. Custodian Agreement between Ivy Fund and Brown
Brothers Harriman & Co., filed with Post-Effective
Amendment No. 74 to Registration No. 2-17613 and
incorporated by reference herein.
9. (a) Master Administrative Services Agreement
between Ivy Fund and Mackenzie Investment
Management Inc. and Supplements for Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund and Ivy Money Market Fund,
filed with Post-Effective Amendment No. 68 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Addendum to Administrative Services Agreement
Supplement for Ivy International Fund, filed
with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(c) Administrative Services Agreement Supplement
for Ivy Emerging Growth Fund, filed with
Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(d) Administrative Services Agreement Supplement
for Ivy China Region Fund, filed with Post-
Effective Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(e) Administrative Services Agreement Supplement
for Class I Shares of Ivy International Fund,
filed with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(f) Master Fund Accounting Services Agreement
between Ivy Fund and Mackenzie Investment
Management Inc. and Supplements for Ivy
Growth Fund, Ivy Emerging Growth Fund and Ivy
Money Market Fund, filed with Post-Effective
Amendment No. 73 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(g) Fund Accounting Services Agreement Supplement
for Ivy Growth with Income Fund, filed with
Post-Effective Amendment No. 73 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(h) Fund Accounting Services Agreement Supplement
for Ivy China Region Fund, filed with Post-
Effective Amendment No. 73 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(i) Transfer Agency and Shareholder Services
Agreement between Ivy Fund and Ivy
Management, Inc., filed with Post-Effective
Amendment No. 71 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(j) Addendum to Transfer Agency and Shareholder
Services Agreement, filed with Post-Effective
Amendment No. 73 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(k) Assignment Agreement relating to Transfer
Agency and Shareholder Services Agreement,
filed with Post-Effective Amendment No. 74 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(l) Form of Administrative Services Agreement
Supplement for Ivy Latin America Strategy
Fund, filed with Post-Effective Amendment No.
75 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(m) Form of Administrative Services Agreement
Supplement for Ivy New Century Fund, filed
with Post-Effective Amendment No. 75 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(n) Form of Fund Accounting Services Agreement
Supplement for Ivy Latin America Strategy
Fund, filed with Post-Effective Amendment No.
75 to Registration Statement No. 2-17613 and
incorporated by reference herein.
(o) Form of Fund Accounting Services Agreement
Supplement for Ivy New Century Fund, filed
with Post-Effective Amendment No. 75 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(p) Form of Administrative Services Agreement
Supplement for Ivy International Bond Fund,
filed with Post-Effective Amendment No. 76 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(q) Form of Fund Accounting Services Agreement
Supplement for International Bond Fund,
filed with Post-Effective Amendment No. 76 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(r) Addendum to Transfer Agency and Shareholder
Services Agreement, filed with Post-Effective
Amendment No. 76 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(s) Addendum to Transfer Agency and Shareholder
Services Agreement, filed with Post-Effective
Amendment No. 77 to Registration Statement
No. 2-17613 and incorporated by reference
herein.
(t) Administrative Services Agreement Supplement
for Ivy Bond Fund, Ivy Global Fund and Ivy
Short-Term U.S. Government Securities Fund,
filed with Post-Effective Amendment No. 81 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(u) Fund Accounting Services Agreement Supplement
for Ivy Bond Fund, Ivy Global Fund and Ivy
Short-Term U.S. Government Securities Fund,
filed with Post-Effective Amendment No. 81 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(v) Form of Administrative Services Agreement
Supplement (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 Post-
Effective Amendment No. 96 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(kk) Form of Addendum to Transfer Agency and
Shareholder Services Agreement (Advisor
Class), filed with Post-Effective Amendment
No. 96 to Registration Statement No. 2-17613
and incorporated by reference herein.
10. Opinion and consent of counsel with respect to
Registrant's Ivy High Yield Fund to be filed by
amendment.
11. (a) Consent of independent accountants to be
filed by amendment.
(b) Report of independent accountants to be filed
by amendment.
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. Not applicable.
18. (a) Plan adopted pursuant to Rule 18f-3 under the
Investment Company Act of 1940, filed with
Post-Effective Amendment No. 83 to
Registration Statement No. 2-17613 and
incorporated by reference herein.
(b) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 85 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(c) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 87 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(d) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with Post-
Effective Amendment No. 89 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
(e) Form of Amended and Restated Plan adopted
pursuant to Rule 18f-3 under the Investment
Company Act of 1940, filed with 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 Post-
Effective Amendment No. 96 to Registration
Statement No. 2-17613 and incorporated by
reference herein.
25. Not applicable
26. Number of Holders of Securities
Fund: Date Class Record Holders
Ivy Asia Pacific 11/30/97 Class A 92
Fund Class B 42
Class C 49
Advisor Class 0
Ivy Bond Fund 11/30/97 Class A 4,699
Class B 506
Class C 0
Class I 90
Advisor Class 0
Ivy Canada Fund 11/30/97 Class A 1,778
Class B 158
Class C 24
Advisor Class 0
Ivy China Region 11/30/97 Class A 2,052
Class B 1,147
Class C 105
Advisor Class 0
Ivy Developing 11/30/97 Class A 1,031
Nations Fund Class B 851
Class C 238
Advisor Class 0
Ivy Global Fund 11/30/97 Class A 1,496
Class B 850
Class C 38
Advisor Class 0
Ivy Global Natural 11/30/97 Class A 294
Resources Fund Class B 190
Class C 13
Advisor Class 0
Ivy Global Science 11/30/97 Class A 843
& Technology Fund Class B 734
Class C 358
Class I 0
Advisor Class 0
Ivy Growth Fund 11/30/97 Class A 27,871
Class B 311
Class C 12
Advisor Class 0
Ivy Growth with 11/30/97 Class A 5,895
Income Fund Class B 1,364
Class C 113
Class D 0
Advisor Class 0
Ivy High Yield 11/30/97 Class A 0
Fund Class B 0
Class C 0
Class I 0
Advisor Class 0
Ivy International 11/30/97 Class A 28,903
Fund Class B 21,765
Class C 410
Class I 3,661
Advisor Class 0
Ivy International 11/30/97 Class A 955
Fund II Class B 1706
Class C 462
Class I 0
Advisor Class 0
Ivy International 11/30/97 Class A 116
Small Companies Fund Class B 91
Class C 33
Class I 0
Advisor Class 0
Ivy Money Market 11/30/97 Class A 2,402
Fund Class B 255
Class C 35
Ivy Pan-Europe 11/30/97 Class A 14
Fund Class B 4
Class C 0
Advisor Class 0
Ivy South 11/30/97 Class A 430
America Fund Class B 230
Class C 22
Advisor Class 0
Ivy US Emerging 11/30/97 Class A 5,674
Growth Fund Class B 3,838
Class C 424
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 Distributors, Inc., Via Mizner Financial Plaza, 700
South Federal Highway, Suite 300, Boca Raton, Florida 33432,
Registrant's distributor, is a subsidiary of Mackenzie Investment
Management Inc. ("MIMI"), Via Mizner Financial Plaza, 700 South
Federal Highway, Suite 300, Boca Raton, Florida 33432. IMDI is
the successor to MIMI's distribution activities.
(b) The information required by this Item 29 regarding each
director, officer or partner of IMDI is incorporated by
reference to Schedule A of Form BD filed by IMDI
pursuant to the Securities Exchange Act of 1934.
(c) Not applicable
30. Location of Accounts and Records
The information required by this item is incorporated by
reference to Item 7 of Part II of Post-Effective Amendment
No. 46 to Registration Statement No. 2-17613.
31. Not applicable
32. Undertakings
(a) Not applicable
(b) Registrant undertakes to file a post-effective
amendment, using financial statements which need not be
certified, within four to six months from the effective
date of Registrant's 1933 Act registration statement.
(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. 97 to its Registration
Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and the Commonwealth of
Massachusetts, on the 30th day of January, 1998.
IVY FUND
By: Keith J. Carlson*
*By: JOSEPH R. FLEMING President
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment No. 97 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 Chairman 1/30/98
(Chief Executive Officer)
JOHN S. ANDEREGG, JR.* Trustee 1/30/98
PAUL H. BROYHILL* Trustee 1/30/98
STANLEY CHANNICK* Trustee 1/30/98
FRANK W. DEFRIECE, JR.* Trustee 1/30/98
ROY J. GLAUBER* Trustee 1/30/98
KEITH J. CARLSON** Trustee and President 1/30/98
JOSEPH G. ROSENTHAL* Trustee 1/30/98
RICHARD N. SILVERMAN* Trustee 1/30/98
J. BRENDAN SWAN* Trustee 1/30/98
C. WILLIAM FERRIS* Treasurer (Chief 1/30/98
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(u) Redesignations of Series and Classes (Ivy Emerging
Growth Fund as Ivy US Emerging Growth Fund; Ivy New
Century Fund as Ivy Developing Nations Fund; and, Ivy
Latin America Strategy Fund as Ivy South America Fund)
Exhibit 1(u)
IVY FUND
Ivy Emerging Growth Fund
Ivy New Century Fund
Ivy Latin America Strategy Fund
Redesignations of Series of Shares of Beneficial Interest and
Redesignations of Classes 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, by a written consent dated as of January 15,
1998, 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, acting pursuant to Article III of the Trust's
Declaration of Trust, the Trustees established each of Ivy
Emerging Growth Fund, Ivy New Century Fund, and Ivy Latin America
Strategy Fund (each a "Fund" and, collectively, the "Funds") as
an additional series of the Trust pursuant to various
Establishments and Designations of Additional Series (the
"Designations"), each of which currently has an unlimited number
of authorized and unissued shares of beneficial interest
designated as Class A, Class B, Class C, and Advisor Class shares
(each a "Class" and, collectively, the "Classes"); and
WHEREAS, the Trustees, acting pursuant to the Declaration of
Trust and the Designations, now desire to redesignate each Fund
and to change the name of its Classes;
NOW, THEREFORE, IT IS HEREBY:
RESOLVED, that "Ivy Emerging Growth Fund" be, and it hereby
is, redesignated as "Ivy US Emerging Growth Fund";
FURTHER RESOLVED, that the name of each of the Fund's Class
A, Class B, Class C and Advisor Class shares be, and it
hereby is, redesignated as "Ivy US Emerging Growth Fund -
Class A", "Ivy US Emerging Growth Fund - Class B", "Ivy US
Emerging Growth Fund - Class C", and "Ivy US Emerging Growth
Fund - Advisor Class", respectively;
FURTHER RESOLVED, that "Ivy New Century Fund" be, and it
hereby is, redesignated as "Ivy Developing Nations Fund";
FURTHER RESOLVED, that the name of each of the Fund's Class
A, Class B, Class C and Advisor Class shares be, and it
hereby is, redesignated as "Ivy Developing Nations Fund -
Class A", "Ivy Developing Nations Fund - Class B", "Ivy
Developing Nations Fund - Class C", and "Ivy Developing
Nations Fund - Advisor Class", respectively;
FURTHER RESOLVED, that "Ivy Latin America Strategy Fund" be,
and it hereby is, redesignated as "Ivy South America Fund";
FURTHER RESOLVED, that the name of each of the Fund's Class
A, Class B, Class C and Advisor Class shares be, and it
hereby is, redesignated as "Ivy South America Fund - Class
A", "Ivy South America Fund - Class B", "Ivy South America
Fund - Class C", and "Ivy South America Fund - Advisor
Class", respectively; and
FURTHER RESOLVED, that the preceding resolutions shall
constitute an Amendment to the Declaration of Trust,
effective as of its filing with the Secretary of State of
The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, I have signed this Amendment this 20th
day of January, 1998.
MICHAEL G. LANDRY
Michael G. Landry, as Trustee
The above signature is the true and correct signature of Michael
G. Landry, Trustee of the Trust.
C. WILLIAM FERRIS
C. William Ferris, Secretary/Treasurer
Mackenzie Investment Management Inc.
